Corporate Ethics Ch. 6
Terms in this set (32)
What is the Foreign Corrupt Practices Act (FCPA)?
legislation introduced to control bribery between foreign countries and the U.S.
What message was Congress trying to send through the FCPA?
that the competitiveness of U.S. corporations in overseas markets should be based on price and product quality rather than the extent to which companies had paid off foreign officials and political leaders
What is disclosure?
the FCPA requirement that corporations fully disclose any and all transactions conducted with foreign officials and politicians
What is prohibition?
the FCPA inclusion of wording from the Bank Secrecy Act and the Mail Fraud Act to prevent the movement of funds overseas for the express purpose of conducting a fraudulent scheme
The Securities and Exchange Commission
could fine companies for failing to disclose such payments under its securities rules
The Bank Secrecy Act
required full disclosure of funds that were taken out of or brought into the U.S.
The Mail Fraud Act
made the use of the U.S. mail or wire communications to transact a fraudulent scheme illegal
Illegal behaviors under FCPA
Record-keeping and accounting provisions
Legal Behaviors under FCPA
Grease payments - facilitating payments to expedite a governmental action
Payments lawful under foreign law
What are facilitating payments?
Facilitation payments - payments that are acceptable (legal) provided they expedite or secure the performance of a routine governmental action
Routine Governmental Action
Any regular administrative process or procedure, excluding any action taken by a foreign official in the decision to award new or continuing business
Why was the FCPA criticized?
because of its recognition of facilitation payments, which would otherwise be acknowledged as bribes
Can a company still be found in violation of the FCPA even if a bribe is unsuccessful?
The U.S. Federal Sentencing Guidelines for Organization
Guidelines for punishing unethical crimes such as bribery
penalties under FSGO
monetary fines, organizational probation, and the implementation of an operational program to bring the organization into compliance with FGSO standards
name the 3 steps in calculating the monetary fine under FSGO
-determining the base fine
-determining the total fine amount
How do you determine the base fine?
the greatest of either the monetary gain to the organization from the offense or the monetary loss from the offense caused by the organization or based on a table judge has
Whats the culpability score
corresponding degree of blame or guilt
Simply a multiplier with a max of 4, so worse case is 4 times the base fine
Can be increased (aggravated) or decreased (mitigated) according to predetermined factors
high level personnel were involved in or tolerated the criminal activity, org willfully obstructed justice, had a prior history of similar misconduct, current offense violated a judicial order
org had an effective program to prevent and detect violations of law, self-reported offense
determining the total final amount
Judge has discretion to impose a so-called death penalty, where the fine is set high enough to match all the organization's assets
What is the best way to minimize culpability score?
having a compliance program
Sevens steps for effective compliance program
1. Management oversight
2. Corporate policies
3. Communication of standards and procedures
4. Compliance with standards and procedures
5. Delegation of substantial discretionary authority
6. Consistent discipline
7. Response and corrective action
What three steps are the most important?
Corporate policies - policies and procedures designed to reduce the likelihood of criminal conduct in the organization must be in place
Communication of standards and procedures - these ethics policies must be effectively communicated to every stakeholder of the organization
Compliance with standards and procedures - evidence of active implementation of these policies must be provided through appropriate monitoring and reporting
Why do we have the Sarbanes-Oxley Act?
A legislative response to the corporate accounting scandals of the early 2000s that covers the financial management of businesses
What are values behind it?
Accounting firms and financial market is ethical and wrongdoings of the past do not happen again
Know all titles!!
Name five titles and what they say
Title I. Public Company Accounting Oversight Board
-An independent oversight body for auditing companies
-Charged with maintaining compliance with established standards and enforcing rules and disciplinary procedures for those organizations that found themselves out of compliance
Title IV. Enhanced Financial Disclosures
-requires companies to provide enhanced disclosures, including a report on the effectiveness of internal controls and procedures for financial reporting and disclosures covering off-balance sheet transactions
Title VI. Commission Resources and Authority
-provides additional funding and authority to the SEC (securities and exchange commission) to follow through on all the new responsibilities outlines in the act
Title IX. White-Collar Crime Penalty Enhancements
-Provides that any person who attempts to commit white collar crimes will be treated under the law as if the person had committed the crime
Title X. Corporate Tax Returns
-Conveys the sense of the Senate that the CEO should sign a company's federal income tax return
The Dodd-Frank Wall Street Reform and Consumer Protection Act
Legislation that was promoted as the "fix" for the extreme mismanagement of risk in the financial sector that led to a global financial crisis in 2008-2010
The consumer financial protection bureau (CFPB)
A government agency within the Federal Reserve that oversees financial products and services
-examine and enforce regulations for banks and credit unions with assets over $10 billion
-creation of new office Financial Literacy
-creation of national consumer complaint hotline
-consolidation of all consumer protection responsibilities
The financial stability oversight council
A government agency established to prevent banks from failing and otherwise threatening the stability of the U.S. economy
Empowered to act if a bank with more than $50 billion in assets "poses a grave threat to the financial stability of the U.S."
The Volker Rule
limit the ability of banks to trade on their own accounts (termed proprietary trading)