Definition and Requirements for Code of Ethics under SOX - Essay Example

Definition and requirements for of ethics under SOX Sarbanes Oxley Act was enacted after the two biggest corporate scandals in the history of United States. In the wake of the same, Congress enforced the Sarbanes Oxley Act to outline some necessary regulatory requirements regarding corporate governance and other issues in order to bring in more transparency into the system. Based on this, Sarbanes Oxley Act required the development of code of ethics for each public limited company. According to Section 406 and 407, there are now requirements in place for developing a code of ethics by the companies to follow. The section outlines code of ethics as Standard that promote: (gsm, 2008) 1. honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; 2. full, fair, accurate, timely, and understandable disclosure in the periodic reports required to be filed by the issuer; and 3. Compliance with applicable governmental rules and regulations. 4. Prompt internal reporting of code violations to “an appropriate person or persons” identified in the code; and 5. Accountability for adherence to the code. Accordingly the act requires that company must develop separate code of ethics for each officer placed on the strategic position including CEO, Financial Officer etc. Three companies which we are exploring are Wal-Mart Shell Ford Motors Wal-Mart Wal-Mart’s code of ethics include their responsibilities towards shareholders including duties to shareholders, financial integrity, conflict of interest, policies on gifts and gratuities, trade secrets, insider dealings, Wal-Mart Assets as well as media statements. Further the code of ethics includes responsibilities of the Wal-Mart towards their fellow associates and finally their responsibilities towards their customers, suppliers, government and communities. I believe that code include more or less all the requirements under the SOX since it is detailed in outlining the honest and ethical conduct of the Wal-Mart including its insider trading, its relationships with the associates, their responsibility towards the government in filing the various reports besides abiding the laws and finally the accountability policies. I believe that if Wal-Mart need to do business globally, it needs to incorporate the cultural challenges it will face regarding its association with its employees. What is missing in the code of conduct for Wal-Mart is the non-awareness with the various cultural aspects of doing business globally as it fail to clearly outline how the employees in international business setting will be dealt. Shell The code first outlines the various positions to which it applies and it includes the association of ethical responsibilities to the Chief Executive Officer, Chief Financial Officer and other executives of the group. It binds that all of the person under the code of ethics to act in accordance with the highest standards of honesty, integrity and fairness besides discussing the situations where the addressee must excuse himself or self from falling into a situation which can create conflict of interest. On the whole, the code includes almost all the requirements required under SOX to be adapted by the companies. Though the code is bit short however it is adequate according to the SOX requirements. It not includes and brings in various executives of the group under the code of ethics as required by the act but also further advocates and bind other ethical conditions on the company and several of its executives to act in accordance with the code of ethics as outlines. Since Shell is involved into the global business therefore it must take into account the various cultural aspects into its code of ethics where it works. Especially in developing countries, most of the people view oil as their indigenous resource therefore Shell must balance all the stakeholders into its code of ethics. Probably what is missing from Shell’s code of ethics is how it will dealing with the foreign governments in which it works. It must clearly outline about its ethical policies regarding bribes, kickbacks etc. (Shell, 2008). Ford Motors The code of ethics of Ford Motors includes six broad areas outlining the ethical responsibilities of the company. These include conflict of interest, corporate opportunities, Confidentiality, Compliance with laws and regulations, encouraging the reporting of unethical behaviors and finally outlining compliance procedures. The code seems to be adequate with respect to the Sarbanes Oxley as it fulfills all the requirements of the code. I believe the code of Ford Motors is so comprehensive that it may not require any big changes to make it customized globally to account for any cultural changes. Part II Summarization of various Management activities. Planning Planning is a process of setting goals, developing strategies, and outlining tasks and schedules to accomplish the goals. (www.investorword.com, 2008). Planning is therefore a process which allows organizations to take into the existing situation whether internal or external and use to it plans its future activities so that the set goals can be achieved. Our company, Wal-mart plans its many different tasks and activities. Since Wal-Mart is a retail store chain therefore it has to plan the inventory handling so that to ensure the proper level of inventory to be present in the stores at every time and customers do not go away without buying it. Organizing Organizing is a process whereby organizations organize various resources for their most optimum use. It is achieved by putting the resources in their most efficient way. “Organizing can be viewed as the activities to collect and configure resources in order to implement plans in a highly effective and efficient fashion. Organizing is a broad set of activities, and often considered one of the major functions of management. Therefore, there are a wide variety of topics in organizing. The following are some of the major types of organizing required in a business organization.” Shell since work internationally and has to coordinate various resources, therefore Shell organizes its various activities in order to achieve the best fit within the organization. Some of The organizational activities include coordination between tanker suppliers to supply the gasoline at time to the petrol pumps, organizations of various resources to shift the oil from refineries to the Shell for onward sell to the dealers. Leading In its essence, leading means getting things done through other people. A good leader is always a one who leads in a way that organizational resources including the people provide their best output to the organization. Leaders derive their power to lead from various sources including personal charisma and knowledge power. Considering Microsoft as our example, it has remained one of those companies which have a very strong leadership at its back in the shape of Bill Gates. The leadership of Bill Gates proved probably the only success factor for Microsoft. Controlling Controlling Process is directly related with the planning process as it allows organizations to control the plans that they have made. Besides controlling the planning, controlling is also used in the connotation of controlling people and resources. “The controlling process ensures that plans are being implemented properly. In the functions of management cycle - planning, organizing, directing, and controlling - planning moves forward into all the other functions, and controlling reaches back. Controlling is the final link in the functional chain of management activities and brings the functions of management cycle full circle.” (Allen, 1998). Toyota is one such company which is famous for its inventory controlling processes. Pioneering the art of Just in Time, it is being considered as the firm best at controlling its inventory. Since the basic aim of Toyota is to reduce inventories and thus costs associated with it therefore they developed plans to effectively control the flow of inventory into the organization so that its cost can be minimized by retaining no inventory at one point in time. Part III “Franchising is a method of doing business wherein a "franchisor" authorizes proven methods of doing business to a "franchisee" for a fee and a percentage of sales or profits. Various tangibles and intangibles such as national or international advertising, training, and other support services are commonly made available by the franchisor, and may indeed be required by the franchisor, which generally requires audited books, and may subject the franchisee or the outlet to periodic and surprise spot checks. Failure of such tests typically involves non-renewal or cancellation of franchise rights.” (Wikipedia, 2008) Franchising is different from starting up business because starting a business from scratch would involve gathering up all the resources in order to start the business. However, in Franchising, almost all the resources are being identified by the firm which provides its franchise to the next firm. Take an example of McDonalds which sell its franchises however at the same time it also outlines the marketing, finance as well as operational activities to the Franchisee also to follow and a failure of which can cancel the franchise whereas on the other hand, starting up business from the scratch would not only involve to develop the brands from the scratch but also to develop marketing and all other activities from the beginning. Franchising provide a benefit of the branding the franchisee and as such firms do not require any extra efforts to develop the associated management activities. Location Franchise location matters a lot as corporate culture provides a very important and critical success factor for the franchise. The corporate culture of the franchise and non franchise differ mainly due to the fact that franchises are sort of original brands therefore they have to retain a certain level of corporate standards to work. Most of the time, franchisee firm have to follow strict rules and procedures as outlined by the franchising firms to follow as it carries their brand name. Thus in order to retain a brand image, a corporate culture regarding the location of the franchise is not only different but also necessary for the former. 3 ) Dear I do not know which text book you follow and what is exhibit 9-3. Please do that portion yourself. References Allen, G. (1998). Controlling. Retrieved April 13, 2008, from http://telecollege.dcccd.edu: http://telecollege.dcccd.edu/mgmt1374/book_contents/5controlling/ctrlproc/ctrl_process.htm gsm. (2008). Sarbanes-Oxley Act 2002. Retrieved April 12, 2008, from Glaxo Smith Kline: http://www.gsk.com/about/corp-gov-sarb-oxley.htm Shell. (2008). Code of Ethics. Retrieved April 13, 2008, from Shell: http://www.shell.com/home/content/investor-en/company_information/code_of_ethics/code_of_ethics.html Wikipedia. (2008). Franchising. Retrieved April 13, 2008, from Wikipedia: http://en.wikipedia.org/wiki/Franchising www.investorword.com. (2008). Planning. Retrieved April 12, 2008, from Investor World: http://www.investorwords.com/3710/planning.html Read More