Code of Ethics of Universal American Company - Essay Example

Essay Company Analysis: of Ethics of Universal American Company September 30, Introduction The Universal American Corporation is a specialty health and life insurance holding company engaged in providing health insurance and managed care products to the senior population in America. This company is licensed to sell life and accident insurance as well as annuities in all the 50 states and the District of Columbia (Reuters, 2012.) The company offers a range of insurance products. It is publicly traded in New York Consolidated and holds office also in New York City. In 2009, it has been ranked as one of the top companies of Fortune’s 500 largest companies. Since the nature of the business is one that holds trust of investors and its clients, and of the privacy of health information, company falls under the jurisdiction of the Sarbanes-Oakley Law that requires correct submission of financial reports to SEC and the state and federal state laws on secrecy. The Sarbanes-Oakley Law was created to reestablish trust and confidence of investors which became very low as a result of three financial scandals that resulted to the loss of trillions of pesos between 2000 and 2002. For this reason, the UMC had to maintain a Code of Ethics principally designed for the principal executives and senior financial officers. This code of ethics is supposed to comply with the requirements of Sec. 406 of Sarbanes-Oakley Act of 2002 and is not meant to replace the Company Code of Ethics updated in 2012. (Universal American Corp. (b), 2012) Company Code of ethics 2012 is applied to all employees of the company, officers and directors including its subsidiary (Universal American Corp., 2012) and is being reviewed annually for applicable modifications. Latest modification is done in November 2011. a) Why Ethics? Business ethics been defined as a behavior that business holds on in its everyday dealings with the world. The Code of Ethics of UAC has been designed to “promote honest, ethical, and lawful conduct of all employees, officers, and directors of the corporation. It has been proposed to make the employees understand the ethical business standards of the company, and to make them aware of the legal and ethical issues they may encounter in the performance of their duties”. It is serves as a reminder of their ethical duty to protect their stakeholders. b) The View from the Top The First Code of ethics of the Universal American Corporation applies to its Chief Executive Officer, Chief Financial Officers and other principal officers; the other one is for all its employees and subsidiaries. Both of the Codes aim to prevent unlawful activity and intend to promote honest and ethical conduct in the management of the day to day activities of the company. It also requires fair, truthful and full disclosure of reports filed with SEC; compliance with governmental policies, prompt internal reporting of any violations to the Code, and accountability of adherence to the code. II) Ethics – How to Do it a) Ethics programs – what are they? An ethics program is defined as a systematic approach to raise ethical awareness of an employee, provides guides and education on ethics and having available resources to assist in identifying and resolving ethical issues b) Ethics programs – what makes them work? Adherence to the code is guided by government policies, whereas heavy fines are implemented. The 2012 UAV code encourages communication so that employees will be guided properly. Strict management sanctions are given to those who do not follow including loss of job. Furthermore, the company is obliged by the Federal and State Law to abide with the privacy of Protected Health Information so that ethical guidelines are important. c) Management support The Code says it is the duty of the company to protect those who report unlawful acts in order to prevent retaliation. A Disclosure Committee is created wherein officers and employees can bring to their attention any relevant information. This constitutes the act of “Whistle Blowing”. The Board of Directors, upon implementing proper procedures determines if an employee is guilty of violation. Whereupon, sanctions maybe demotion, reassignment, suspension, or termination. d) General goals A Code of Ethics is a statement of general rules, business standards and practices. It is often called a mission statement, or a statement of philosophy of the company. Universal American (NYSE: UAM), through the family of healthcare companies, provides health benefits to people with Medicare. The company hopes to achieve this through “healthy collaboration, working together with healthcare professionals in order to improve the health and well-being of our members” (Universal American Corp. (b), 2012). III) Implementation a) Structure The code is based on four ethical principles: respect, integrity, competence, and responsibility. As such the code reflects the fundamental beliefs of the company that guides ethical behavior, reasoning and decisions. The ethical principles are set out as the standards expected from all its employees. b) Standards The ethics principles of the company are guided by the following standards: general respect; privacy and confidentiality; informed consent, self-determination; awareness of professional ethics, ethical decision making, recognizing limits of competence, recognizes impairment, general responsibility, termination and continuity of care, honesty and accuracy, avoiding conflict of interests and exploitation, maintaining personal boundaries, and addressing ethical misconduct. According to the Code, grounds of unethical standards are conflicts of interests, protection and proper use of company assets; theft or misuse of company assets; corporate opportunities, confidential information/privacy; network use, integrity and security, relationships with vendors and customers, trade practice and antitrust compliance; false claims laws; compliance with other laws, rules and regulations, insider trading and fair disclosure, inquiries from the media and the public; foreign corrupt practices act, political contributions and activities, subpoenas and government investigations, international business dealings, maintaining a safe, healthy, and affirmative workplace; accounting practices, books and record, and record retention. The grounds are many, but each has a distinguishing rule that guides employees on its actions. c) Publicizing the commitment A copy of the Code of conduct is given to the employee at the time of hiring. As a company policy, it is one of the conditions of employment wherein the employee must certify that he has received, read, and will comply with all its content. The Code is reviewed or modified annually wherein all employees are informed and again same process is done. d) Communication The Code provides a commitment “to provide full, fair, and accurate disclosure to all public communications and in compliance with existing government laws” (Universal American Corp. (b), 2012). However, employees are not authorized to answer inquiries from media, analysts and investors or from the public. Questions like these should be directed to an appropriate committee, the Code rules. Company provides an open line of officers wherein they can communicate information anytime. e) Training The Code does not have any provision for training. But it is assumed, that the finance officers, directors and executives are professionally trained and have the necessary expertise to keep their jobs and to follow rules. f) Special challenges a. Rewards – Anonymous mechanisms is provided for in the code, whereby the “whistle blower” is protected from any retaliation. There is no promise of reward here since employees are expected to do their job with honesty and integrity. b. Corporate objectives UAC’s objective is to work “collaboratively” with doctors, pharmacists, and other caring professionals in order to improve the health and well-being of members; and to become the top provider of medical service, a leader in underwriting of Medicare Supplement and Medicare plans (Universal American Corp., 2012) c. Supervisors The Code refers to the Principal Officers as the Chief Executive Officer, Chief Financial Officer and other principal financial officers of the company. Each of them are given a copy of the code wherein the have to acknowledge in writing that they have read the code and abide by its terms. A clause is provided that any violation of the code may subject them to discipline, penalties, or dismissal. A list of authorized officers is provided in the Code. Accordingly, it will be the duty of the principal officers to submit a full, fair, and accurate report to the SEC. It will be part of their duty to bring to the attention of authorized committee of the company any information that may be relevant to the company’s disclosure, whereupon a thorough investigation will be done. d. Other problems. The company expands its operations through integration, mergers and creation of subsidiaries. These companies, doctors, and other professionals have their own culture and ideas of ethical standards that might run counter with those of UAC. Mergers create conflict of interests particularly with those from affected companies. Whistle blowers or informants are afraid of retaliatory actions of their supervisors once they bring the matter into open. The burden of proof lies on the informant and this comes to be hard and uneasy. Whistle blowing when brought to open discriminates the informant, and process of legal investigation is long and tedious and might place the informant into jeopardy. One situation that could be seen here as a problem is the “White collar theft”; It is an opportunity open to executives who may take advantage because of their knowledge to private information and his/her ability to manipulate it. White collar theft becomes a risk o management because of the presence of “fraud triangle”. Fraud triangle exists when a employee I under financial pressure; he often rationalizes his fraud, for example, when he teals money from the company, an employee reasons out that “he is just borrowing it”; or there is an open opportunity because there is weakness of internal control (Otto, Rebecca, 25 March 2011). VI. CONCLUSIONS The Code of Ethics of UAC for its executives and financial officers is especially geared toward compliance of certain sections of Sarbanes-Oakley Act of 2002. Per se, the code adheres to the standards set in the regulation in that encourages truthful reporting. Dishonesty in reporting has been the root cause of financial scandals in three big financial companies in 2002. The intention of an ethical standards and code stops unethical practices, and acts as a deterrent to those who will have such intentions in the future. When employees see that the company is strict in its compliance, an atmosphere of obligatory response is created, and compliance becomes automatic. As training provisions are absent in the code, the advise of Salem. George and Franze, Laura can be considered. Specifically it relates to training of employees on complaint procedures and the company’s anti-retaliation commitment. Accordingly, training is needed for those employees “who have the authority to terminate, demote or reassign employees. The entrusted employees must be trained on the type of conduct that would violate the Act and the type of documentation that might help a company from being wrongly accused or convicted” (Universal American Corp., 2012) Strict hiring procedures, should be implemented, observations on any changes on behavior of employee/officer should be done. Observations maybe sudden change of lifestyles, such as being from frugal to being lavish might encourage one’s curiosity. The code of ethics encompasses not only principal officers but the whole community of employees that should follow the ethical standards of the company mainly because it is their duty to protect the company. References Otto, Rebecca. (2011). The Fraud Triangle. Minnesota Office of the State Auditor. Retrieved 30 December 2012 from http://www.osa.state.mn.us/default.aspx?page=20090724.057 Reuters (2012). Universal American Corp. Company Profile. Retrieved 29 September 2012 from http://www.reuters.com/finance/stocks/companyProfile?symbol=UAM Salem, George and Franze, Laura M. (2003). The Whistle-Blower Provisions of the Sarbanes. Oxley Act of 2002. Retrieved 29 September 2012 from http://www.niri.org/Main-Menu Category/advocate/regulations/Sarbanes-Oxley/whistleblowerpr. Universal American Corp. (2012). Company Code of Conduct 2012.[pdf]. Retrieved 29 September 2012 from http://www.universalamerican.com/pdfs/UAM-CodeOfConduct.pdf Universal American Corp. (b). (2012). Code of Ethics for Principal Executives & Senior Financial Officers. Investor Relations. Retrieved 29 September 2012 from http://investor.uafc.com/phoenix.zhtml?c=75985&p=irol-irhome Universal American Corp. (c). (2012). A Healthy Collaboration. Retrieved 29 September 2012 from http://www.universalamerican.com/learn-about-universal-american.aspx Read More