Creating a Successful Corporate Culture after a Merger - PowerPoint Presentation Example

Creating a Successful Corporate Culture after a Merger Introduction The current US business environment is very promisingand analysts have noted on several occasions that it has a significant impact on the rest of the economies across the world because of its large size. The United States of America, from its historical prowess in seeing to the creation of large fortunes by its residents, has been christened the land of dreams, the land of the free or the land of opportunity (Lau & Johnson, 2013). With people flocking to this vast country to tap into the many opportunities it offers, there is a great struggle to reach the limelight and get recognition for one’s efforts before the next person does. It, therefore, has culminated into a cutthroat type of competition where the aim is to reach the pinnacle in riches and power before anything and anybody else. Since the slots at the top are few and limited in number, short-cuts and illegal means among them fraud and insider trading are sought by any people in this country in their daily bid to realize their dream of greatness. Purpose of the Memo It is thus with a great urge that I write to the chairperson of the Securities and Exchange Commission with proposals whose aim is to minimize cases of fraud, insider trading and unlawful actions by people and business with the intentions of making quick money. The main aim of this proposal is to contribute to the Securities and Exchange Commission’s efforts towards reining in fraudsters and insider trading who plunder other people into poverty. The commission’s efforts cannot be assumed to have been useless in any way since they have prevented most of the cases that would have caused damage to the whole financial sector (Mallor, Barnes, Bowers & Langvardt, 2012). It replaces some existent rules and regulations in place since they have evidently failed to rein in the criminals and, most importantly, managing financial crimes as displayed by the 2008 global recession. Findings of numerous research studies on the 2008 global recession indicate that the spending behavior of US citizens and the laxity of the Securities and Exchange Commission are responsible for the recession. It should be put into consideration that the main aim of all regulatory bodies in this sector should be the prevention of the crimes since, as they say, prevention is better than cure. The Current Laws The United States government has made enormous efforts towards handling the issue of financial crimes by setting the Securities and Exchange Commission which has established a number of rules governing the US business environment to see to a balanced business environment for all business participants. Among these rules are those against the illegal type of insider trading and fraudulent activities in general. For instance, Rule 10b5-1 prohibits insider trading by stating that it is illegal for individual to engage in a trade arrangement using non-public information. However, the rule permeates individuals to only trade under special instances in which there is lack of knowledge that the information was non-public. Moreover, the actions of the trader must be in good faith. The second rule by the Securities and Exchange Commission meant to curb illegal insider trading is the Rule 10b5-2. It is a rule clarifying how the misappropriation theory applies to certain non-business relationships. The rule states that individuals with the privilege of access to confidential information have the obligation to maintain the privacy and confidentiality of such information. Persons violating the law are liable for breach of information confidentiality as outlined by the misappropriation theory. The Securities and Exchange Commission has established several measures targeting at minimizing the level of financial fraud in major areas of the US business industry. These include the use of people who have inside information on the fraudulent cases being undertaken by companies who tip the Securities and Exchange Commission and thus enable rapid movement to curb the acts (Mallor, Barnes, Bowers & Langvardt, 2012). Another way is the carrying out of surprise exams of the suspect companies’ assets to gauge if the records given by the companies are true and verifiable. The Securities and Exchange Commission also uses third party reviews of companies since this gives a true picture of what a company’s health is like. The Securities and Exchange Commission, in June 2001, proposed rules aimed at bettering the protection of customer assets in the broker’s hands. The rules proposed included audit enhancements that strengthen the evidence for the brokers’ ability to securely take care of their clients’ assets. Auditors are also to be given better and deeper access to the firm in question’s records to ascertain the truth of the reports put forth. The use of custody reports was also proposed as a measure of increasing transparency in broker-dealer transactions to enable the focusing of efforts on the party in whose custody the assets are. The Securities and Exchange Commission also plans to improve risk assessment capabilities to identify areas of risk in the markets and to investors. The SEC requires it that all firms conduct risk-based examinations to minimize the exposure to financial risks that investors’ assets are exposed to. Fraud detection procedures, which are the Securities and Exchange Commission’s main bet in the fight against fraud, are improved now and then even though fraudsters always seem to have an upper hand in the end. The Securities and Exchange Commission has also recruited staff members with specialized skills that ensure fraud rarely goes unnoticed. These include senior specialized examiners and additional staff with capital markets expertise. The expansion and targeting of training by the Securities and Exchange Commission has been a longtime activity whose has always been equipping staff at the Securities and Exchange Commission with skills that shall enable them detect fraudulent activities with increasing ease. Improving the internal controls in companies, advocating for a whistleblower program, seeking more resources and integrating broker-dealer and investment adviser examinations are among the various ways the Securities and Exchange Commission has strived to improve the business environment by eliminating the barriers set up by fraudulent activities of some business units against other parties (Reed, Shedd, Morehead & Pagnattaro, 2009). Proposed Solutions to the Same Problems Even with the increased efforts towards the curbing of by the Securities and Exchange Commission, there exist many loopholes in the current and proposed laws which are utilized in many cases by those intend on committing acts of fraud for personal gain. Many such cases arose in the period around 2008. The first one, termed the Fraud of the Century, was by Bernard Lawrence Madoff, known as Bernie Madoff by the general public. This involved a $50 billion Ponzi scheme that ended up badly when he was found out. Another notable case was the arrest and conviction of the Galleon manager Raj Rajaratnam who was charged with insider trading. His brother, Rengan Rajaratnam, is also under investigation for aiding his brother try to get away with insider trading (Reed, Shedd, Morehead & Pagnattaro, 2009). Around the same time, Berkshire Hathaway, the company whose chief executive is a living legend when it comes to investing, had one of the most shaming incidences in the history of its existence. David Sokol, a Berkshire executive, traded in the Librizol stoke just before pitching it to his boss. It was insider trading and led to his dismissal as an employee at Berkshire Hathaway. Proposed Changes A counter argument can be made in response to the Securities and Exchange Commission’s Rule 10b5-1 which permits individuals to trade in specific cases where there is clarity as to the information they are aware of not being a factor in the decision to trade. This is vague in many ways since it is quite easy justifying one’s decision and possession of information to being publicly known information. There have been many cases where the courts failed to convict a criminal whose guilt is quite clear from the evidence against him but this law has been used to set them free. In saying, for example, that information is public knowledge it means the average person not too keen on financial news is also aware of the news in question. Anybody with a little sanity could argue that they based their trading decision on deep research. The vagueness and ambiguity in this law should therefore be done away with especially with regard to the definition of public information and what it entails. The second law by the SEC is Rule 10b5-2 whose weakness is easily discernable. While the rule provides that a person receiving confidential information should owe the other party a duty of trust and confidence and thus be liable under the misappropriation theory, it should known that classifying information as sensitive could be ambiguous in one way or the other (Reed, Shedd, Morehead & Pagnattaro, 2009). The validity of information considered as sensitive is also another hurdle since information gets out of use after a while. An inside trader therefore found to have shared sensitive information could use the ambiguity of the same statement to wriggle himself out of the case. This rule should thus be put under more scrutiny to define the terms in it well and ensure that no loopholes exist that may allow the stealing of innocent investors’ assets. Another effort put into place by the Securities and Exchange Commission that needs to be revamped is its use of insiders in the business that are suspected of carrying out fraudulent activities. Promising the insiders of reduction in sanctions upon their giving of truthful information is deemed to fail in many cases. Rarely are people who work for a given firm willing to leak information to outside parties even with such promises of reducing the sanctions they could face. What may happen in such cases is that the insiders may be identified long before they get any meaningful information and, given that these insiders went to these firms originally to seek livelihoods, they would fear their job security and report the wrong information just to get along and be labeled as useful to the SEC and harmless to society (Miller & Jentz, 2010). Instead, what should be done to get such information is the better use of the other means of revealing a firm’s true health. These include the use of surprise audits and so on. Insiders also fear for their lives and, on a great degree, for their employability since no employer would hire a candidate who has a history of being an insider. With the ever-increasing cases of fraud and insider trading, the Securities and Exchange Commission has put into place measures to safeguard investors’ assets but most of these measures have fallen short of their expectations. Such a flawed measure is the dependence on the reports of auditors to determine the health and safety of investors’ assets. Auditors, like any other person undertaking a business, aim to keep a good name for themselves and their business. This is a normal thing to do in their aim to acquire and keep more companies using their services. It is thus quite plain that whatever results these auditors relay to the Securities and Exchange Commission are biased to save their businesses and ensure future contracts come their way. The best solution for this would be using auditors hired not by the companies under scrutiny but by the government through the Securities and Exchange Commission. This shall reduce fraud cases to a great extent if done correctly. Staffing is one of the main reasons the Securities and Exchange Commission isn’t very effective in curbing crimes committed in the financial arena. The staff members in this watchdog of an organization have little skills that will enable them find crimes while under development and, if already done, trace them to the original culprits. A case is given in which Bruno Iksil, a JP Morgan trader based in London made a huge trading loss by poorly controlling his risk. The loss, which is estimated at about $6 billion, was mostly customer funds that, up to now, are yet to be returned in full (Meiners, Ringleb & Edwards, 2011). The important thing here though is that Bruno, nicknamed the London Whale, is still at large and enjoys his freedom even more than his innocent counterparts. If the Securities and Exchange Commission had staff with enough skills to read into criminal minds and drag them to justice, the culprits would be more careful in handling investors’ assets and thus reduce on the frequency of ripping off of customers in the form of investors. Conclusion In conclusion, the issue of taking care of customer funds by many companies is a crucial one since they expect that by investing they will get profits in return. What many fraudsters and other criminals in the financial sector don’t put in mind is that so little of the money they steal belongs to individual companies. A huge chunk of it is investors’ money. The bodies in control, among them the Securities and Exchange Commission, the United States government and other bodies with vested interest in the goings-on in the business world are doing commendable work in this sector (Mallor, Barnes, Bowers & Langvardt, 2012). The main problem is that the rules in place have many loopholes that are used by would-be culprits to siphon money from the institutions and, in Bruno Iksil’s case, get away with losing investors’ money. Great efforts should be made in amending the existent rules and creating new ones all with the aim of catching thieves who, like in the year 2008, plunged the whole world in to a severe recession all with the aim of personal gain. What remains to be done is the implementation of the rules with the best trained staff the system can afford. References Lau, T & Johnson, L. (2013). The Legal and Ethical Environment of Business, v. 1.0. New York: Flatworld Knowledge. Mallor, J., Barnes, J., Bowers, T. & Langvardt, A. (2012). Business Law. New York: McGraw- Hill Education. Meiners, R., Ringleb, A. & Edwards, F. (2011). The Legal Environment of Business. New York: Cengage Learning. Miller, R & Jentz, G. (2010). Business Law Today: The Essentials. New York: Cengage Learning. Reed, O., Shedd, P., Morehead, J. & Pagnattaro, M. (2009). The Legal and Regulatory Environment of Business. Chicago: McGraw-Hill. Read More