"Issues in the Governance of Business: The Aftermath

of America's Sarbanes-Oxley Act of 2002"

Aliza Racelis, PhDCollege of Business,

U.P. Diliman

• Businesses make the goods and services you use each day.

• The U.S. is the largest producer of goods and services in the world. Americans consume more than any other country.

• All businesses worldwide produce more than $40 trillion of goods and services.

• U.S. businesses are responsible for almost 29 percent of world production. Nearly 24 million full- and part-time businesses produce those goods and services.

BACKGROUND

• Businesses, therefore, play a major role in keeping any economy alive.

• It is, therefore, necessary to ensure the proper and ethical governance of businesses.

BACKGROUND

• increasing pressure on the corporate world - accountability failures leading to bankruptcies and restatements of financial statements. • crisis of investor confidence (Racelis, 2010; Walker, 2005).

BACKGROUND

As a reaction to a number of major corporate and accounting

scandals including those affecting Enron, Tyco

International, Adelphia, Peregrine Systems, and

WorldCom, the Sarbanes–Oxley, Sarbox or SOX was

enacted in 2002.

In response to the perception that stricter financial governance laws are needed, SOX-type laws have been subsequently enacted in Japan, German, France, Italy, Australia, India, South Africa, Turkey and the Philippines.

• Organization for Economic Cooperation and Development (OECD),

• Philippines Code of Corporate Governance (Echanis, 2006; Wong, 2009) (Philippine Management Review).

•A significant body of academic research and opinion exists regarding the costs and benefits of SOX, with significant differences in conclusions. Debates continue over the perceived benefits and costs of SOX.

•…businesses should be more keenly aware of the need to practice genuine corporate social responsibility and to aim at true sustainable development.

When the ethics of business is not properly and sufficiently discussed, businessmen may become oblivious to their social responsibility:

• responsibility to consumers as manufacturers of ethical goods,

• responsibility to human resources as employers,

• responsibility to the environment as ecological caretakers, and

• responsibility to society as economic agents aiding in the achievement of economic development.

This presentation: social and ethical aspects of business!

• in the realm of production of goods that are truly good and rendering of services that truly serve,

• in the ethics of care with which business looks after human capital, and

• in the realm of moral education.

Are companies producing goods that are truly good and rendering

services that truly serve?

‘‘The Parable of the Sadhu,’’ describes a Wall Street executive who (by his own acknowledgment) lost his sense of humanity on a Himalayan mountain-climbing expedition (McCoy, 1983).

‘‘The Parable of the Sadhu’’ describes a Wall Street executive who lost his sense of humanity on a Himalayan mountain-climbing expedition (McCoy, 1983).

Do businesses exercise an ethics of care when looking after human capital? Do companies appreciate the task of promoting the true good of the whole person?

Positive Dimensions of Population Growth

https://sites.google.com/site/positivedimensionsofpopulation/

“We cannot give in to the ‘population bomb’ scare —the widespread use and dissemination of artificial contraceptives, which in reality eventually lead to more abortions, divorces, destruction of family life, etc.—, for this can have serious economic consequences for the long-term and sustainable development of human societies, apart from not treating any medical condition (Villegas, 2011).”

• “Ethics of care”: ethical management of human resources.

• Human capital —referring to the skills and knowledge that can make every person productive— is known to bear an important correlation with performance and growth.

In the study of the so-called “Bottom-of-the-Pyramid” (BOP) market, it has been suggested that it may be more morally correct to deal with the BOP markets in such a way as to make them productive suppliers or employees, instead of the more manipulative strategy of milking the poor

The significance of human capital was further emphasized when Human Development Index (HDI) was introduced in the early 90’s:“Development is not only about national income but primarily about improving people’s capabilities and well being. The most essential of these aspects are the capacity to have access to education, to have long and healthy life, and to lead a decent standard of living.”

• Considering that several nations are perilously close to what population experts call an irreversible demographic decline, there is no need for any State-sponsored population control program which can be counter-productive over the long run, as can be gleaned from the demographic crisis being faced by such countries as Singapore and Japan.

Augmenting human capital by expanding education, improving health conditions, and creating an economic environment have greater returns that can be generated by the world’s human resources (Villegas, 2011).

The increasing popularity of the Human Development Index (HDI) has opened the eyes of many that a rapid growth of GDP may lead to more human misery if it is not accompanied by a more equitable distribution of income and wealth as well as increased access to education and health among the masses. Lord Peter Bauer: “worries about population growth reflect a patronizing view that the poor are incapable of making sensible choices about having children…”

Lord Peter Thomas Bauerhttp://www.economist.com/node/1109786

Are companies led by individuals who are true

servant leaders ?

Collaboration and solidarity; Public-private partnerships (PPP):

Do corporations exercise sufficient solidarity so as to make those public-private partnerships work for the benefit of society, especially the excluded?

Are business schools addressing the need for a fine-tuned moral education and responding to the demand to redress unsustainable business practices?

These, and more, ought to be matters for reflection among business leaders, in America and elsewhere.

aliza.racelis@up.edu.ph

THANK YOU!