Ethics Officers n Cfo
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Transcript of Ethics Officers n Cfo
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ETHICS OFFICERS AND CFO
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CONT
In the wake of numerous corporate scandals
between 2001-04, even small and medium-sized
companies have begun to appoint ethics officers.
They often report to the Chief Executive Officer and
are responsible for assessing the ethical
implications of the company's activities, making
recommendations regarding the company's ethical
policies, and disseminating information to
employees. They are particularly interested in uncovering or
preventing unethical and illegal actions.3
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CONT
An ethics officer is someone who aligns the
practices of a workplace with the stated ethics and
beliefs of that workplace, holding people
accountable to ethical standards.
Ethics officers are an increasingly common sight in
the business community, and they can also be
found at colleges and universities, where ethical
conduct is often an issue of grave concern for
students and staff. Special qualifications are not required to act as an
ethics officer, although people in this position
generally tend to have excellent ethics. 5
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CONT
Ethics officers perform a number of important tasks.
They can help their employers develop codes of ethics
so that a clear standard is created, and they also
establish clear consequences for violations of these
codes, so that everyone at a company understands thathe or she will be held ethically accountable.
Ethics officers may also enforce ethical codes, and
make adjustments to the code as needed.
One of the roles of an ethics officer is to examine thestated values, mission, and goals of an organization and
to determine whether or not the organization's behavior
actually supports these statements.6
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CONT
A company which claims to behave ethically may
use an ethics officer as a symbol of accountability.
Ethics officers can also be part of the ethical review
boards which review proposed experiments in the
research environment or consider other proposed
activities which may have ethical implications.
In their role as compliance officers, ethics officers
keep an eye on all activities at an organization.
The ethics officer may also be empowered to
undertake investigations into specific employees or
activities to confirm that they conform with the
company's ethical guidelines. 7
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SKILLSREQUIREDBYETHICSOFFICER
An ethics officer is responsible for developing and
enforcing ethical policies within an organization. To
do this job successfully, skills such as:
1. Honesty
2. Fairness
3. Objectivity
4. Professionalism
5. The ability to keep a clear head during times of crisis
are all important skills for an ethics officer to have.6. In addition to these skills, specific training in ethics,
cultural customs and decision-making skills might be
helpful.8
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RESPONSIBILITIES
Identifying the corporate values of the company,incorporating those into a code of ethics
Developing and distributing a code of conduct
Managing ethics and legal compliance program
Assessing the needs and risks of organization wideethics program.
Creating training programs to familiarize employeeswith the company's ethical goals and guiding
employees in making the right decisions whereethics are concerned.
Conducting training program.
Cofidentential service to answer employees9
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CONT
Investigating reports of unethical activity and taking
actions for violation
Creating a system for the reporting of ethical
breaches
Making periodic reports to top executives on the
state of corporate ethical affairs
EO is the key person in your installation of an ethics
culture. This means installing the ethics culture in
employees and management personnel.
Once the culture is installed, the EO does the
preventive maintenance and constant improvement
and monitoring of the system.10
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WHYHAVEAN EO?
The multiplication of regulations and regulatoryauthorities, with which companies now have to deal
The increasingly difficult legal environment placescompanies in a situation fraught with the risk of badpublicity, heavy fines, and maybe even criminalsanctions
Many governmental regulatory bodies or governmentcontracts require the business to have an ethicsprogram with a corporate person of "high managementposition" overseeing the ethics program
A company which claims to behave ethically may use anethics officer as a symbol of accountability, showing thatit does not just pay lip service to the ideal of ethics, butactually has an ethics code in force and appoints peopleto enforce it.
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PROSOFHAVINGANEO
Increases investor confidence in the company
Promotes an ethical culture
Can act as an advisor to employees on ethical dilemmas
Ensures that decisions made by the company are ethical, andprevents potentially damaging decisions
Provides a vehicle for dealing with stakeholder concerns
Provides better protection to shareholders and otherstakeholders
Can identify problems and fix them
Ensures compliance with increasingly complex regulations
Ethical focus may be competitive advantage for the company12
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CONSOFHAVINGANEO
Additional cost to shareholders
EO may not be taken seriously by Senior
Management
Potential conflict of interest (salary & bonuses)
May lead to decisions that do not maximize
shareholder wealth
Could lead to worse behavior if ethical responsibilityis outsourced to the CEO
May create oppressive culture within the company13
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CODEOFETHICS
A code of ethics will start by setting out the values thathighlight the code and will describe a company'sobligation to its stakeholders.
The code is publicly available and addressed to anyonewith an interest in the company's activities and the way itdoes business.
It will include details of how the company plans toimplement its values and vision, as well as guidance tostaff on ethical standards and how to achieve them.
A code of conduct is generally addressed to andintended for employees alone.
It usually sets out restrictions on behavior, and will be farmore compliance or rules focused than value orprinciple focused. 14
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ADOPTIONOF EOS
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CHIEF FINANCIAL OFFICER
The Chief Financial Officer (CFO) of a company orpublic agency is the corporate officer primarilyresponsible for managing the financial risks of thebusiness or agency.
This officer is also responsible for financial planning andrecord-keeping, as well as financial reporting to highermanagement.
In recent years, however, the role has expanded toencompass communicating financial performance andforecasts to the analyst community.
The title is equivalent to finance director, commonlyseen in the United Kingdom. The CFO typically reportsto the Chief Executive Officer, and is frequently amember of the Board of directors. 16
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CFOAND ETHICS
The collapses of Enron, Worldcom, Arthur Andersen, the
Arms deal controversy, the Shabhir Shaik and Jackie
Selebi trials and other cases of fraud and corruption
have brought ethics to the front burner.
The scandals of the 2000s have left the accountingprofession not only with egg on its face, but dented its
reputation as an independent provider of informed
opinion on the state of corporate finances.
Financial practitioners must have the passion for cleangovernance, an uncompromising approach to ethics,
and an absolute pride in sustaining and enhancing the
reputation and trust that they have built over the
decades.17
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CONT
The rise of the profession in recent years has
enabled CFOs to do far more than tend to finances
and financial reporting.
Increasingly, CFOs have a hand in a companys
strategic direction and provide a representative face
to investors and the media.
CFOs are the guardians of company controls and,
often, a partner to the chief executive and member
of the board.
This dual part of steward and strategist accords the
position a unique role in disseminating ideas and
attitudes on ethical practice throughout the firm. 18
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THE CHANGED ROLE OF CFO
The traditional role of the CFO has changed toincorporate a multi-faceted individual who is well-rounded to drive every aspect of the business not justthe finances
The post-Enron and Worldcom world has created theneed for the Finance function to focus more of itsattention on the wider issues relating to enterprise riskmanagement (ERM), and so there has been a shift inthe focus of accountants and CFOs
In terms of ERM, risk and strategy need to be aligned.This means that once strategy choices are made, therisk responses must be identified, accountabilitiesassigned, and implementations monitored.
Thus ERM is integral to strategic planning andperformance assessment
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CONT
oA key challenge for the CFO of today isperformance management
o The CFO needs to ensure growth and improvedproductivity of the entire organization
o Accordingly, performance targets and standardsneed to be set to measure productivity
o Further, creativity and innovativeness needs to be
at the heart of everything we do as accountants andCFOs
o In terms of sustainability the environment is also aconcern. We need to look at the triple bottom line 20
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CFO & ETHICAL DECISIONS
The role of the CFO has become much more diversified.The CFO is no longer just a number cruncher. New rolesand responsibilities include SCM, risk, VFM (Value forMoney), and performance management
In addition, the intense pressures of business may notalways allow the CFO the luxury of much time forreflection, and the high stakes may tempt the CFO tocompromise on compliance issues
Irregular expenditure in terms of non-compliance with
SCM regulations is a key issue facing CFOs right now
CFOs often face difficult ethical dilemmas, for example,housing standards and the financial viability andsustainability of same 21
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CFOSCODEOFETHICS
Embody and enforce the Code of Ethics.
Ensure that this Code of Ethics is communicated at leastannually throughout all financial departments.
Formally and promptly communicate any breach of thisCode of Ethics to the Senior Vice President and General
Counsel.Act at all times with honesty, integrity and
independence, avoiding actual or apparent conflicts ofinterest in personal and professional relationships.
Discuss with the appropriate Senior Management level,
or, in the case of the Chief Executive Officer, with theSenior Vice President and General Counsel, in advanceany transaction that reasonably could be expected togive rise to a conflict of interest.
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CONT
Provide full, fair, accurate, complete, objective,
timely and understandable financial disclosures in
internal reports as well as documents filed or
submitted as public communications.
Comply with all applicable rules and regulations of
central, state, provincial and local governments, the
SEBI, the stock exchanges on which the
Company's stock is listed, and other appropriate
private and public regulatory agencies. Comply with the Company's policies and
procedures.23
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CONT
Act in good faith, responsibly, with due care,
competence, diligence, and without knowingly
misrepresenting material facts or allowing my better
judgment to be subordinated.
Protect and respect the confidentiality of informationacquired in the course of my work except when
authorized or otherwise legally obligated to disclose.
Confidential information acquired in the course of my
work will not be used for personal advantage.
Be recognized as a responsible partner among peers.
Responsibly use and control assets and other resources
employed or entrusted to my supervision.24
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CONCLUSION
The effectiveness of ethics officers in the marketplace is
not clear.
If the appointment is made primarily as a reaction to
legislative requirements, one might expect the efficacy
to be minimal, at least, over the short term. In part, this is because ethical business practices result
from a corporate culture that consistently places value
on ethical behavior, a culture and climate that usually
emanates from the top of the organization.
The mere establishment of a position to oversee ethics
will most likely be insufficient to inculcate ethical
behaviour: a more systemic programme with consistent
support from general management will be necessary. 25
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