Corporate Ethics

Ethical corporate behaviour has been a matter of disputes for the world of business for many years. Rational capitalists, starting wit Henry Ford, realized that a better paid workforce would be more loyal and would be able to buy more goods and services, and that a better educated work force would be more efficient one. This practice emphasizes corporate responsibity to workers.

Corporates should be responsible to the society and shareholders too. Following the scandals with the major corporations both in the USA and Europe in 2002 the Sarbanes-Oxley Act was adopted. It regulates the auditing standards and establishes White Collar Crime Penalty Enhancements. It also implies corporate responsibility for financial reports. The CEO (chief executive officer) and CFO (chief financial officer) shall prepare a statement to accompany the audit report to certify the "appropriateness of the financial statements and disclosures contained in the periodic report." A violation of this section must be intentional to give rise to liability.

But Russia is far from instituting a mandatory law for corporate governance. The existing Corporate Governance Code for the Russian Federation is only recommendatory in nature.

This is because there are few small investors in Russia, as opposed to the United States, where legislation is needed to protect individual investors.

In addition to legislation, Russian analysts highlight many obstacles to the rise of a culture of corporate governance in Russia, such as mentality and the lack of independent directors.

As one of the members of the Association of Independent Directors noted that corporate governance is not an end, but a means of capitalization and achieving transparency for a company. "The more independent observers there are in Russia, the better indicator that Russia is on the Western track, or the generally accepted track....".

Differences in mentality include the concept of whistle blowing named by the American professor as a positive element of corporate governance. As they said, American whistle blowing could never be implemented as a mechanism of corporate governance in Russia because it is not seen as a way of ensuring transparency, but as snitching.

Insider trading, one target of the Sarbanes-Oxley Act, is also viewed differently in Russia.

As one businessman put it, how can business be expected to implement corporate governance measures in a country where governors and legislators are elected by affiliation with the president’s party?

However, many companies realize the necessity to establish their mission statements and develop their codes of practices.

1 Find English equivalents for the following words:

вступление (в партию)/ незаконные операции с ценными бумагами на основе внутренней информации о деятельности компании/ вызывать ответственность/ доносы/ прозрачность/ принудительный/ нарушение закона/ осведомительство

2 Answer the questions:

What is rational capitalism?

What does the Sarbanes-Oxley Act imply?

What are the obstacles to raise corporate culture in Russia?

Up to you…

Do you think that these activities conform to the basic rules of society or not?

1. Undertaking “profit smoothing”, i.e. using all the techniques of “creative accounting” to hide big variations in profit figures from year to year, and threatening to replace the auditors if they object.

2.Telling only half the truth in advertisements, or exaggerating a great deal, or keeping quiet about the bad aspects of a product.

Links

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Дата добавления: 2015-11-14