Month: December 2008

Writing a Company’s Code of Ethics

W. Michael Hoffman of the Center for Business Ethics at Bentley College penned a 1999 Writing a Company’s Code of Ethics for Perspectives on the Professions.

If employees are not brought into the process in some such way as I have suggested, they will be turned off. The code will seem something “they” have imposed on “us”. That’s not what ethics should be. Ethics should be part of an organizational community. Everything should be done to make employees see that having a code of ethics can strengthen the ethical environment in which they work, as well as protect the company legally. Everything should be done to make employees understand that the code is subject to change, revision, and renewal – and that they will have a part. So, in a sense, the code is never finished.

Software License Compliance

Mike Sisco of Cutter Consortium wrote a case study on what to do about a softwre license problem in the context of an M&A transaction: Compliance Problems? Address All Issues Quickly.

If you encounter software license compliance problems in an M&A transaction, there are two ways to resolve the problem:

  1. Point out the problem to the acquisition target and have the company resolve the issue before the merger is transacted.
  2. Build an action item to resolve the issue into your IT due diligence plan and budget. In other words, take care of the problem soon after the merger transaction is completed.

Ethical Relativism

Ethical Relativism is a theory that morality is relative to the norms of one’s culture. The same action may be morally right in one society but may be morally wrong in another.

One of the arguments against ethical relativism is that universal moral standards can exist even if some moral beliefs vary among societies.

In the case of compliance, US laws are mandating high levels of business practices. The problem is often what to do in other societies. In Japan you have to think about what to do with the Yakuza, in Russia you need to worry about everyone. How do you operate a business with high ethical standards in these countries? Should you?

Is There More White Collar Crime Today?

Sam E. Antar, the convicted felon and former CEO of Crazy Eddie, puts forth the theory that the bad economy is accusing white collar crimes to float to the surface: Is there really more white collar crime today? No.

The Madoff scheme is an example of a scheme that fell apart whent he markets went south. A combination of decreased asset value (at least the few that he actually had) and increased redemptions due to the declining markets prevented him from being able to cover up the scheme.

Mr. Antar draws the parallel to the NYPD pulling more bodies out of the water during the spring months than other months. The warmer spring water just makes them float. The bodies sink in the colder winter months.

The current crash in economic markets is going to cause more bodies to float.

Siemens to Pay Huge Fine in Bribery Inquiry

The DOJ’s Information charging Siemens in the biggest FCPA enforcement action ever tells of more than 4,000 payments worth at least $1.4 billion to foreign officials to obtain or retain business. Siemens also had systematic and intentional violations of the internal controls and books and records provisions that might have prevented or detected the corrupt payments.

Unfortunately, the DOJ is not charging Siemens under the anti-bribery provisions of the FCPA. This would have barred them as a government contractor.

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Red Flags in the Madoff Case

Gregory Zuckerman of the Wall Street Journal put together a story on the Multiple Red Flags in Madoff Case.

  • Steady returns  in every kind of market
  • Operated as a broker dealer with an asset management division. Why not simply act as a hedge fund and pocket big gains, rather than profit from trading commissions. “Why work your magic for pennies on the dollar?”
  • No independent custodian involved who could prove the existence of assets
  • Blatant conflict of interest with a manager using a related-party broker-dealer
  • The size of the fund was enormous compared the market in which it operated
  • Questions about where the assets were
  • Used a small auditing firm
  • Inadequate number of employees in relation to the purported size of the operation
  • Inadequate office space in relation to the purported size of the operation
  • Clients did not have electronic access to their trading files
  • Clients experienced delays in getting their money back
  • Madoff would tell you nothing about how he achieved his returns
  • Lack of transparency

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The Contribution Revolution

Harvard Business ReviewThe October issue of the Harvard Business Review has an article by Scott Clark: The Contribution Revolution – Letting Volunteers Build Your Business. Mr. Clark challenges companies to tap into the contributions of people beyond their organizations. (He has clearly driven the Kool-Aid offered by Don Tapscott in Wikinomics.)

One section caught my attention:

I also began to see that user contributions are fueling some of the world’s fastest-growing and most competitively advantaged organizations—in some cases revolutionizing the economics of entire industries by radically shrinking their cost structures. Think of eBay, which opened as an online store with no inventory, leaving it up to customers to fill its “shelves” with goods to sell. Or Wikipedia, which gutted the value proposition of 230-year-old Encyclopaedia Britannica by offering a free encyclopedia written and updated frequently by unpaid amateurs. [I added the emphasis on these last two words.]

I understand the use of “unpaid” or “amateur”, but not both. People are clearly volunterring their time and energy using web 2.0 tools. Authors and editors do not get paid to contribute to wikipedia. I do not get paid to write this blog. That does not mean I am an “unpaid amateur.” Many of the contributers to wikipedia are experts in those fields. They are not “amateurs.”