Expert answer:Need business and finance help with Regulatory Mea
Answer & Explanation:This assignment contains two elements: a PowerPoint presentation and a white paper.For the PowerPoint presentation, you will examine the Federal Sentencing Guidelines for Organizations (FSGO), the Sarbanes – Oxley Act (SOX), and the Consumer Financial Protection Bureau (CFPB). In your presentation, explain the events that led to each of these regulatory measures and illustrate the impact these laws have had on business ethics. Be sure to include examples in your presentation to support your points. To prepare for this part of the assignment, access and view the following tutorials: http://office.microsoft.com/en-us/powerpoint-help/training-courses-for-powerpoint-2010-HA104039040.aspx and A PowerPoint Tutorial – The Essentials.The presentationMust be 8 slides in length (not including the title slide and references slide) and formatted according to APA style as outlined in the FSB APA guidance located in the classroom.Must include a separate title page with the following:Title of presentationStudent’s nameCourse name and numberInstructor’s nameDate submittedMust use at least two scholarly sources in addition to the course text.Must document all sources in APA style as outlined in the FSB APA guidance located in the classroom.Must include a separate references page that is formatted according to APA style as outlined in the FSB APA guidance located in the classroom.To complete the white paper portion of the assignment, go to the Ashford University Library and select an article or case study that highlights how one or more of these regulatory measures have affected business ethics in an organization. In your paper, explain how the legislation affected the organization as well as how the legislation is intended to reform corporate abuse. You may find the following resource helpful as you work on this portion of your assignment: https://owl.english.purdue.edu/owl/resource/546/1/THE ARTICLE FOR THE WHITE PAPER IS ATTACHED BELOW!!!The paperMust be two double-spaced pages in length (not including title and references pages) and formatted according to APA style as outlined in the FSB APA guidance located in the classroom.Must include a separate title page with the following:Title of paperStudent’s nameCourse name and numberInstructor’s nameDate submittedMust use at least two scholarly sources in addition to the course text.Must document all sources in APA style as outlined in the FSB APA guidance located in the classroom.Must include a separate references page that is formatted according to APA style as outlined in the FSB APA guidance located in the classroom.proquestdocuments_2015_12_08.pdf
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21 July 2015
ProQuest
Table of contents
1. Compliance: an over-looked business strategy……………………………………………………………………………….. 1
Bibliography…………………………………………………………………………………………………………………………………… 15
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Document 1 of 1
Compliance: an over-looked business strategy
Author: Rossi, Clelia L
ProQuest document link
Abstract: The purpose of this paper is to discuss the merits of self-regulation and the art of embedding it within
an organisation, not as a secondary activity but as a core and fundamental business skill that ensures the
survival of a business entity in the long term. The objective is achieved by considering compliance leadership as
a strategy within a modern company. If the highest layer of stewardship of the firm (directors) explicitly accepts
a conventional definition of business ethics (the law, best practice, a set of values in a specific hierarchy), then
the author can measure this agreement and benchmark it against the highest known standards of corporate
governance. Rational shareholders and managers will behave morally and find acceptable categorical
imperatives to govern their behaviour. The delivery and preservation of long-term value demand that firms build
capabilities to self-regulate and co-shape their environment, particularly if highly regulated. The paper suggests
a way to organise the compliance leadership within some well-known business structures and present the idea
that the chief executive officer of a firm who operates in a complex regulatory environment must make
compliance a significant part if not the core element of his or her overall strategy. Some arguments highlighting
weaknesses in the Kantian arguments have not been fully discussed. A global initiative that measures the
relationship between ethical maturity and share price has not been undertaken in the writing of this paper.
Twenty-first century management must ensure the health and resilience of their company’s culture to
successfully manage and overcome the daily ethical questions that arise across all levels and layers of the
organisation as a first priority and that whole business models can be built around this mission. Regulators
should be accountable for recognising cultural crisis within the firms they regulate in order to balance the
reliance on quantitative measurements of success and to navigate the complexity of the largest players in the
market. The paper builds on earlier research by the author that rational norms of behaviour are core business
capabilities that will produce industry leaders that can change the risk landscape of the industries wherein these
firms operate. This new leadership will be demanded by the rational shareholder and will transform firms into
stakeholder firms capable of interacting with their environment and creating and sustaining value over the
longest term.
Full text: Edited Ethics: Corporate Governance and Kantian Scholarship
Edited by Patrick A. McNutt
1 Introduction
In highly regulated environments, the rules of the country, the uncertainty around legislation, insufficient court
precedents, and principle-based jurisdictions have created whole corporate functions whose full-time mission is
to unravel the maze of guidelines and legal requirements and give business leaders assurance as to the
correctness of their decisions. The legal department, the audit function, the risk function, and the compliance
function all aim to become trusted partners of the business. The question is are these aspirations too low? Is
there an ethical deficit? Are these functions ready and able to lead the business and create trust with
stakeholders directly as a result of their prominent role?
Given the amount of technical expertise available to banks in particular, did an ethical deficit become a material
bankruptcy? Why did regulators and regulated alike fail to recognise basic governance problems and why did
alarm bells not ring when reasonable tests like sobriety, x-inefficiency, and bounded rationality clearly indicated
that there were massive agency costs being forced on shareholders and stakeholders alike? The constant need
to increase agency costs and add further layers of monitoring and control reflected the fact that the capabilities
of the firms to understand ethical dilemmas was deteriorating, resulting in a circle of negative findings caused by
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misunderstood regulation which in turn caused additional rules to be created.
The reality is that ethical behaviour is simple to understand but hard to apply across all levels of the
organisation, particularly when the firm does not subscribe to the stakeholder approach. Kant argued about the
dangers of forgetting concepts like duty, harm, and the realities of ethical dilemmas. Despite impressive mission
statements, governance codes, and the inclusion of ethical values in the corporate documents of investment
banks, brokers, traders, and insurers, the realities of what was going on behind closed doors are still sending
shock after shock to the financial markets, and the impact of these business cultures eventually proved to
destroy value in the long-term causing harm to shareholders and stakeholders alike.
The dissection of the root causes behind some of the spectacular failures we have witnessed may present us
with a leadership and strategy challenge, rather than technical and financial re-calibrations. We may be ready to
take guidance from our compliance strategists to re-build trust and recover lost market share, to fill the void left
by many of the now defunct financial institutions, and transpose the analogies and lessons learned to other
highly regulated industries that are highly vulnerable to the loss of public confidence and now more than ever
the ghost of state intervention.
2 Ethical culture of a company
We begin from the premise that a new chief executive officer (CEO) must be ethically aware. He or she must be
able to measure the ability of the current group of managers and employees to carry out a successful long-term
mission from watchful, educated, and, in some cases, emotionally charged stakeholders. The way to measure
this ability is by using a recognised metric to establish an ethical position and ethical goals to aspire that give
him and shareholders confidence that although failures of integrity are possible, they are not probable. Among
the existing metrics that have attempted to become global benchmarks, the ethical maturity index has the
advantage of incorporating the core elements of several existing international and regional governance codes,
and its application can tell us as much about the long-term prospects of a company as its current share price or
dividend policy. This visible way of approaching the ethical culture of the firm sends a powerful message within
and outside the organisation a value statement in itself.
Governance codes can show only a post-facto snapshot in time of the dynamics of human behaviour in a
country, industry, market, or firm. The existence of this tangible set of rules or the social contract of the firm is
essential but represents only part of the picture. The typical role of the compliance leadership has been to
ensure that this formal set of rules is accurate, transparent, public, and updated in real time. Less often, it is
tasked with an assurance role that aspires to understand if the set of identified rules is truly embedded in the
organisation. But, we must go further and make a predictive judgement as to whether the formal framework has
a real opportunity of long-term success given the company structure (addressed under a separate chapter in
this paper) and also given the firm’s ethical culture. It is essential to understand the latter to guarantee a certain
behaviour consistent with the ethical expectations of regulators, shareholders, suppliers, clients, and
consumers. Without this element, the compliance role is much diminished in both its value to the company and
its motivation to the holder of this position of great responsibility. The fact that compliance leaders may have
failed to persuade executive teams to recognise this strategic opportunity is certainly open to criticism. But, it is
equally true that unless the compliance leaders are first perceived as first-choice industry leaders inside the
closed doors of the boards of directors, this will be a difficult opportunity to seize to the detriment of the firm.
If we accept that the ethical culture of a firm is largely driven from the top and, using an analogy from the legal
and political science disciplines, if we compare a firm with our understanding of a democratic institution, we can
quickly see that firms may be democratic in their aspirations, theory, and general makeup (the Annual General
Meeting of all shareholders being the best example of democratic principles applied to a firm), but they may not
be democratic in the way they are managed day to day. In keeping with this same analogy of forms of
government, the multinational firm is more akin to an aristocracy than a democracy. In the former, followers
choose leaders. In contrast, like in the aristocracies of old, the inherent nature of the firm and the way means
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that leaders choose followers. Therefore, it is right to assume directors exercise a serious degree of control over
the destiny of the firm from the day of their appointment. Of course, given this unbalanced quota of power, the
formal controls must first be defined, agreed, and applied top-down to be effective. This implementation is not
enough to guarantee timely information on breaches of integrity to shareholders but it sets strong foundations
capable of sustaining the firm during good times, bad times, and critical times.
The normal controls and checks and balances that allow scrutiny from a principal-agent point of view at the
highest level do not really suffice to exercise a meaningful deterrent from running the company in a manner that
contravenes shareholders’ interest unless the ranks are also given a tool that can be used to influence and
benchmark the conduct of their leaders in a more independent manner. One such tool might be a governance
code that allows behaviour of management to be compared against a code of conduct that makes it possible for
every hierarchy in the company to exercise a level of scrutiny that will be proactive rather than reactive, no less
because of the natural competition to reach the top positions in the organisation that will drive the reporting lines
to spot and highlight any clear weaknesses of leadership, if only because of the natural ambition of the best
performers in the organisation. This is also a very significant reason why an ethical code adds value to an
organisation. It is not only a deterrent of incorrect behaviour but also an enabler for all members of the
organisation to become custodians of the ethical legacy of the firm. If the highest layer of stewardship of the firm
(directors) explicitly accepts a conventional definition of business ethics (the law, best practice, a set of values
in a specific hierarchy), then we can measure this agreement and benchmark it against the highest known
standards of corporate governance.
3 Companies and compliance
[17] Rossi (2008) questioned why firms were reluctant to invent or position themselves as compliance leaders.
The typical leadership choices that shape the strategy of a firm involve market, cost, and product leadership. In
reality, compliance leadership may outlive all others.
Cost is often cited as a reason not to be at the forefront of compliance and regulation but she suggested that the
costs are more akin to R&D for product development (particularly true for financial services), brand investment
which is key to marketing, or efficiency investment that avoids costly operational costs such as fines. When this
core capability exists, it is often ignored as a source of competitive advantage, as if it were a risky proposal to
be the first to recognise and adopt a regulatory evolution to achieve or sustain compliance leadership. After the
collapse of Lehman Brothers in 2008, stakeholders were looking for such leadership in the marketplace. There
were no clear winners, but the very survival of the financial system and each individual bank hung by the thin
thread of trust that was almost completely torn by the magnitude of the crisis.
When successful companies become so big, complex, and strong that they are of national importance, they
interact, influence, and ultimately depend on governmental action for their long-term prospects. Because
governments in turn depend on the good will of the majority of their citizens, these governments are reluctant to
assist companies that become political liabilities. Reputations are crucial when such decisions are being made.
Yet, banking CEOs failed to recognise compliance as a strategy and reputations as their largest asset. They
focused on traditional quantitative key performance indicators, most of which were extracted from the
information held by their finance functions, and because they could not measure softer aspects of their
architecture, such as ethics, culture, and compliance, they found themselves at the mercy of the markets, who
were rather unmerciful.
In the process, they lost the priceless opportunity to continue to co-shape their business environment. Worse
yet, they were seen to be incapable of doing so in the foreseeable future. Their future now lies in the hands of
government bureaucrats and regional and global regulators. Yet, all of the institutions that failed had within their
midst professionals and employees who could have saved their corporate futures if they had been enabled to
take on more meaningful roles in the leadership of their companies. These chief compliance officers, chief risk
officers, vice presidents of human resources, and similar had large departments, strong budgets, and important
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intelligence to share with their colleagues. All of these companies had access to these resources, out of
necessity, because the environments in which these firms moved was highly regulated. But, none of these
leaders became the CEO, although some of them were choices of last resort in the succession strategies of
these banks.
These senior managers and executives were seen as consultants, specialists, and technicians, not as possible
captains of industry that could manoeuvre complex environments even though many of them were in close
touch with problems each of the functional managers declared beyond their capability to solve precisely
because they involved the company stakeholders and were not only technical in nature. They had to do with
company policy, the external environment, external relationships, and government oversight. These
professionals could connect the dots in a way that perhaps only the CEO could – except they were trained to do
it with clinical objectivity – because their bonuses were not tied to sales or profits but were connected instead to
the value and accuracy of their analysis and opinion. These functions were seen, and still are, as supporting
functions, rather than managers of core activities of the companies whose behaviours, opportunities, contracts,
and threats they are commissioned to know inside out.
In general, the heads of assurance functions cannot force other heads of function to follow their
recommendations, unless there is a proven breach of the law, or less seriously due to some degree of flexibility,
of company policy. They are able, but not sufficiently enabled, to be the moral compass of the company, the
industry, or the markets. Over the past two years, we all paid a dear price for this failure of vision within the
banking sector. This price is almost unquantifiable and will be paid over generations.
During the boom years, ethical values and principles may have been overlooked as long-term profit prospects
and the old-school way of doing business was not altered. Businesses, for example, forgot that compliance with
those values and principles had a value that went beyond the ethical reasoning behind them and that the
actually translated into a financial benefit for shareholders in a narrow sense but extended to society in the
broadest terms. Shareholders forgot to allocate a premium to the social benefits of companies that worried
about the how, and not only about the what to do, and we have been forced instead to allocate a cost to the
social harm that resulted from the non-adherence of industry players to basic principles such as accountability,
prudence, and duty of care. Business leaders failed to recognise their firms as nexus of contracts that went
beyond the firm, and the ravenous nature of a classical p-firm have become apparent to society as a whole,
forcing us to look at a deep transformation of business.
4 Change management
Change management, culture, and compliance never trail too far behind, and tight financial times are likely to
force mergers and strategic alliances that would never be considered under normal circumstances, making
these areas of expertise truly relevant for the modern strategic groups and executive teams. Corporate
governance is not practical unless the ethical contract including the “highest need” and “highest good” are
agreed upon at the top levels of the organisation. The better defined and enforced this corporate social contract
is the more effective a governance framework, whatever its size and scope is likely to be.
The surge of the “ethical consumer” and its supplier match the “ethical firm” that has prompted much debate on
what the term “ethical” actually means in a business world. It is interesting to note that the main driver of the
ethical movement has been more apparent from the consumer perspective. According to the Stanford Open
Encyclopaedia of Philosophy, the term ethics is “derived from the Greek word ‘ethos’, which means ‘way of
living’ […] ” – ethics is a branch of philosophy that is concerned with human conduct, more specifically the
behaviour of individuals in society. Ethics examines the rational justification for our moral judgments; it studies
what is morally right or wrong, just or unjust. Szasz (1960) correctly pointed out that:
[…] anything that people do – in contrast to things that happen to them – takes place in a context of value. In this
broad sense, no human activity is devoid of ethical implications.
If we apply this concept to business ethics, we can say that these consist of a set of principles that explain
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human behaviour when an individual or a group of people are engaged in an economic activity. Whether these
principles are truly ethical or not depends much more on the consistency of the behaviour with the principle, the
individual upholds than the coincidence of principles and values from individual to individual. Aristotle had
argued that conflicts arise not from a difference of opinions of what is good but what is the “highest good”. This
difference in priorities, the subordination of other values that can also be described as “good”, create what Kant
described as a moral dilemma. Complex ethical decisions are seldom made against the backdrop of a “good”
versus “bad” principle, but rather following a discussion of which is the “better” principle to apply. Firms
experience these shifting needs on a much more frequent basis due to the rapidly changing environments in
which they operate. …
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