Sesi 4 Ethical Governance & Accountability

7/30/2019 Sesi 4 Ethical Governance & Accountability

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SESI 4

ETHICAL GOVERNANCE

AND

ACCOUNTABILITY


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GOVERNANCE SYSTEMS

1970s: professional accountants realized

that the reports they were preparing orauditing were only as good as the internal

control systems of their clients. Thoseprocesses by which a corporation seeks toassure the safekeeping of its assets, the

propriety activities, and the properrecording of its transactions.


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GOVERNANCE SYSTEMS

1980s: financial scandals weakened thecredibility of accounting profession in Canadaand US.

1988 AICPA issued SAS 55 and SAS 60,Consequently, auditors are required to reportmaterial weaknesses in internal control to theaudit committee of the organization under audit.

Failure to do so effectively could result in legalliability for the auditor.


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GOVERNANCE SYSTEMS

Nov 1991: US and Canada increase thepenalties for ethical/environmentalmalfeasance

1994 & 1995: pronouncement from theToronto Stock Exchange and CICAspecified that directors were to be thesocial conscience of their companies andwere responsible for developing andmaintaining an ethical culture.


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GOVERNANCE SYSTEMS

During 1990s, it has become understoodthat management approaches must reflectaccountability to STAKHOLDERS, not justSHAREHOLDERS

Since 1995: The need for a company andprofession to ensure support of its primarystakeholder group to achieve its strategic

objectives optimally, led to thedevelopment of broader concepts andtheir inclusion in ethics programs withinmodern governance systems


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EMERGING GOVERNANCE

AND ACCOUNTABILITY

NEW EXPECTATION NEW FRAMEWORK

ACCOUNTABILITY TO SHAREHOLDERS &OTHER STAKEHOLDERS

GOVERNANCE PROCESS BASED ONSTAKEHOLDER INTERESTS


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Copyright Houghton

Mifflin Company. All rightsreserved. 1-7

Figure 4.1: External Stakeholders, Moral Stakes,

and Corporate Responsibilities


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STAKEHOLDER ACCOUNTABILITY

GOVERNANCE PROCESS (SAOG)

SHAREHOLDER + STAKEH0LDER

PUBLIC INTEREST

BOARD OF DIRECTORS

CORPORATE CULTURE

Lawyers

ExternalAuditors

ProfesionalAccountant


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DEVELOPING AND MANAGING

AN ETHICAL GOVERNANCE

1. ETHICS PROGRAM ORIENTATION:

2. CODE OF CONDUCT3. MONITORING AND REPORTING


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Improving Ethical Climate

Top

Management

Leadership

Ethics Programs

& Officers

Realistic

Objectives

Ethical Decision-

making Processes

Codes of

Conduct

Ethics Audit

Ethics Training

Whistle-blowing

Mechanisms

(Hotlines)

Discipline of

Violators

Effective

Communication

Codes of

Conduct


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ETHICS PROGRAM ORIENTATION

Compliance based

Integrity or value based

Satisfaction of external stakeholders Protect top management from blame

Combination of above


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CORPORATE CODE OF CONDUCT

Is a basic foundation block to building anethical culture to manage or governcorporate behavior.

Focus on:1. Interest of stakeholders/constituent

2. Strategic policies or responsibility or

responsibility of the organization3. A specific mission or several issues

4. A composite of the above


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EFFECTIVE IMPLEMENTATION

OF CODE OF CONDUCT

The development and maintenance of anethical corporate culture

An effective internal control system

A due diligence for directors and officers

Effective empowerment of employees to

make ethical decision The sending of proper signals to external

stakeholders

Documents

Sesi 4 Ethical Governance & Accountability