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ETHICS OFFICERS AND CFO

INTRODUCTION

Ethics officers (sometimes called "compliance" or "business conduct officers") have been appointed formally by organizations since the mid-1980s. One of the catalysts for the creation of this new role was a series of fraud, corruption and abuse scandals that afflicted the U.S. defense industry at that time. This led to the creation of the Defense Industry Initiative (DII), a pan-industry initiative to promote and ensure ethical business practices. Another critical factor in the decisions of companies to appoint ethics/compliance officers was the passing of the Federal Sentencing Guidelines for Organizations in 1991. This set standards that organizations (large or small, commercial and non-commercial) had to follow to obtain a reduction in sentence if they should be convicted of a federal offense. Although intended to assist judges with sentencing, the influence in helping to establish best practices has been far-reaching.

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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.

WHO IS ETHICS OFFICER

An ethics officer is a corporate executive charged with the responsibility of overseeing all aspects of a company's operations to ensure that they are consistent with the company's code of ethics. The officer is also responsible for seeing that the company code of ethics is a dynamic document that is modified to reflect changing attitudes and concerns both within the business world and the population at large.

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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.

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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 that he 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 the stated values, mission, and goals of an organization and to determine whether or not the organization's behavior actually supports these statements.
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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.

SKILLS REQUIRED BY ETHICS OFFICER

An ethics officer is responsible for developing and enforcing ethical policies within an organization. To do this job successfully, skills such as:
1. 2.

3.
4. 5.

6.

Honesty Fairness Objectivity Professionalism The ability to keep a clear head during times of crisis are all important skills for an ethics officer to have. In addition to these skills, specific training in ethics, cultural customs and decision-making skills might be helpful.

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 wide ethics program. Creating training programs to familiarize employees with the company's ethical goals and guiding employees in making the right decisions where ethics are concerned. Conducting training program. Cofidentential service to answer employees

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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.

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WHY HAVE AN EO?


The multiplication of regulations and regulatory authorities, with which companies now have to deal The increasingly difficult legal environment places companies in a situation fraught with the risk of bad publicity, heavy fines, and maybe even criminal sanctions Many governmental regulatory bodies or government contracts require the business to have an ethics program with a corporate person of "high management position" overseeing the ethics program A company which claims to behave ethically may use an ethics officer as a symbol of accountability, showing that it does not just pay lip service to the ideal of ethics, but actually has an ethics code in force and appoints people to enforce it.

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PROS OF HAVING AN EO

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, and prevents potentially damaging decisions

Provides a vehicle for dealing with stakeholder concerns


Provides better protection to shareholders and other stakeholders Can identify problems and fix them

Ensures compliance with increasingly complex regulations


Ethical focus may be competitive advantage for the company
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CONS OF HAVING AN EO

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 responsibility is outsourced to the CEO May create oppressive culture within the company
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CODE OF ETHICS

A code of ethics will start by setting out the values that highlight the code and will describe a company's obligation to its stakeholders. The code is publicly available and addressed to anyone with an interest in the company's activities and the way it does business. It will include details of how the company plans to implement its values and vision, as well as guidance to staff on ethical standards and how to achieve them. A code of conduct is generally addressed to and intended for employees alone. It usually sets out restrictions on behavior, and will be far more compliance or rules focused than value or principle focused.

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ADOPTION OF EOS

CHIEF FINANCIAL OFFICER

The Chief Financial Officer (CFO) of a company or public agency is the corporate officer primarily responsible for managing the financial risks of the business or agency. This officer is also responsible for financial planning and record-keeping, as well as financial reporting to higher management. In recent years, however, the role has expanded to encompass communicating financial performance and forecasts to the analyst community. The title is equivalent to finance director, commonly seen in the United Kingdom. The CFO typically reports to the Chief Executive Officer, and is frequently a member of the Board of directors.

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CFO AND 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 accounting profession 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 clean governance, an uncompromising approach to ethics, and an absolute pride in sustaining and enhancing the reputation and trust that they have built over the decades.

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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.

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THE CHANGED ROLE OF CFO

The traditional role of the CFO has changed to incorporate a multi-faceted individual who is wellrounded to drive every aspect of the business not just the finances The post-Enron and Worldcom world has created the need for the Finance function to focus more of its attention on the wider issues relating to enterprise risk management (ERM), and so there has been a shift in the focus of accountants and CFOs In terms of ERM, risk and strategy need to be aligned. This means that once strategy choices are made, the risk responses must be identified, accountabilities assigned, and implementations monitored. Thus ERM is integral to strategic planning and performance assessment

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CONT
oA

key challenge for the CFO of today is performance management productivity of the entire organization

o The CFO needs to ensure growth and improved o Accordingly, performance targets and standards

need to be set to measure productivity


o Further, creativity and innovativeness needs to be

at the heart of everything we do as accountants and CFOs


o In terms of sustainability the environment is also a

concern. We need to look at the triple bottom line

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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 roles and responsibilities include SCM, risk, VFM (Value for Money), and performance management In addition, the intense pressures of business may not always allow the CFO the luxury of much time for reflection, and the high stakes may tempt the CFO to compromise 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 and sustainability of same

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CFOS CODE OF ETHICS


Embody and enforce the Code of Ethics. Ensure that this Code of Ethics is communicated at least annually throughout all financial departments. Formally and promptly communicate any breach of this Code of Ethics to the Senior Vice President and General Counsel. Act at all times with honesty, integrity and independence, avoiding actual or apparent conflicts of interest in personal and professional relationships. Discuss with the appropriate Senior Management level, or, in the case of the Chief Executive Officer, with the Senior Vice President and General Counsel, in advance any transaction that reasonably could be expected to give 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.

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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 information acquired 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.

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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.

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