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Ethics, Compliance, and Training [WLO: 2] [CLOs: 3, 4] [NACE: 1, 2, 3, 5, 6, 7, 8] Read Chapter 4 in the textbook and the article Ethics, Reputation, and Compliance Gain as Corporate PrioritiesLinks to an external site.. In the article, Hagel (2015) states, The demand for greater transparency from consumers and stakeholders across the world has pushed the areas of ethics and compliance up the corporate list of priorities in recent years. In addition, the risk to reputation and potential damage that can be done if evidence of unethical practice is discovered have increased significantly with the advent of social media. (para. 2) Based on the importance of transparency, your organization (You can represent any organization, McDonalds, Starbucks, ESPN, etc.) has asked you to create a training presentation on ethics and compliance to be presented next week. Referencing the Hagel article, the Gonzales-Padron textbook, and at least two other journal articles, present an outline for your training as a response to this thread: · Create an outline describing the information that you would include in your training presentation. · Cite and create reference entries for all sources in APA Style as outlined in the University of Arizona Global Campus Writing Center. Your response must be a minimum of 300 words. 6/11/23, 2:19 PM Print https://content.uagc.edu/print/Gonzalez.2162.15.1?sections=ch04,ch04introduction,ch04sec4.1,ch04sec4.2,ch04sec4.3,ch04sec4.4,ch04summary&… 1/22 LearningOutcomes After reading this chapter, you should be able to do the following: Describe how laws, regulations, and guidelines form the underpinning of ethics and compliance. Summarize requirements for mandated legal compliance relating to business, such as competition, corruption, corporate governance, consumer protection, and health, safety, and environmental considerations for employees and the community. Analyze the role that guidelines, self-regulatory initiatives, and industry standards play in global ethics and compliance. Examine cooperation strategies to utilize with external authorities to mitigate the punishment of a company’s misconduct. 4 Drivers of Ethics and Compliance RobertKneschke/Superstock 6/11/23, 2:19 PM Print https://content.uagc.edu/print/Gonzalez.2162.15.1?sections=ch04,ch04introduction,ch04sec4.1,ch04sec4.2,ch04sec4.3,ch04sec4.4,ch04summary&… 2/22 Introduction RegulationsDriveOrganizationalEthicalPrograms New employees of a major international pharmaceutical company are uneasy. During orientation, they are learning of ethical issues relating to their new position within the company. They discover that discussing a breakthrough drug before a public announcement, even with family and friends, could invite �ines or imprisonment. Any contact with physicians, hospitals, or insurance companies must follow strict guidelines on gifts, travel, and entertainment, especially when working in other countries. Any unauthorized disclosure of client or patient information creates legal risks for the company and employee. The new employees learn that joking at the workplace about religions or race could jeopardize their employment if coworkers perceive it as bullying. As the orientation concludes, the new employees receive a list of mandated trainings. Some trainings are online and others require classroom attendance. General training that all new employees have to take within 30 days include con�licts of interest, workplace harassment, con�idential information security, gifts and entertainment policies, Internet use, and travel expense policies. Other trainings are speci�ic to the employee’s function. For example, supervisors are required to complete classes to prevent discriminatory behaviors, develop ethical leadership styles, and learn of reporting standards. Financial and accounting professionals must complete trainings in internal control systems. Employees joining the research and development team need training speci�ic to regulatory approvals for new medicines. Sales and marketing training includes learning to avoid bribery and kickbacks, deceptive selling and promotions, and inaccurate sales reporting. Additionally, any employee that interacts with healthcare professionals has to undergo training on the ethical guidelines of the Pharmaceutical Research and Manufacturers of America (PhRMA) and the Association of the British Pharmaceutical Industry (ABPI) Code of Practice (Devlin, Hastings, Smith, McDermott, & Noble, 2007). The new employees’ excitement about beginning their career with the company begins to waver as they consider how to balance new job responsibilities with the mandated training. They wonder why the company is focusing so much on ethics and compliance. Companies in the pharmaceutical industry are subject to increasing regulations worldwide that result in large �ines and reputational damage. In a highly competitive industry, the pressure to make sales through incentives and off-label uses of prescription drugs is tempting. One report estimated that the industry spends more than $27 billion on the promotion of products to physicians, including meals, gifts, travel, and lucrative speaking fees (“The hypocritical oath,” 2014). However, incentives to secure business can result in bribery charges with large �ines. In 2014, GlaxoSmithKline plc was �ined nearly $500 million for bribing hospitals and doctors to use their products. In the United States, a transparency clause in the Affordable Care Act provides for a public reporting of all other valuables given to physicians by pharmaceutical companies (Patient Protection and Affordable Care Act, Pub. L. 111–148, 124 Stat. 119, 2010). In 2012, the U.S. Department of State �ined GlaxoSmithKline $3 billion for marketing drugs for unapproved uses. Promoting a drug in the United States for uses not approved by the Food and Drug Administration (FDA) is off-labelmarketing and is illegal. AstraZeneca plc paid $520 million to settle a U.S. investigation into its marketing of the schizophrenia drug Seroquel for unapproved uses (Whalen, 2009). In a 2009 interview, the chief executive of�icer (CEO) of AstraZeneca highlighted the need for more training in ethical conduct in the industry. If you go back ten years in this industry, this was not an issue. I mean, we trained our people not to promote off-label . . . so it’s always been sensitive. But now, it’s even more sensitive because we’re paying �ines. The government investigated this stuff, and they’ve said, “We don’t like the way you guys did this.” So we’re more sensitive than we’ve ever been. (Whalen, 2009, B2) This chapter addresses the factors driving organizational ethics and compliance on a global scale, including mandated laws, regulations, and guidelines. It will include a review of the legal compliance requirements for a business, including laws and regulations relating to antitrust/anticompetitive behavior, bribery/anticorruption, corporate governance, consumer protection, environmental protection, and worker health and safety. The chapter also recognizes the important role that industry guidelines, self-regulatory initiatives, and other non-mandatory standards play in encouraging ethical conduct in business. The chapter concludes with a discussion of relationships with legal counsel and enforcement authorities, including consequences for noncompliance and strategies for cooperating with governmental agencies. 6/11/23, 2:19 PM Print https://content.uagc.edu/print/Gonzalez.2162.15.1?sections=ch04,ch04introduction,ch04sec4.1,ch04sec4.2,ch04sec4.3,ch04sec4.4,ch04summary&… 3/22 4.1EvolutionoftheEthicsandComplianceField The ethics and compliance �ield focuses primarily on how to keep organizations out of trouble. The profession includes company positions such as chief ethics of�icer, chief compliance of�icer, and various other positions such as integrity/ethics of�icer and ethics ombudsman. The expansion of mandatory laws and voluntary self-regulation initiatives in recent years has made these roles in business particularly challenging. However, companies and industries that promote the use of ethics and compliance professionals foster trust in their stakeholders, which in turn contributes to a successful economy. Roy Snell, the chief executive of�icer of the Society of Corporate Compliance and Ethics, stresses the role of compliance: If you build a trusted regulatory environment, you will have a better chance to succeed economically. The standard of living and safety of people depend on it. Countries that not only want to be at the top of the list but improve even more will have compliance of�icers in most of their companies. (Snell, 2013, p. 34) MandatoryRequirementsandVoluntaryInitiatives Both mandatory compliance requirements and voluntary initiatives compel companies to focus on compliance and ethics. Mandatory requirements include laws and regulations. A law is a rule enacted by a governing body, while a regulation is the process of monitoring and enforcing the rules. Governing bodies can include national state legislative branches, such as the U.S. Congress, state or provincial legislative authorities such as the State of California in the United States or the Guangdong Province in China. In the United States, federal agencies (e.g., FDA, Federal Trade Commission (FTC)) are responsible for documenting implementation details of a law or legislation. Worldwide, regulatoryagencies represent a wide range of institutional settings. The trend in developed countries is to move toward independent regulators that are separate from the policy makers of the national government, such as in the United States, Germany, and the United Kingdom (Malyshev, 2008). In some countries, such as China and India, regulatory agencies are part of the central government with limited autonomy of budget and administration. The Organisation for Economic Co-operation and Development (OECD) has found that regulatory agencies that are independent from the legislative body and political system improve regulatory ef�iciency (Malyshev, 2008). There are two key bene�its of independent regulators to monitor and enforce law. First, independent regulatory agencies should reduce interference from political and private interests. Second, independent regulatory agencies provide for a separation of the government role as policymaker and the government ownership of strategic industries such as energy, transportation, and communications. In order for an independent regulatory agency to be effective, it requires adequate resources and autonomy in monitoring and enforcing the laws. China is transitioning to independent regulation of the energy and �inancial industries, yet government of�icials express concern about giving independent regulatory agencies too much control over the energy sector, and therefore limit the amount of autonomy the agencies have in enforcing laws (Tsai, 2014). Achieving full compliance for every regulation is not an easy task for businesses. Therefore, regulatory agencies will issue guidelines that describe the agency’s current thinking on a regulatory issue. Guidelines are nonbinding and clarify the of�icial regulations. For example, U.S. companies often struggle with the interpretation of the Foreign Corrupt Practices Act of 1977. In 2012, the U.S. Department of Justice issued AResourceGuide to theU.S.ForeignCorrupt PracticesAct that provides details and examples that clarify speci�ic applications of the law. The U.S. Sentencing Guidelines outline recommended �ines and prison terms for criminal violations, including organizational misconduct through the Federal Sentencing Guidelines for Organizations, or FSGO (United States Sentencing Commission, 2013). While only advisory, the guidelines promote ethics and compliance in organizations. Ethics and compliance professionals must consider the ethical responsibilities of their employer within the global marketplace and their industry. To stress compliance with mandatory laws, or avoid pending regulatory oversight, companies demonstrate a commitment to ethics through self-regulative initiatives, which include global ethics standards and industry standards for business conduct. Global ethical standards stress international norms for responsible conduct that companies should comply with even though they are not legally bound, while industry standards for ethical conduct are generally accepted requirements that members of an industry follow. An example from Chapter 1 (http://content.thuzelearning.com/books/Gonzalez.2162.15.1/sections/ch01sec1.2#IndustriesH3) is the Defense Industry Initiative on Business Ethics and Conduct, or DII, which established guidelines for ethics and compliance for defense contractors in the United States. HistoryofEthicsandCompliance In the United States, businesses began recognizing ethics and compliance as a formal company function in response to the guidelines of the FSGO and DII. In 1991, the FSGO prompted many U.S. companies to establish an ethics and compliance program. An article in BloombergBusinessweek states: . . . companies with tough ethics policies will receive treatment that is much more lenient as long as they cooperate with prosecutors and their policies meet the guidelines’ standards. For instance, a �ine of $1 million to $2 million could be knocked down to as low as $50,000 for a company with a comprehensive program including a code of conduct, an ombudsman, a hotline, and mandatory training seminars for executives. (Hager, 1991, para. 4) The FSGO stipulate that a) high-level personnel of the organization need to be assigned overall responsibility for the compliance and ethics program, and b) speci�ic individual(s) within the organization must have operational responsibility for the compliance and ethics program (United States Sentencing Commission, 2013). According to the Sentencing Guidelines: “High-level personnel of the organization” means individuals who have substantial control over the organization or who have a substantial role in the making of policy within the organization. The term includes a director; an executive of�icer; an individual in charge of a major business or functional unit of the organization, such as sales, administration, or �inance; and an individual with a substantial ownership interest. (United States Sentencing Commission, 2013, p. 492) In the early 1990s, many companies did not have personnel with the knowledge to oversee ethics and compliance, and therefore formed compliance of�ices within the legal or human resource functions. Companies that understand the legal dimensions for their business have a competitive advantage over companies that ignore ethics and compliance (Peterson, 2013). Compliance with legal requirements is not new to business. While it seems like it should be a straightforward process, there is no single way to develop an organizational capability to consider laws, regulations, and self-regulation. The legal dimensions vary by industry, company, and even departmental function. Nevertheless, simply knowing the laws is not suf�icient to ensure an ethical business. For example, companies that rely solely on advice from company lawyers may focus too much on risk reduction and thus sti�le innovation. The profession of compliance of�icer emerged to coordinate a company’s https://content.uagc.edu/books/Gonzalez.2162.15.1/sections/ch01sec1.2#IndustriesH3 6/11/23, 2:19 PM Print https://content.uagc