South-Western - Management  
Leadership Trickles Down: Ethical Behavior in America
Topic Ethics and Social Responsibility
Key Words Code of ethics, accountability
InfoTrac Reference A101889378
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News Story 

People will follow a great leader. If the leadership is corrupt, it is only a matter of time until the company is corrupted. If the leadership is open and honest about their financial dealings, the company will be successful because workers will be more vested in the success of the company.

Recent scandals in the business world have created a new accountability among business owners and CEOs. The government is now holding CEOs legally responsible for what happens in their companies.

A corporate code of ethics helps to deter wrongdoing. In October, 2002, the SEC released document 2002-150 regarding issues relating to corporate codes of ethics. It emphasized the following:

1.  Honest and ethical behavior is imperative in handling conflicts of interest. 2.  Avoidance of conflicts of interest should be sought or mediated, and employees should report violations of the code of ethics. 3.  Full, fair, accurate, timely and understandable disclosure in reports submitted to the SEC is necessary. 4.  Companies should comply with government laws, rules and regulations. 5.  Code violations should be reported to the appropriate person internally. 6.  A system of accountability should be set up. 7.  The existence of a code of ethics should be made public - in annual reports or on web sites. Changes to the code should also be announced.

Questions
1.

Examine this statement taken from the article: If the leadership is open and honest about their financial dealings, and in other aspects of their business day, the company will be successful. What was the author of this article trying to say?

2.

What is the purpose of the SEC, and why is it involved in issues relating to codes of ethics?

Source "Leadership Trickles Down: Ethical Behavior in America," Catalyst (Dublin, Ohio), May-June 2003, p. 44.
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