Benefits of Adopting a Corporate Code of Ethics

Question: Discuss about theBenefits of Adopting a Corporate Code of Ethics. Answer: Introduction A good corporate governance in a company implies a disciplined and productive workforce followed by a collaborative environment with clear line of understanding and code of ethics. It is very crucial for the top management to adopt stronger principles of ethics that will uplift the company's image and profitability. This report briefs on the importance of corporate code of ethics with successful cases to highlight the need of such codes in an organization. Importance of Corporate Code of Ethics In an organization, good ethics is the key to customer loyalty, stakeholder confidence, long term growth and staff satisfaction (Robberts, 2016). The corporations act states the need for proper ethics in order to manage information trading and also ensure protection of liabilities and not affect the positions of others. Insider Trading Case Study Mr and Ms Lim were responsible for not following the principles as stated under Securities and Futures Act and they supported false trading and this was identified by Monetary Authority of Singapore in 2015. They were identified to promote insider information about a Singapore Petroleum Company (SPC) Ltd and some misleading information of shares about it. Having known to be the 14th richest person in Singapore, Ms Lim is enforced with civil penalty of $2.241 million (MAS, 2015). This case gives a clear understanding of the lack of ethics by the board of directors of SPC Ltd that eventually led to industrial espionage. Further, the section 1041A under Corporations Act 2001 indicate prohibition of market manipulation of perpetrator. ASIC takes the accountability to perform stronger investigations against such cases. Asset Impairment Case Study The case of asset impairment happened at Fairfax Media Ltd where the directors of the company have overstated the actual value of assets that created false impression among shareholders about company. This also limited its borrowing capacity and financial image in the market (Ong, 2016). The case is a clear example to note that it is an act of misleading conduct which is strongly prohibited as per section 1041H of Corporations Act and Section 52 of Trade Practices Act 1974. It is the civil liability of a company to promote only true information to third parties. BHP Billiton Tragedy This case involves board of directors who provided wrong values during its asset valuation and one out of three dams that they have built has burst. However, BHP has given incorrect values in its remediation programs so as to build the asset portfolio (Ker, 2016). However, this case clearly says that it is illegal when a company attempts to protect information to be secret and omit regulation and balanced disclosure of financial statements. Conclusion and Recommendations Corporate code of ethics is primary for organizations not only because it saves the image of firm but also regulates every action including financial and operational divisions to ensure satisfaction of all the stakeholders. The three case studies also indicate the importance of clear asset evaluation and need for board of directors to give accurate statements and also to prohibit insider trading in a business. References MAS (2015), MAS takes civil penalty action against Lim Oon Cheng and Lim Huey Yih for insider trading [online]. Available at: https://www.mas.gov.sg/news-and-publications/enforcement-actions/2015/singapore-petroleum-company.aspx [Accessed on 9th October 2016] Ker, P. (2016), BHP Billiton takes $1.4b hit after Samarco dam disaster [online]. Available at: https://www.smh.com.au/business/mining-and-resources/bhp-billiton-takes-14b-hit-after-samarco-dam-disaster-20160727-gqfdlk.html [Accessed on 9th October 2016] Ong, T. (2016), Fairfax to book nearly $1b in write downs, hints of domain spit [online]. Available at: https://www.abc.net.au/news/2016-08-01/fairfax-writedown-domain-report-separate/7677264 [Accessed on 9th October 2016] Robberts, R. (2016), Corporate governance. NSW: Southern Cross University.