Legal, Ethical and Moral Responsibilities of Companies

Abstract

No matter what an individual does in life, from the time they are born there are certain standards that become instilled in them. From the toddler years where parents are teaching them right from wrong, proceeding to the school years and on to adult life where they are become introduced to new rules, regulations and standards in which they are expected to be upheld to. This is something that is happening from the time a child is not able to communicate through talking, and is happening throughout their whole life. There are always going to be time where you have to follow the rules and regulations, whether it is at work, home, while driving or any other establishment. This same strategy can apply when referring to different businesses and corporations, because no business starts perfect, but over time, they learn through trial and error as well as the mistakes that others have made so they know what not to do in certain situations. Although an organization can make mistakes, just as any human, they have an obligation to ensure that they are doing what is in the best interest of their stockholders. No matter how big or small a company is, they have a set of rules and regulations that they must oblige to. All corporations, whether they are public, private or even non-profit have a set of legal, ethical and moral responsibilities that they are expected to be upheld to in hopes that it is in the benefit of those keeping that corporation functioning. Just because a corporation has a set of standards that they want to follow does not necessarily mean that they are in the best interest of their stockholders. That is why it is important to do research on any company and know who they are, because they may show interest in you, but it could potentially be something that is in their best interest and not yours.

“The time is always right to do what is right”, is quote from the late, great Civil Rights activist Dr. Martin Luther King Jr. This quote is one that all corporations could refer back to ensure that they are constantly reminded of this as well as exposing employees so they can have the same mindset. When it comes to public corporations, they probably have the most people that they are obligated to, but they still have to ensure that they are doing what is in the best interest of their people on the legal, ethical and moral side. A public corporation is one whose ownership dispersed between the public and is bought through trading in the stock exchange. Another type of public corporation could be a government owned company such as a public transit company or an airline, and they are to have regulations in line that lead to the best interest of the people. No matter the company, they all have a legal, moral and ethical responsibility to the stockholder. The legal responsibility of a publicly held corporation can differ between companies, but by having a corporate governance; one can try to ensure that the management is effectively running the company for the benefit of its shareholders. Shareholders can include anyone from employees, clients, creditors and other associates in which the firm conducts business. The governance of a company is usually regulated by its’ Board of Director and they are considered the core group and they develop a relationship with management to ensure that everyone is on the same page when it comes to the mission of the company and they are doing what needs to be done to see that mission through. Although each corporation has their own set of regulations that they adhere to, there is still an understanding between them and Board Directors that there are some things that are implemented to ensure the well-being of the company and its shareholders. A company such as General Electric has a handbook that list the protocol that one must follow if there is an issue with anything. They allow everyone’s voices to be heard, but they are also holding everyone accountable for their job. If an employee needs to speak with upper management in regards to anything, they have a confidentiality policy that allows employees names to be presented on a “need to know” basis (General Electric Company, 2005). They also have a section that states that they work with government agencies and it is imperative to abide by the laws applicable, because they run the risk of investigation for non-compliance. This company seems to pride themselves on integrity and giving everyone the equal opportunity to have their voice heard. They have guidelines in place for fair employment practices, ways for employees to speak out if they concerns about the integrity of the company, and lets them know the proper channels to follow when going about making a report. They have a Code of Conduct that everyone has an obligation to adhere to such as being fair, honest and trustworthy to the company and the relationship they are developing. One of companies conduct rules that caught my attention was “Throughout leadership at all levels sustain a culture where ethical conduct is recognized, valued and exemplified by all employees” (General Electric Company, 2005). This is a powerful statement that ties right into the topic of this paper that focuses on the ethical and moral responsibility that such companies have to the consumer. This company is one that appears to hold all of their employees on all levels to a certain standard and they have written rules down that are accessible so others can be aware of what they expect from their employees. By being so transparent would make a consumer feel more comfortable purchasing from a company such as this, because they feel as if they are a part of the company. They allow all to see the standards that they set and by doing it this makes everyone to feel as if they can ensure that the company is doing what it says they are. Each corporation has their own code of conduct that is tailored to their corporation, but all of them should hold their staff accountable to a certain extent and General Electric is a company that appears to go above and beyond what they are expected to, when it comes to setting company standards.

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Private companies have some similarities and differences when comparing to a public held company. A private company is different from a public held company in that they do not trade on the any public stock exchanges such as NASDAQ and the New York Stock Exchange. The shares of private companies is owned among interested parties privately and traded the same way. The way that these companies are ran is similar to a public company; the biggest difference is that the ownership of the company is a relatively small group of investors. Just because a company is private, does not mean that they are secretive or not known. Some of the most popular private companies include Facebook, Ikea and many more. Investors in these types of companies are usually close friends or relatives of the founders of that company (Investing Answers, 2019). If a private company grows to a certain point where they decide to take the company public, it is at this time that they begin to issues stocks out through an initial public offering, which will eventually trade on all of the public stock exchanges. As it should be, owners of private companies are subject to more profits, because there are less people to spread the wealth amongst, compared to a public company that has tens of thousands of investors that dividends have to be split between them all. Although there is greater reward coming with a private company, it is also more difficult to acquire buyers or sellers because shares are illiquid (Investing Answers, 2019). This means that it will a lot harder for an investor to exit or cash out if they wanted to. Often times when something like this occurs, one may have to come an agreement or bargain with the company or whoever is interested in buying those private stocks. Private companies have a different standard when it comes their legal, ethical and moral responsibilities. A company like Ikea has a Code of Conduct that they make sure that all of their employees are adhering to it accordingly. They have a legal compliance that requires them and suppliers to comply with the requirements of applicable laws in regards to Ikea (IKEA Supply AG, 2008). It is very important to make sure that a company has all of their legal standpoints covered, because you never you know when you one may try to take advantage of your company. This company has a confidentiality clause in place that will preserve the identity of anyone that provides the company with written or verbal information. They also have a section in their conduct for business ethics. A statement is the section that goes with the topic is “The values of trust, integrity and honesty are at the foundation of IWAY…” (IKEA Supply AG, 2008). This statement is one that is part of the core standards of what their company stand by. They have a corruption prevention policy that they ensure all workers and external business partners understand. They also have a non-discrimination policy, which can be a relief when dealing with private companies, as they may not have, as much concern with the happiness of employees considering there is usually a small number of owners, looking for the most return on the investment. When looking at private companies, one such as Ikea appears to have a tight hold on the responsibilities to the company as well as the shareholder’s. That is very important in any company, but especially interesting when it comes to private companies as they have less people to listen to and they usually will have the same outlook on something as them considering the investors are usually related or close friends.

There are many different companies that all have a different set of standards and morals that they follow to run their organization. Another type of organization that is quite popular is the 501 © (3) nonprofit corporations. This type of organization is one that is exempt from federal income under the United States Code Title 26. This type of tax exemption is for organizations that are operating for the sole purpose of something such as religion, education, among other subjects. There are quite a few a company must go through in order to claim 501 © (3) status. You must fill out an IRS Form 1023 and pay a processing fee (Top NonProfit, 2019). There are strict rules and regulations that come with this status that prohibit from the company from doing things such as generate personal profit, or engage in political campaigns. If an organization is interested in doing those types of things then this status may not be something that they need to try to gather information in that regard. Some obligations that nonprofit must do are keep financial records, allow for taxation income unrelated to the business, along with other rules that can be out on the nonprofit website. Out of the thousands of nonprofit organizations that service a number of needs that the community and society has, only a few that get recognition on the national level. Some of the more known nonprofits include the American Civil Liberties Union Foundation, American Heart Association, and Boys & Girls Clubs of America along with some other notable organizations (Top NonProfit, 2019). When look at an organization such at the American Heart Association, you wonder if they have all of their policies and codes of conduct accessible. Upon further research, it appears that they ethics policy in place that highlights. They present that they are dedicated to have customer satisfaction at 100% and want to ensure that all customers’ expectations has exceeded. In the event that any fraud taking place, the Board of Directors and senior management have developed a “no tolerance “policy. In this company, fraud is defined as anything from misappropriation of funds, to breaking a confidentiality clause and anything between. If there is a suspicion of fraud, then an investigation by the legal department will take place (AHA, 2019). At this time all parties effected, internally and externally will be a part of this investigation until the matter is rectified. This is great for an organization to have something like this in place, because it gives the people a sense of security. It also makes employees mindful of their actions before they do something, because they know the consequences that come with it. This organization has a code of ethics that say that all of their affairs held to the highest standard of ethical conduct no matter person. Their code ethics include obligations such as complying with all government laws, acting responsibly when it comes to reporting fraudulent activities and a list of other stipulations (AHA, 2019). When looking at their code of ethics, they emphasize items that they want to make sure that volunteer and employees understand. By talking about wanting to prevent fraudulent behavior, then they proceed to be very transparent with the consequences that come with those actions for those that attempt to engage in such activity. Things like this show how serious a company is about certain things, as all companies have a different code that they follow and require their people to adhere to. This organization has grown over time and focusing on the benefits of their consumers appears to be at the forefront of their objectives, because if they are not satisfying their customer and employees then they will not have anyone to hold accountable.

After looking at all three different types of organizations they all appear to have some differences, but they also have many things in common. One of the things that makes each type of company different is the set up and how they are ran. All of them have a group of owners, small and large, but they all have a different way they can receive funds and disperse funds. Something that appeared to be a part of all of the different types of companies were the code of ethics. Each company under the different types I researched all had a tab on their organizations website that stated some code of ethic that they followed and required all employees to follow also. This surprised me, because I was expecting a private company to be not as worried about a code of ethics, but private companies can be just as big as public companies so they have a great number of people that they are responsible for internally and externally. This very insightful research provided me with information about the different types of companies that I was unaware and did not anything about.

References

1. AHA. (2019). Ethics Policy. Retrieved from American Heart Association: https://non-profit-organization.laws.com/501c3
2. General Electric Company. (2005). General Electric Company Code of Conduct. Retrieved from SEC: https://www.sec.gov/Archives/edgar/data/1314357/000119312508061938/dex142.htm
3. IKEA Supply AG. (2008, June 4). IWAY Standard. Retrieved from IKEA: https://www.ikea.com/ms/ar_QA/about_ikea/pdf/SCGlobal_IWAYSTDVers4.pdf
4. Investing Answers. (2019). Private Company. Retrieved from Investing Answers: https://investinganswers.com/financial-dictionary/businesses-corporations/private-company-2307
5. Laws. (2017). 501 (c) (3) Designation Qualification. Retrieved from Laws: https://non-profit-organization.laws.com/501c3
6. Top NonProfit. (2019). Top 100 NonProfits on the Web. Retrieved from Top NonProfit: https://topnonprofits.com/lists/best-nonprofits-on-the-web/