Scenario 1: Code of Ethics and Business Conduct [To illustrate the concepts in t

Question

Scenario 1: Code of Ethics and Business Conduct [To illustrate the concepts in this case study, the following scenario changes the facts provided in Case Study 1, “Auditing Entity-Level Controls,” where it was stated that SHR had a written code of conduct.] In the past, SHR has relied on a collection of individual policies to communicate its expectations regarding compliance with laws, regulations, and internal operating practices. The senior vice president – legal, who also is designated as SHR’s CCO, has determined that the company has grown to a size and operating complexity necessitating an integrated code of ethics and business conduct (the “code”). He has assembled a team consisting of personnel from the legal, human resources, and internal audit functions to develop this code. Scenario 1 Activities

1. Explain why it is important to include representatives from the legal, human resources, and internal audit functions in the development of the code. What other areas of the organization, if any, should also be consulted when developing the code?

2. Based on the background and case facts describing SHR Corporation’s business, identify the types of laws and regulations that the company is subject to and should consider for inclusion in the code.

3. Develop an outline for SHR’s code listing the sections that should be considered to create a robust, comprehensive code. There is no need to develop any of these sections; simply create the outline.

4. Describe ways for communicating the new code and providing the necessary training to employees and new hires.

5. There are other key elements to an effective compliance and ethics program.

Discuss the value of the following:

a. Annual certification of compliance.

b. Whistleblower hotline.

c. Escalation and investigation process.

d. Disciplinary action process.

e. Compliance program audits.

Explanation / Answer

The legal function can advise on elements of the code that may be driven by laws and regulations. Additionally, the legal function may need to lead certain investigations and should therefore have input into the section of the code that discusses enforcement and disciplinary actions. The human resources function can provide insights on expectations for employee behaviors, ensuring alignment with Department of Labor regulations as well as the values of the SHR Corporation (SHR). The internal audit function can provide insights into how the code can be monitored, controls to help enforce the code, and the escalation and investigation protocol.

Since SHR is a publicly traded company in the United States, it would be subject to regulations surrounding public communications and trading of its securities. Some of the more common regulations include:

Additionally, since the company manufactures and sells sportswear, it would likely be subject to the following laws and regulations:

Finally, since the company manufactures and sells sportswear in a competitive market, it would likely be subject to the following laws and regulations:

Students may have a wide variety of answers and formats for their outlines. However, the following areas should be included in some fashion:

Summary of the code, reinforcing the previous sections

Rolling out an important policy such as a code of ethics and business conduct typically requires more than one communication to ensure employees obtain the understanding needed to support ongoing compliance. Common ways of doing this include:

The following are key elements of each area:

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