Training: Introduction to corporate ethics and compliance system and its establishment in China


In September 2013, at the invitation of the United Nations Global Compact Organization, Yao Feng, Executive Vice President of China Association of Listed Companies, led a delegation to the United States to attend the "2013 United Nations Global Compact Leaders Summit". Period, was invited to visited the United States association of ethics and compliance officer (Ethics&ComplanceOfficerAssociation, referred to as "ECOA), to understand business ethics and compliance system, the necessity, feasibility of related systems in China are discussed in this paper. Below, the basic situation of corporate ethics and compliance system is briefly introduced for everyone to exchange and reference.
The topic of "corporate ethics" first came to the attention of the business community and the public in the 1970s. In 1976, LockheedCorporation, then America's largest aircraft manufacturer and arms supplier, was caught paying bribes to Japanese politicians to sell products to Japan, involving more than $10 million. A subsequent investigation by the Senate Committee on National Corporations found that the practice of hiring middlemen to bribe decision makers was widespread in countries including Saudi Arabia, Turkey, Spain, Brazil and the Philippines. Then, in an amnesty program carried out by the Senate National Corporation Investigation Committee, more than 400 American companies admitted to having made questionable payments to overseas related people to grow their businesses, which greatly shocked the US government and the public. This incident led to the introduction of the Foreign Corrupt Practices Act (FCPA) in 1977. Subsequently, Barings Bank incident, Enron incident, Worldcom Company incident and a series of cases caused by the company or company staff's violation of business ethics led to the collapse of the company bankruptcy, making people more and more aware of the importance of corporate ethics and compliance. People began to reflect on an important issue that enterprises must face in operation, management and good development, that is, how to strengthen ethics and compliance in corporate culture, in order to balance the negative impact and crisis brought by one-sided and excessive pursuit of profit.
In 2002, the United States Congress passed the Sarbanes Act with a high vote, which made many new provisions on corporate governance, accounting practice supervision, securities market supervision and so on. The legal compliance model established by Sarbanes goes beyond the rules-based model of the past by engaging directly with corporate governance (boards of directors), senior management, and accounting firms to hold them accountable for the health of the business, ensuring that operational management decisions and corporate culture are more focused on ethical outcomes, and that the legal compliance model is more effective. And not just to comply with the law.
Enterprise first appeared in the "ethics and compliance officer (ethicsandcomplianceofficer)" as America in the 1980 s, its main duty is to study and formulate business compliance policy, supervision and management of the enterprise culture, as well as the implementation of various management systems and implement. Appeared for the first time in 2002, the company's "chief ethics and compliance officer (chiefethicsandcomplianceofficer)", it is appointed by the board of directors of the company, reporting to the board of directors, overall responsibility for corporate ethics and compliance policy development, management and execution. At present, most of the world's large multinational companies and Fortune 500 companies have set up a "Chief Ethics and Compliance Officer (CECO)" or "Chief Compliance Officer (CCO)". In 1991, 19 of the top 500 listed companies in the United States initiated the establishment of the Ethics Officers Association (EOA), which was renamed the Ethics and Compliance Officers Association (ECOA) in 2005. ECOA members are mainly executives in charge of business ethics and corporate compliance practices of enterprises in the United States and abroad. Its main mission is to conduct research and promotion of corporate ethics and compliance systems and practices, promote enterprises to establish a corporate culture focusing on business ethics and compliance through consulting, training, professional certification and other forms, and constantly improve the level of integrity and compliance.
At the end of 2008, Siemens settled with the relevant law enforcement authorities in the United States and Germany for $1.4 billion for commercial bribery, which is a milestone event in global corporate compliance and anti-corruption, making more and more multinational companies further realize the importance of "ethics and compliance" for the stable and healthy development of enterprises. At the same time, governments and relevant international organizations are also stepping up efforts to promote corporate compliance and anti-corruption. In December 2009, the United Nations Global Compact and Transparency International jointly developed the "Tenth Principles of anti-Corruption Reporting Guidelines", which provides a framework for companies to write compliance reports based on the experience of many multinational companies. In addition, the United Nations Global Compact has set up the Expert Group on Principles 10, namely the Expert Group on Principles against Corporate Business Corruption, to promote global corporate compliance and anti-corruption. In December 2009, the OECD Council adopted the Recommendations on Further Combating Bribery of Foreign Officials in International Business Dealings, the Guidelines on Best Practices in Internal Control, Ethics and Compliance in February 2010, and the newly revised Code of Conduct for Transnational Corporations at the end of May 2011. It also holds two meetings a year to sum up the experience of enterprises in various countries and promote global corporate compliance and anti-corruption. In July 2010, the United Kingdom passed the Anti-Bribery Act, which is the highest level of anti-corruption in the world, and classifies the crimes related to bribery into three categories: general bribery crimes (including bribery and bribery), bribery of foreign public officials, and commercial organizations' negligence in preventing bribery. Among them, the crime of preventing bribery dereliction of duty is a new creation, which reflects the change of law enforcement concept from heavy handling to heavy prevention. In addition, Canada, Germany, the United Kingdom, France, Japan, South Korea and other countries have enacted similar laws and regulations. The significance of establishing ethics and compliance system for enterprises is that the establishment of compliance system is not for the sake of obtaining empty name, but for the needs of realistic interests of enterprises. There is a reason why most well-known multinational companies have established relatively mature ethics and compliance systems. Since the 1950s and 1960s, Western companies have widely used bribery to compete with each other in the third world countries, which not only resulted in increasing business costs and damage to the overall interests of the industry, but also made multinational companies realize that problems in ethics and compliance will bring unbearable losses to the company. The effects of notoriety, stock price crashes, and market losses are global, fundamental, and even devastating. No mature company is willing to take such a big gamble. Many cases tell people that the development of enterprises must be based on integrity and compliance, so that enterprises do not have to worry about being held accountable in the future and have to pay huge compensation, fines and litigation costs, and do not have to fear losing customers and being expelled from the market due to scandals. In the long run, the way of integrity and compliance is the most economical way of development, and the property obtained by taking moral and illegal risks is always not their own property. In modern society, enterprises have huge wealth, rich resources and great influence. Therefore, they also bear great social responsibilities. As the cell of national economy, the quality and health of enterprises determine the quality and competitiveness of the country. It is hard to imagine how citizens' health and public safety can be safeguarded and consumers' confidence can be supported in a society where corporate compliance and ethics are lacking. In this sense, integrity management and compliance operation are the social responsibilities of enterprises. A good compliance and ethics team can often rely on professional experience and best practices in the industry to assist other functional departments of the enterprise to find new ways that are both compliant and effective, so that the risks of the enterprise and employees can be effectively controlled or eliminated, and the costs and expenses of the enterprise can be avoided or saved. By cooperating with the internal control team, the corporate compliance and ethics team can not only provide policy basis for various internal control systems of the enterprise, but also put forward specific suggestions and evaluations on the rationality and effectiveness of the internal control system. By closely combining with the internal control system, the ethics and compliance system can not only reduce the external losses caused by administrative penalties or civil compensation for violations, but also reduce the internal losses caused by conflicts of interest or malicious theft. In addition, the ethics and compliance system can provide protection for enterprises and employees, can win the respect and trust of partners, customers and investors, can guarantee the quality of products, improve the pride of employees, and provide a strong driving force for the development of enterprises. The competition between enterprises is ultimately talent competition, attracting and retaining excellent employees is always the top priority of enterprise work. Excellent employees value not only the benefits, but also the pride of working in a well-known company with a high reputation. Compliance and ethics work creates the best place for employees to work and a stable, secure and long-term career. Employees with a strong sense of compliance and ethics can also consider the reputation and development of the company everywhere, and consciously and proactively safeguard the interests of shareholders. A correct understanding of the relationship between compliance and development is another cognitive threshold that enterprise leaders must cross when promoting compliance and ethics. For most enterprises, it is easy to form a consensus on development, and it is often difficult to make up your mind to meet the rules, and you always want to wait for a more appropriate time. In fact, if you hold the mentality of waiting until the enterprise is successful or even has an absolute advantage in the industry to engage in compliance, then the enterprise will never have the right time to engage in compliance. It is shortsighted to set compliance against development, and to argue that the more compliant you are, the less competitive you will be. The more challenging a business is, the greater the need for compliance and ethical influence to penetrate. If an enterprise lacks competitiveness, it should first find the reasons in product quality, marketing strategy, cost model, management efficiency and other aspects. Proper compliance and ethical work can help the enterprise seriously find the fundamental way to improve its competitiveness with a highly responsible attitude towards society, customers, shareholders and employees, and have the courage to shoulder its due responsibilities.
The "Ethics andcompliance", the main content of corporate ethicsandcompliance, includes two parts: Ethics is the internal constraint, requiring employees to consciously restrain their own business behavior and comply with the social moral standards of the place where the enterprise is located; Compliance is an external constraint that requires employees' behavior not to violate laws and regulations and codes of conduct formulated by the company. The healthy development of enterprises cannot be separated from the escort of good ethics and compliance mechanisms, which complement each other and are indispensable. The "ethics and compliance" work of enterprises mainly includes three aspects: First, the formulation and promulgation of the Code of Business Conduct and a series of other supporting policies to clarify the code of conduct advocated and required by the company; The second is to carry out various forms of publicity and training to make every employee understand the significance of ethics and compliance, and understand the specific content and requirements; The third is to establish a mechanism for reporting and dealing with disciplinary violations to prevent non-compliance and unethical behaviors that affect the interests of the company and employees. The establishment of the "ethics and compliance system" should start from the following key aspects: First, the establishment of a specialized responsible organization, with specialized talents responsible for the operation of the "compliance" work of the enterprise, and coordinate other departments to participate in the ethics and compliance work; The second is to issue an Employee Code of Conduct or a Business Code of Conduct and other supporting documents to clarify the core values and propositions of the company in terms of ethics and compliance; Third, strengthen communication, publicity and training. Through regular communication with senior management of the company, enhance operators' attention to ethics and compliance work, so that employees and related parties of the company can understand the specific requirements of ethics and compliance of the company and integrate them into business activities; The fourth is to report and punish violations, encourage employees to report violations found and punish violators, highlight the deterrence of corporate ethics and compliance work, reward employees who perform well in compliance, and set an example for others. In the process of carrying out ethics and compliance-related work, the person in charge of corporate ethics and compliance-related work should pay attention to the following three important aspects: First, it should not be ethical for the sake of ethics, and compliance for the sake of compliance. The person in charge of the ethics and compliance work shall avoid undue loss of the company's interests due to incorrect interpretation and presentation of ethics and compliance requirements; Second, the purpose of ethics and compliance is not to kill problematic work and disrupt existing ways of working, but to make problematic or potentially problematic work become problem-free in order to achieve corporate goals. Ethics and compliance staff should participate in the discussion of many specific problems faced by enterprises in the development process, and assist enterprise managers to find both principles and regulations responsible for ethics and compliance, and feasible solutions to problems; Third, ethics and compliance work is a step-by-step process and cannot be carried out in an overnight manner. The establishment of ethics and compliance system is a process of continuous understanding, continuous search, continuous discovery, continuous debugging, continuous deepening and continuous improvement. The Ethics and compliance team will be based on the overall concept, the concept of cooperation, the concept of service and the concept of learning. It is only through patient, meticulous and creative work that the ethics and compliance team can find practical protection measures for the development of the company and realize its value.
For most Chinese enterprises, corporate ethics and compliance are still relatively unfamiliar concepts. Although some internationally developed enterprises and some financial enterprises have established ethics and compliance systems according to their own development or regulatory needs, they often place more emphasis on compliance and pay less attention to ethics. With the continuous and rapid development of China's economy and the continuous improvement of the degree of internationalization of enterprises, the research, promotion and establishment are in line with China's national conditions
The corporate ethics and compliance system and culture are becoming more and more important and urgent, which is not only the inevitable need for the healthy development of enterprises, but also the only way for enterprises to integrate into the international economic system. Due to various reasons, the current integrity and compliance status of Chinese enterprises is not satisfactory. The repeated occurrence of a series of incidents such as poisoned rice and poisoned milk powder has caused serious social impact and great psychological insecurity to consumers. In addition, the occurrence of foreign affairs such as the China Aviation Oil incident, the Rio Tinto incident and the Glaxo incident that harm business ethics has made the international community worried about China's business environment and the ethical compliance of Chinese enterprises. In 2012, the World Bank issued a list of enterprises that were banned from undertaking World Bank-funded projects for a certain period of time due to suspected fraud and bribery, and many well-known Chinese large enterprises such as China Geological Engineering Corporation, China Road and Bridge Engineering Corporation, China State Construction Engineering Corporation, and China Wuyi Industrial Corporation were blacklisted. According to the relevant report of the United States agency, China has become an important area for the United States to fight overseas corruption.

In 2008, five of the 35 foreign corruption (FCPA) cases investigated worldwide involved China. Ten of the 44 cases in 2009 involved China. In this case, many multinational companies have correspondingly equipped compliance governance resources in China. Although China's reform and development and market economy construction has gone through more than 30 years, on the whole, most Chinese enterprises are still in the early stage of development, market culture, integrity culture has not been well established, profit-seeking, unfair competition and other early practices of market economy are understood by many business managers as the rules of market competition. In the 1990s, the modern enterprise management theory began to be popularized in China, and the corporate value orientation such as shareholder value maximization was accepted by many enterprises. It should be said that this is a great progress for Chinese enterprises and has very important positive significance. However, in the new century, when multinational companies in China are promoting comprehensive responsibility, including social and environmental responsibility, many Chinese companies either do not understand what corporate responsibility is, or dismiss it as a show by multinational companies, or one-sided understanding of corporate responsibility as public welfare undertakings. From the perspective of corporate ethics, compared with foreign companies, Chinese enterprises' moral concepts are too vague and lack guiding principles closely related to the business activities of enterprises. There is no specific implementation mechanism such as compliance officer, compliance committee, new employee training and regular training of all staff, reporting hotline, disciplinary violation handling, etc. Publicity and training are far from being in place. This is also one of the important reasons for the serious moral problems of Chinese enterprises. Therefore, to advocate the concept of corporate ethics and compliance in China and promote the construction of relevant systems, we must first strengthen publicity and training in concept and consciousness, so that enterprises and enterprise managers can fully understand the connotation of corporate ethics and compliance and fully understand the significance of ethics and compliance for the long-term development of enterprises. The promotion of corporate ethics and compliance is not a show, nor is it a public benefit, but an important means and guarantee that can bring real benefits to enterprises and promote the long-term and healthy development of enterprises. A company that does not pay attention to business ethics and compliance will never become a great company that can develop healthily for a long time. At the same time, on the basis of learning from foreign companies to strengthen compliance management experience, according to the reality of Chinese enterprises and Chinese enterprise system, the establishment of
Ethics and compliance system suitable for China's national conditions. Strengthen the early warning and control mechanism of ethics and compliance risks, and comprehensively promote the ethics and compliance management of enterprises. To promote the construction of ethics and compliance, enterprises must not only make efforts in the system and mechanism, but also grasp the implementation, and pay attention to practical results. Relevant concepts should be truly implemented in consciousness and behavior, and ethics and compliance should become the conscious consciousness and behavioral habits of every manager and employee of the company, and become part of the DNA of the company. In this way, unethical and non-compliant behavior that endangers the company's reputation will encounter layers of resistance within the company and will not be able to flourish or secretly take advantage of the situation. In the era of globalization, the competition among multinational companies has risen from the hardware competition to the software competition, from the technology and product competition to the concept of corporate responsibility and corporate ethics. The advanced concept of corporate responsibility has become an indispensable soft competitiveness for enterprises to win. Chinese enterprises should adapt to the new situation of global enterprise competition, and enhance soft competitiveness by renewing ideas and strengthening responsibilities. It is good to see that in recent years, many Chinese companies, especially those that are developing internationally, are paying more and more attention to corporate ethics and compliance and have made positive progress. According to the relevant statistics of the United Nations Global Compact organization, of the 26 Chinese mainland enterprises that entered the global top 500 in 2007, only 8 have compiled and disclosed corporate compliance and anti-corruption reports. However, by 2011, 49 of the 57 mainland Chinese companies that entered the global Top 500 had compiled and disclosed anti-corruption compliance reports. In 2012, 54 of the 69 Chinese mainland enterprises that entered the world's top 500 disclosed corporate compliance and anti-corruption reports, especially more than 30 of them wrote quite complete compliance and anti-corruption reports with high transparency and high operability. In addition, in the current political and economic environment, advocating the concept of corporate ethics and compliance and establishing an ethics and compliance system are not only related to the long-term healthy development of enterprises, but also an important requirement for enterprises to practice the core socialist values in the new era. The 18th National Congress proposed to "advocate prosperity, democracy, civilization, harmony, freedom, equality, justice, the rule of law, patriotism, dedication, integrity, and friendship, and actively cultivate socialist core values." The purpose of socialist core values is to rebuild the moral beliefs of the state, society and individuals, enhance the important role of morality in promoting economic development, and cultivate good moral customs, improve social moral standards, and promote the all-round development of social economy by guiding every social individual to speak morality, respect morality and keep morality, and pursue noble moral ideals. As the main body of social economic activities, enterprises should regulate their own behavior according to higher moral standards. Enterprises constantly improve their own moral standards, actively and consciously carry out economic activities in strict accordance with moral standards in daily business activities, and establish honest and harmonious business relations with customers, users, partners, community residents and other stakeholders, which is the social responsibility of enterprises should be fulfilled, but also an important way for enterprises to practice socialist core values.
It is believed that with the establishment and improvement of corporate ethics and compliance concepts and relevant systems in China, China's business environment and business ecology will be greatly improved, and there will be more and more great companies that can create huge social value and commercial value at the same time.