In September 2013, at the invitation of the United Nations Global Compact Organization, Yao Feng, Executive Vice President of the China Listed Companies Association, led a delegation to the United States to attend the "2013 United Nations Global Compact Leaders Summit." During this period, he was invited to visit the Ethics & Compliance Officer Association (ECOA) in the United States, where he learned about corporate ethics and compliance systems and discussed the necessity and feasibility of introducing related systems to China. Below is a brief introduction to the basic situation of corporate ethics and compliance systems for everyone's exchange and reference.
The development history and current status of corporate ethics and compliance systems. The topic of "corporate ethics" first gained widespread attention from the business community and the public in the 1970s. In 1976, Lockheed Corporation, then the largest aircraft manufacturer and arms supplier in the United States, was exposed for bribing Japanese officials to sell products in Japan, with an amount involved exceeding 10 million USD. An investigation by the Senate's National Company Investigation Committee subsequently found that Lockheed Corporation commonly used intermediaries to bribe decision-makers in countries such as Saudi Arabia, Turkey, Spain, Brazil, and the Philippines. Following this, over 400 American companies admitted to having paid suspicious amounts to overseas personnel for business development under a pardon program implemented by the Senate's National Company Investigation Committee, which greatly shocked the U.S. government and public. This incident directly prompted the enactment of the U.S. Foreign Corrupt Practices Act (FCPA) in 1977. Subsequently, a series of cases such as the Baring Bank scandal, Enron scandal, and WorldCom scandal—where companies or their employees violated business ethics leading to corporate collapse—made people increasingly aware of the importance of corporate ethics and compliance. People began to reflect on an important issue that enterprises must face in their operations, management, and good development: how to strengthen ethics and compliance within corporate culture to balance the negative impacts and crises brought by a one-sided and excessive pursuit of profit.
In 2002, the U.S. Congress passed the Sarbanes-Oxley Act with a high vote, introducing numerous new regulations on corporate governance, accounting practice supervision, and securities market regulation. The legal compliance model established by the Sarbanes-Oxley Act transcended the past rule-based model by directly engaging with corporate management bodies (board of directors), senior management personnel, and accounting firms to encourage them to take responsibility for healthy corporate development, ensuring that management decisions and corporate culture focus more on ethical outcomes rather than merely complying with legal provisions.
The position of "ethics and compliance officer" first appeared in American companies in the 1980s. Its main responsibilities include researching and formulating corporate compliance policies, supervising corporate culture management, as well as overseeing the implementation of various governance systems. In 2002, American companies saw the emergence of the "chief ethics and compliance officer," appointed by the board of directors and reporting to them, fully responsible for formulating, managing, and executing corporate ethics and compliance policies. Currently, most large multinational corporations and Fortune Global 500 companies have established positions for "Chief Ethics and Compliance Officer (CECO)" or "Chief Compliance Officer (CCO)." The Sarbanes-Oxley Act emphasizes corporate "self-management" (i.e., self-discipline). In 1991, an association for ethics officers (EOA) was established by 19 American Fortune 500 listed companies; it was renamed as the Ethics & Compliance Officer Association (ECOA) in 2005. ECOA members are mainly executives responsible for business ethics and corporate compliance practices within companies inside and outside of the United States. Its main mission is to research and promote corporate ethics and compliance systems and practices through consulting, training, professional certification, etc., encouraging companies to establish a corporate culture that emphasizes business ethics and compliance operations while continuously improving integrity and compliance levels.
At the end of 2008, Siemens reached a settlement with relevant law enforcement agencies in the United States and Germany for $1.4 billion due to commercial bribery issues. This was a milestone event in global corporate compliance and anti-corruption, making more multinational companies realize the importance of "ethics and compliance" for the stable and healthy development of enterprises. Meanwhile, governments and relevant international organizations in various countries have also increased their efforts to promote corporate compliance and anti-corruption. In December 2009, the United Nations Global Compact and Transparency International jointly developed the "Guidelines for the Tenth Principle of Anti-Corruption Report," which proposed a framework for companies to write compliance and anti-corruption reports based on the experiences of many multinational companies. In addition, the United Nations Global Compact established an expert group on the Tenth Principle, which opposes corporate commercial corruption, to promote global corporate compliance and anti-corruption. In December 2009, the OECD Council adopted recommendations on further combating bribery of foreign public officials in international business transactions, and in February 2010, it adopted the "Best Practices for Internal Control, Ethics, and Compliance." By the end of May 2011, a new revised version of the "OECD Guidelines for Multinational Enterprises" was launched, with meetings held twice a year to summarize experiences from enterprises in various countries and promote global corporate compliance and anti-corruption. In July 2010, the UK passed the "Bribery Act," which set a new global high for anti-corruption efforts, categorizing bribery-related offenses into three types: general bribery offenses (including bribery and receiving bribes), bribery of foreign public officials, and failure by commercial organizations to prevent bribery. Among them, the offense of failing to prevent bribery is a new creation that reflects a shift in law enforcement philosophy from heavy punishment to heavy prevention. Additionally, countries such as Canada, Germany, the UK, France, Japan, and South Korea have also established similar laws and regulations. The importance of establishing ethical and compliance systems in enterprises is significant; establishing compliance systems is not merely for gaining empty titles but is driven by the real interests of enterprises. It is reasonable that well-known multinational companies have established relatively mature ethical and compliance systems. Starting from the 1950s and 1960s, Western companies widely used bribery methods to compete in third-world countries, which not only increased business costs but also harmed overall industry interests. The later occurrences of events like Enron and Siemens made multinational companies realize that issues in ethics and compliance could lead to unbearable losses for companies—infamy, plummeting stock prices, and loss of market share—with impacts that are global, fundamental, and even catastrophic. No mature company would gamble on such issues. Numerous cases tell us that enterprise development must be based on integrity and compliance; thus, companies need not worry about being held accountable later or having to pay huge compensations, fines, or litigation costs. They need not fear losing customers or being expelled from the market due to scandals. In the long run, integrity and compliance are the most economical ways to develop; property obtained through moral or legal risks is never truly one's own property. In modern society, enterprises possess vast wealth, rich resources, and significant influence; therefore, they also bear substantial social responsibilities. As cells of national economies, the quality and health of enterprises determine the quality and competitiveness of nations. It is hard to imagine how citizens' health and public safety can be guaranteed in a society where enterprises lack compliance and ethics; how can consumer confidence be supported? In this sense, operating with integrity and complying with regulations is a social responsibility that enterprises should fulfill. A good compliance and ethics team can often assist other functional departments within an enterprise in finding new pathways that are both compliant and effective through professional experience and industry best practices, effectively controlling or eliminating risks for both enterprises and individual employees while avoiding or saving costs. By cooperating with internal control teams, compliance and ethics teams can provide policy support for various internal control systems within enterprises while also offering specific suggestions and evaluations regarding the rationality and effectiveness of these systems. Through close integration with internal control systems, ethical and compliance systems can reduce external losses due to administrative penalties or civil compensations caused by violations while also minimizing internal losses due to conflicts of interest or malicious theft. Furthermore, ethical and compliance systems can protect both enterprises and employees; they can earn respect and trust from partners, customers, and investors; ensure product quality; enhance employee pride; and provide strong driving force for enterprise development. Competition among enterprises ultimately boils down to talent competition; attracting and retaining excellent employees remains a top priority for businesses. Outstanding employees value not only compensation but also take pride in working for a reputable company. Conducting compliance and ethics work can create an optimal workplace for employees as well as a stable, safe career path with long-term development potential. Employees with strong awareness of compliance and ethics can think about the reputation and development of enterprises at all times while proactively safeguarding shareholders' interests. Correctly understanding the relationship between compliance and development is another cognitive threshold that enterprise leaders must cross when promoting compliance and ethics work. For most enterprises, it is easy to reach consensus on discussing development but often difficult to make decisions on compliance work; they tend to wait for a more appropriate time. In fact, if one holds onto the mindset of waiting until an enterprise succeeds or holds an absolute advantage in its industry before addressing compliance issues, then there will never be an appropriate time for compliance work. Opposing compliance to development by believing that greater compliance leads to less competitiveness is shortsighted. The greater challenges an enterprise faces, the more it needs the influence of compliance and ethics permeation. If an enterprise lacks competitiveness, it should first look for reasons in product quality, marketing strategies, cost models, management efficiency, etc.; appropriate compliance and ethics work can help enterprises responsibly seek fundamental ways to enhance competitiveness towards society, customers, shareholders, and employees while courageously fulfilling their responsibilities.
The main content of corporate ethics and compliance work "Ethics and Compliance" includes two parts: Ethics is an internal constraint that requires employees to consciously restrain their business behavior in accordance with the social moral standards of the location where the company operates; Compliance is an external constraint that requires employees' behavior not to violate laws and the various rules and codes of conduct established by the company. The healthy development of a company relies on a good ethical and compliance mechanism, both of which complement each other and are indispensable. The "Ethics and Compliance" work of a company mainly includes three aspects: First, to formulate and issue the "Code of Business Conduct" and other supporting policies, clarifying the codes of conduct that the company advocates and requires; Second, to carry out various forms of publicity and training to make every employee understand the importance of ethics and compliance, as well as the specific content and requirements; Third, to establish a mechanism for reporting violations and handling disciplinary actions to prevent non-compliant and unethical behavior from occurring, which could affect the interests of the company and its employees. When establishing an "Ethics and Compliance System," companies should focus on several key aspects: First, establish a dedicated institution responsible for the operation of corporate compliance work, coordinating with other departments to participate in ethics and compliance work; Second, issue an "Employee Code of Conduct" or "Business Conduct Code" along with other supporting documents to clarify the core values and claims regarding ethics and compliance; Third, strengthen communication, publicity, and training by regularly communicating with senior management to enhance their attention to ethics and compliance work, ensuring that employees and stakeholders understand the specific requirements in these areas and integrate them into business activities; Fourth, encourage reporting of violations and impose penalties on violators to demonstrate the deterrent effect of corporate ethics and compliance work, rewarding employees who perform well in compliance to set an example for others. In carrying out ethics and compliance-related work, those responsible for corporate ethics and compliance should pay attention to three important aspects: First, do not pursue ethics for the sake of ethics or compliance for the sake of compliance. The person in charge should avoid causing undue losses to the company's interests due to misinterpretation or misstatement of ethical and compliance requirements; Second, the purpose of ethics and compliance is not to stifle problematic work or disrupt existing working methods but to resolve issues or potential problems in a way that aligns with corporate goals. Ethics and compliance personnel should participate in discussions about specific issues faced by the company during its development, assisting management in finding solutions that are both principled regarding ethics and compliance as well as practical; Third, ethics and compliance work is a gradual process that cannot be achieved overnight. Establishing an ethics and compliance system is an ongoing process of understanding, searching, discovering, adjusting, deepening, and perfecting. The ethics and compliance work team will adopt a holistic perspective, collaborative mindset, service orientation, and learning attitude. Only through patient, meticulous, and creative work can the team find practical protective measures for corporate development that reflect their value.
The significance, current status, and reflections on Chinese enterprises establishing ethical and compliance systems For most Chinese enterprises, corporate ethics and compliance are still relatively unfamiliar concepts. Although some internationally developed companies and certain financial enterprises have established ethical and compliance systems based on their own development or regulatory needs, they often emphasize compliance more than ethics.
With China's continuous rapid economic development and increasing internationalization of enterprises, researching, promoting, and establishing ethical and compliance systems that align with China's national conditions has become increasingly important and urgent. This is not only a necessary requirement for the healthy development of enterprises themselves but also an essential path for integrating into the international economic system. Due to various reasons, the current integrity and compliance status of Chinese enterprises are unsatisfactory. A series of incidents such as toxic rice and toxic milk powder have caused serious social impacts, leading to significant insecurity among consumers. Additionally, incidents involving foreign relations that harm business ethics such as the China Aviation Oil incident, Rio Tinto incident, GlaxoSmithKline incident have raised concerns in the international community about China's business environment and the ethical compliance status of Chinese enterprises. In 2012, the World Bank released a list of companies banned from undertaking World Bank-funded projects for a certain period due to allegations of fraud and bribery. Many well-known Chinese enterprises such as China Geological Engineering Group Corporation, China Road & Bridge Corporation, China State Construction Engineering Corporation, China Wuyi Industrial Co., Ltd., were blacklisted. According to reports from American institutions, China has become an important area for U.S. anti-foreign corruption efforts.

In 2008, out of a total of 35 overseas corruption (FCPA) cases investigated globally, 5 involved China. In 2009 out of 44 cases totalled 10 involved China. In this context, many multinational companies have correspondingly equipped themselves with excessive resources for compliance governance in China. Although China's reform and opening up as well as market economy construction have gone through more than 30 years of history overall most Chinese enterprises are still in the early stages of development; market culture and integrity culture have not been well established. Practices from the early stages of market economy such as profit-seeking at all costs or unfair competition are often understood by many enterprise managers as rules of market competition. In the 1990s modern enterprise management theories began to spread in China; concepts such as maximizing shareholder value were accepted by many enterprises which can be seen as a significant progress for Chinese enterprises with very important positive implications. However entering the new century when multinational companies promote comprehensive responsibilities including social responsibility in China many Chinese enterprises either do not understand what corporate responsibility is or dismiss it as mere showmanship by multinational corporations or misunderstand corporate responsibility narrowly as public welfare activities. From the perspective of corporate ethical concepts compared with foreign companies Chinese enterprises' ethical concepts are too vague lacking guiding principles closely related to business operations without specific implementation mechanisms such as compliance officers or committees new employee training regular training for all employees reporting hotlines disciplinary handling etc., publicity training is also far from adequate. This is also one important reason contributing to severe ethical issues currently faced by Chinese enterprises. Therefore advocating corporate ethics and compliance concepts in China promoting relevant institutional construction must first strengthen publicity training in terms of concepts awareness so that enterprises managers fully understand the connotation of corporate ethics compliance recognize fully its importance for long-term development.
A moral and compliance system suitable for China's national conditions. Strengthen the early warning and control mechanisms for moral and compliance risks, and comprehensively promote the moral and compliance management of enterprises. When enterprises promote moral and compliance construction, they should not only focus on systems and mechanisms but also on implementation, emphasizing effectiveness. Relevant concepts must be truly implemented in awareness and behavior, making moral and compliance a conscious awareness and behavioral habit for every manager and employee in the company, becoming part of the enterprise's DNA. In this way, unethical and non-compliant behaviors that endanger the company's reputation will encounter layers of resistance within the enterprise, making it difficult to thrive or operate covertly. In the era of globalization, competition among multinational companies has shifted from hardware competition to software competition, from competition mainly in technology and products to competition in corporate responsibility concepts and ethical standards. Advanced corporate responsibility concepts have become an indispensable soft competitiveness for enterprises to succeed. Chinese enterprises should adapt to the new situation of global corporate competition by updating concepts and strengthening responsibilities to enhance their soft competitiveness. It is encouraging that in recent years, many Chinese enterprises, especially large enterprises engaged in international development, have increasingly valued corporate moral and compliance work and made positive progress. According to relevant statistics from the United Nations Global Compact Organization, among the 26 Chinese mainland enterprises that entered the global top 500 in 2007, only 8 had prepared and disclosed corporate compliance and anti-corruption reports. However, by 2011, among the 57 Chinese mainland enterprises that entered the global top 500, 49 had prepared and disclosed compliance and anti-corruption reports. In 2012, among the 69 Chinese mainland enterprises that entered the world top 500, 54 disclosed corporate compliance and anti-corruption reports, particularly with more than 30 companies having well-prepared reports with high transparency and operability. Furthermore, in the current political and economic environment, advocating corporate moral and compliance concepts and establishing moral and compliance systems not only concerns the long-term healthy development of enterprises but is 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; advocate freedom, equality, justice, rule of law; advocate patriotism, dedication, integrity, friendliness; actively cultivate socialist core values." The purpose of socialist core values is to reshape the moral beliefs of the nation, society, and individuals, enhancing the important role of morality in promoting economic development by guiding every social individual to speak of morality, respect morality, uphold morality, pursue noble moral ideals to cultivate good moral customs, improve social moral standards, and promote comprehensive social and economic development. As the main body of social economic activities, enterprises should regulate their behavior according to higher moral standards. Enterprises continuously enhance their own moral standards by proactively and consciously conducting economic activities strictly according to moral standards in daily operations while establishing honest and harmonious business relationships with stakeholders such as customers, users, partners, and community residents; this is both a social responsibility that enterprises should fulfill and an important way for enterprises to practice socialist core values..
I believe that with the establishment and improvement of corporate moral and compliance concepts as well as related systems in China, China's business environment and ecosystem will see significant improvements. At that time, China will witness an increasing number of great companies capable of creating immense social value alongside commercial value.