Business Ethics and Corporate Culture

Less Than One Third of Formula One Companies Respond to Human Rights Concerns

The Business and Human Rights Resource Centre (BHRRC) has announced that only 29% of Formula One companies responded to the BHRRC’s human rights concerns at the Bahrain Grand Prix, with many organisations such as Human Rights Watch and Amnesty International claiming that holding the Grand Prix in Bahrain would give the kingdom’s government the wrong message. The BHRRC noted that “[t]he company responses were on the whole disappointing, given the gravity of the human rights concerns raised about Bahrain, and given that last year the United Nations Human Rights Council adopted by consensus the Guiding Principles on Business and Human Rights, which confirmed that all companies have a responsibility to respect human rights”. Further information about which companies did and did not respond, as well as their responses, is detailed in the BHRRC’s media release.
BHRRC’s media release (18 April 2012)
(Source: BHRRC)

Private Lives and Conduct of Executives Under Greater Scrutiny by Boards

Traditionally, CEOs’ behavior outside of the office has been their own business. However, as boards look to protect corporate reputations, this notion is rapidly falling off. Last week, amid reports he was being investigated for the misuse of company funds in relation to an inappropriate relationship he was having with a female employee, Brian Dunn stepped down as CEO of Best Buy. This is just the latest in a number of instances where boards have acted quickly to dismiss executives as a result of their concerns about personal conduct rather than financial or legal wrongdoing. Highmark, the University of Arkansas and Hewlett Packard have all made similar moves. In each of these instances, the company’s board was looking to protect the organization’s reputation. In addition, the board actions reflect the many laws in the United States that require company leaders to preserve a culture of compliance at their organization. Boards also need to trust in their chief executive’s judgment. It would be difficult for these objectives to be achieved if the chief executive engages in inappropriate personal conduct. Moving forward, it might be time for companies to consider adopting personal codes of conduct for their executives and other internal controls that address the personal conduct of their executives.

New York Times: On and Off the Clock, Conduct Matters (18 April 2012)
(Source: New York Times)

Middle Management Largely Unaware of UK Bribery Act
Europe, Middle East and Africa

According to a survey conducted by Ernst & Young, 72% of middle managers working in Britain were not aware of the Bribery Act 2010 (Act). Additionally, of the 28% of middle managers who do know about the Act, only 55% feel they have been provided with enough training to enable them to abide by the law. According John Smart, a partner at Ernst & Young, “The survey results should serve as a stark warning to firms that they should ramp up their compliance procedures to ensure that clear anti-bribery policies are in place.”

ILM: Survey: 72% of managers unaware of Bribery Act (13 April 2012)
(Source: Institute of Leadership & Management)

Real Estate Co Settles Race Discrimination and Retaliation Suit

The US Equal Employment Opportunity Commission (EEOC) has announced that it has arrived at a settlement with Bankers Asset Management Inc (BAM), who has agreed to pay US$600,000 to former employees and a class of applicants. The EEOC alleged that  “the company excluded black applicants for jobs at the company’s Little Rock location based upon their race” and “retaliated against other employees and former employees for opposing or testifying about the race discrimination, by demoting and forcing one out of her job and by suing others in state court”. As well as the injunctive and monetary relief, BAM must, inter alia, “provide mandatory annual three-hour training on race discrimination and retaliation under Title VII [of the Civil Rights Act of 1964] to all of its employees”, “maintain records of complaints of race and retaliation discrimination” and “provide annual reports to the EEOC regarding such complaints”.

EEOC’s media release (18 April 2012)
(Source: EEOC)

Misleading Advertisers Settle Trade Commission Charges

The US Federal Trade Commission (FTC) has announced that it has obtained a settlement order (undated) against Green Millionaire, Syndero Inc, Scott Waltz and Nigel Williams for misleading consumers. The company led “an online operation that allegedly lured consumers with a supposedly ‘free’ book falsely promising that it would show them how to power their cars and homes at no cost, and then billed them for an online magazine they never ordered”. According to the order, Green Millionaire must ensure that they disclose “the most critical terms of the negative-option program: all costs associated with it, that consumers are agreeing to pay the costs, the length of any trial period, and that consumers must cancel to avoid the charges”.

Green Millionaire is required to ensure that it has the affirmative approval of consumers before processing any billing information. Amongst other things, the defendants failed to disclose the costs associated with the e-magazine subscription program and “allegedly debited or charged consumers’ bank or credit card accounts without their consent, misrepresented the book’s contents, and used unsubstantiated endorsements”. The settlement order bars the defendants from carrying out such conduct and “making any material misrepresentation in the sale of any good or service”. According to the FTC, “[t]he order imposes a judgment of more than US$5.7 million”, which will be suspended when certain conditions are met, and “[t]he full judgment for each defendant will become due immediately if the defendant is found to have misrepresented his financial condition”.

FTC’s media release (16 April 2012)
(Source: FTC)