Question

Explain in details how misconduct in workplace effects on having:

1- Actual FInancial loss

2- Cost of investigation have to be borne

3- Loss of share in the market

4- Revocation of special grant or privilege (if any) by government

Answer 1

Ans:

Workplace misconduct falls into two categories: gross and general. While general misconduct is a problem for employers, gross misconduct is a reason for swift disciplinary action, usually dismissal. As a small-business owner, make sure you understand that the burden of proof is on the employer when firing someone for gross misconduct. Keep accurate records in human resources files and document everything related to the behavior.

Like all organizations, Calvin University is faced with risks from wrongdoing, misconduct, dishonesty, and fraud in its financial operations. As with all business exposures, we must be prepared to manage these risks and their potential impact in a professional manner.

1) Actual Financial Loss:

Financial loss is an obvious effect of both types of fraud. When someone misappropriates company assets, the loss is fairly easy to quantify. For example, if a cashier takes $60 from the cash register, the company loses $60. The costs of fraudulent financial reporting are harder to determine. If a small-business owner perpetrates financial statement fraud, an explicit dollar figure might not be obvious. However, fines assessed for misleading investors, civil suits to recoup investor and creditor losses and the unwillingness of companies to extend credit to the business in the future all add up to a severe financial loss for the company.

Companies with a strong ethical identity tend to maintain a higher degree of stakeholder satisfaction, positively influencing the financial results of the company, according to the Ethical Investment Research Service. Conversely, lack of personal and professional ethics can lead to negative financial results, as recently evidenced by the collapse of Wall Street firms. Risky loans and questionable business practices put many banking and insurance firms in a precarious position. Ensuring ethical behavior at your company can help improve your company's economic performance.In our capitalist society, the economy emphasizes private ownership in a privately controlled economy.

Companies exist primarily to make money for their owners and shareholders. Generating a profit is the main goal. Short-term profit tends to be more important than long-term success. Without confidence in management, stakeholders tend to limit investments, negatively affecting growth. According to EIRIS, studies show that ethics-related news influences a company's share price for better or worse, revealing effects of between 0.5% and 3% of share price. Whether a company has outside investors, relies on venture-capital funding or reinvests its own profits, keeping accurate records is essential to long-term success. Announcing large returns that are the result of fraudulent accounting can lead to issues that ultimately hurt a company's performance. Ethical business practices can help companies avoid legal problems and negative financial results that arise once the unethical behavior is discovered. These practices can also help companies provide a consistent return on investment as they continue focusing on operating effectively and efficiently without the distractions of bad press and negative public perception, hurting business.

2- Cost of investigation have to be borne:

Small businesses that are subject to audit and have experienced fraud, especially if the fraud was perpetrated by company management, are likely to be assessed as a high audit risk. That means auditors will more closely scrutinize company books before signing off on a company's financial statements. When an auditor is required to perform more procedures, the cost of the audit will increase. This can often be mitigated by demonstrating that the offending managers or employees have left the company and the company has instituted strict procedures to thwart future attempts at fraud.

The impact of financial misconduct and mishonest may include:

• the actual financial loss incurred.
• damage to the reputation of our organization and our employees.
• negative publicity.
• the cost of investigation.
• loss of employees.
• loss of students.
• damaged relationships with our contractors and suppliers.
• Litigation.
• damaged employee morale.

Our goal is to establish and maintain a business environment of fairness, ethics, and honesty for our faculty, our staff, our students, our alumni and donors, and anyone else with whom we have a relationship. To maintain such an environment requires the active involvement of every employee every day.

Calvin University is committed to the deterrence, detection, and correction of any misconduct and dishonesty in all of its financial operations. The discovery, reporting, and documentation of such acts provides a sound foundation for the protection of innocent parties, the taking of disciplinary action against offenders up to and including dismissal where appropriate, the referral to law enforcement agencies when warranted by the facts, and the recovery of assets.

Purpose

The purpose of this document is to communicate policy regarding the deterrence and investigation of suspected financial misconduct and dishonesty by faculty, staff, and students, and to provide specific instructions regarding appropriate action in case of suspected violations.

Definition of Financial Misconduct and Dishonesty

For purposes of this policy, “financial misconduct and dishonesty” includes but is not limited to:

• theft or other misappropriation of assets, including assets of the university, our suppliers, or others with whom we have a business relationship.
• misstatements and other irregularities in company records, including the intentional misstatement of the results of operations.
• financial wrongdoing.
• forgery or other alteration of documents.
• fraud and other unlawful acts.
• any similar acts.

Calvin University specifically prohibits these and any other illegal activities in the actions of its faculty, staff, administrators, students, and others responsible for carrying out the university’s financial operations.

Reporting

It is the responsibility of every student employee, employee, supervisor, manager, and executive to immediately report suspected financial misconduct or dishonesty to either their supervisor or divisional vice president. Supervisors, when made aware of such potential acts by subordinates, must immediately report such acts to the Director of Human Resources, the Director of Financial Services, their divisional vice president, or the President’s Office. Any reprisal against any employee or other reporting individual because that individual, in good faith, reported a violation is strictly forbidden.

Due to the important yet sensitive nature of the suspected violations, effective professional follow up is critical. Managers, while appropriately concerned about “getting to the bottom” of such issues, should not in any circumstances perform any investigative or other follow up steps on their own. Concerned but uninformed managers represent one of the greatest threats to proper incident handling. All relevant matters, including suspected but unproved matters, should be referred immediately to those with follow up responsibility as described in the Faculty Handbook Chapter 6, Staff Handbook Appendix B, or the Student Conduct Code Article V and Appendix G.

To facilitate reporting of suspected violations, especially in those situations where the reporting individual wishes to remain anonymous or has not received a satisfactory response, the university has established a third-party telephone hotline. The details of this hotline are found in the attached Appendix A. Campus Conduct Hotline.

Additional Responsibilites of Supervisors

All employees have a responsibility to report suspected violations. However, employees with supervisory and review responsibilities at any level have additional deterrence and detection duties. Specifically, personnel with supervisory or review authority have three additional responsibilities.

• First, become aware of what can go wrong in your area of authority.
• Second, put into place and maintain effective monitoring, review, and control procedures which will prevent acts of wrongdoing.
• Third, put into place and maintain effective monitoring, review, and control procedures which will detect acts of wrongdoing promptly should prevention efforts fail.

Authority to carry out these three additional responsibilities is often delegated to subordinates. However, accountability for their effectiveness cannot be delegated and will remain with supervisors and managers.

3- Loss of Share in the Market:

Fraud can have a substantial impact on a business, no matter what size it is. The two most basic types of fraud are misappropriation of assets by employees and fraudulent financial reporting by management, whereby misleading or inaccurate financial information is disseminated to investors, stakeholders and the public. The first type of fraud often happens without management knowledge, and the second type is often unknown to employees. Both can devastate a company. Once a fraud has been uncovered, the company faces an ongoing problem of public trust in the organization. While a small business scandalized by fraud might never be the victim or perpetrator of another fraud, its public image might be irreparably tainted. As a consequence, the company may have to pay a higher price for credit, may be refused membership in trade associations or might not be considered for a strategic alliance.

Among the worst effects of unethical behaviour on business is that a company is unable to forge or maintain any long-term relationships with customers. In addition, it becomes vulnerable to long and expensive litigations. The fact is that even one such instance can make the company vulnerable to further accusations, many of which could be false, made by people and competitors seeking to harm the company’s reputation. While customers do have access to a lot of information by way of the internet and other market intelligence, they do rely heavily on the company and its representatives for accurate information and structured guidance on a number of aspects. Therefore, as the business environment becomes more competitive, companies must make the decision to act ethically or else face the highly damaging effects of unethical behaviour on their business and the representatives. It would be extremely immature and imprudent on the part of companies to believe that customers are naïve and would not find out eventually about the company’s malpractices.

Despite the truth of the quote and the labour and investment required to gain customers, the harsh reality is that almost every company will have some ‘malefactors’ who are not ashamed to indulge in dishonesty. They completely ignore the effects of unethical behaviour on the business of their company. Unethical behaviour could be a range of things – using company property for personal gains, dishonesty in financial dealings, accepting and giving bribes and possibly the worst – insider trading. Some companies do not hesitate to offer huge ‘incentives’ to land lucrative contracts, government deals and other such transactions that will optimize their profits – irrespective of the damage they may cause to others. These companies, as they become stronger from building ‘associations’ care less and less for their employees and customers. Their only aim is to gain profits through whatever means possible.

Another of the effects of unethical behaviour on business is that customers would completely shun the company’s products and start a campaign inciting others to follow. A drop in sales means a dip in profits and a fall in the company’s share prices, which eventually would drive investors and other stakeholders away from the company since no one would want to put their hard-earned money in a failing company. The company internally too would have an environment of confusion, distrust, stress and conflict since each person would doubt the intentions of the other. Such a poor work environment would lead to a drop in productivity, lowered morale and employee attrition, which would lead to the downfall of the company. it impact on business goodwill ultimately on share price.

4- Revocation of special grant or privilege (if any) by government:

President Coolidge once said the chief business of the American people is business. Indeed, the private sector is the country's chief economic force, but it needs government regulation. The U.S. government's role in business is as old as the country itself; the Constitution gives the government the power to regulate some commerce. Though the government’s role has increased over time, the business community still enjoys considerable freedom. The government exercises its authority several ways.

The consequences of an ethical lapse can be serious and far-reaching. Organizations can quickly become entangled in an all-consuming web of legal proceedings. The risk of litigation and liability has increased in the past decade as lawmakers have legislated new civil and criminal offenses, stepped up penalties, and improved support for law enforcement. Equally—if not more—important is the damage an ethical lapse can do to an organization’s reputation and relationships. Both Sears and Beech-Nut, for instance, struggled to regain consumer trust and market share long after legal proceedings had ended.

As more managers have become alerted to the importance of organizational ethics, many have asked their lawyers to develop corporate ethics programs to detect and prevent violations of the law. The 1991 Federal Sentencing Guidelines offer a compelling rationale. Sanctions such as fines and probation for organizations convicted of wrongdoing can vary dramatically depending both on the degree of management cooperation in reporting and investigating corporate misdeeds and on whether or not the company has implemented a legal compliance program.

Integrity as a Governing Ethic

A strategy based on integrity holds organizations to a more robust standard. While compliance is rooted in avoiding legal sanctions, organizational integrity is based on the concept of self-governance in accordance with a set of guiding principles. From the perspective of integrity, the task of ethics management is to define and give life to an organization’s guiding values, to create an environment that supports ethically sound behavior, and to instill a sense of shared accountability among employees. The need to obey the law is viewed as a positive aspect of organizational life, rather than an unwelcome constraint imposed by external authorities.

An integrity strategy is characterized by a conception of ethics as a driving force of an enterprise. Ethical values shape the search for opportunities, the design of organizational systems, and the decision-making process used by individuals and groups. They provide a common frame of reference and serve as a unifying force across different functions, lines of business, and employee groups. Organizational ethics helps define what a company is and what it stands for.

Many integrity initiatives have structural features common to compliance-based initiatives: a code of conduct, training in relevant areas of law, mechanisms for reporting and investigating potential misconduct, and audits and controls to insure that laws and company standards are being met. In addition, if suitably designed, an integrity-based initiative can establish a foundation for seeking the legal benefits that are available under the sentencing guidelines should criminal wrongdoing occur.