What's next for human gene therapy?

By Chester C. Gumball

Many recent business failures and corporate collapses have everything a good potboiler needs, including unchecked egos, lifestyles of the rich and famous, Wall Street and inestimably huge mountains of money. But the endings are not happy ones, as any shareholder or employee would tell you.

At the height of their success, it appeared that everything these companies touched turned to gold. So why did the fairytale end so unromantically? How could companies, having reached the heights of the Fortune “100 Best Companies to Work for in America”, fall so unceremoniously?

Reasons include the stock ticker, budget shortfalls, accounting issues and the fact that a select few in key roles, when faced with tough decisions, were driven not by their own values and those of the company, but rather by greed and perhaps a sense of being untouchable.

But whose fault is it when companies fail? Often, the answer is everyone.

If you could isolate the two financial areas that led to these collapses, the use of mark-to-market accounting and Special Purpose Entities (SPEs) would head the list.

Mark-to-market accounting means that you can book the estimated value of a contract as soon as you sign it. In other words, it doesn’t matter what happens later, the idea is rewarded immediately. Over time, this notion of value defined these companies – they would book millions on a business that hadn’t generated a dime. The problem is that profits look great, but cash flow is non-existent. In effect they were using SPEs as a way of creating money - vast sums of money - out of nothing. Hedging each division’s position by using the company’s stock. Like most transactions, it was built on the fundamental belief that the stock would never fall. Very few safeguards were put in place to protect against an actual economic loss; an accounting loss was not considered when the obligations and values of the SPEs and other hedged assets began to fall. Hundreds of millions of dollars supposed to be covered by a company’s shares. Shares that were now plummeting.

A culture developed within these companies built around smoke and mirrors – the off-balance-sheet-partnerships, generating cash through prepays, monetizing assets. Those involved were banking on someone coming up with an idea that would be so brilliant that they would ultimately make real profits.

The General Accepted Accounting Principles (GAAP) is the complex list of rules designed to keep businesses honest. A company’s financials are always supposed to be in compliance with GAAP. Accountants involved in these scandals tried to find ways around this labyrinth of rules, but in the end no amount of creative accounting could disguise the fact that they were virtual companies with virtual profits.

While a few rogue individuals were largely responsible for most of these scandals, strong company cultures built on shared values could have helped to prevent them. An insidious side effect of “big ticket” rogue behavior is also a decline in other forms of ethical conduct. Bullying, kickbacks, blatant conflicts of interest all somehow seemed more acceptable when the overall climate was set to almost anything goes. The culture of a company is a key factor in it success, or in its downfall. Culture can bring out the best in people… and the worst. It is clearly not enough to have a magnificently written set of company values or code of conduct; people have to actually believe them and apply them on a daily basis.

Recent corporate collapses have highlighted to the world that rarely is it just about the money. With the payoffs come responsibilities - to shareholders, the staff, those who are investing their pensions. It’s about how we treat our customers and clients. By operating in a transparent, ethical manner. It’s about having corporate values that actually mean something.

In countless business failures around the world, the little people watch the lawyers and accountants take out their Mont blanc pens and sign off on another train wreck. Responsibility is shirked, and blame is passed around. Whistleblowers are bullied or ignored. The legal and accounting bills pile up. And the CEO and other executives seem taken by surprise. It’s an expensive lesson in corporate governance.

What’s the good news?

Recent calamitous corporate failures have driven dramatic changes in corporate culture. No longer is a culture of concealment or denial acceptable. Corporate failures have provided a blueprint for how not to run a company and folks have taken notice.

People started asking, “How can we do better?” How do we get boards to step up and really supervise? And what about better auditing and transparency? And while we’re at it, let’s take a look at bank’s lending practices? And the role of credit rating agencies and analysts and… so it goes.

The Sarbanes-Oxley Act of 2002 was signed into law with President George W. Bush stating that it included “the most far-reaching reforms of American business practices since the time of Franklin Delano Roosevelt.”

Some of the major provisions of the Sarbanes-Oxley act are:  

• accelerated reporting of trades by insiders
• public reporting of CEO and CFO compensation and profits
• criminal and civil penalties for violations of securities law
• harsher penalties for corporate executives who misstate financial statements
• certification of financial reports by CEOs and CFOs

Complying with Sarbanes-Oxley will certainly help your organization, but is it enough?

“You can never do enough to protect the integrity of your organization,” says Terry Hancock, of SAI Global’s Compliance Services Division. “And compliance to requirements such as Sarbanes-Oxley should always be complemented by auditing, education and adoption of rigorous best business practices. Compliance isn’t a short-term event, it’s a long-term strategy that needs to be transitioned into the matrix of an organization.”

Several recent studies reveal that while many corporations recognize the importance of a strong and well-enforced code of ethics, the majority do not provide ethics training to their employees. With Sarbanes-Oxley deadlines looming and corporate governance everywhere increasingly under the microscope, more companies are turning to formal business ethics or code of conduct training. But compliance is not the only motivation. Most organizations realize that good ethics is simply good business.

Based on recent experiences in the business ethics field, CEO of SAI Global’s Compliance Services Division, Terry Hancock, offers some insights and best practices to consider when planning and implementing an enterprise-wide employee awareness program.

Recent surveys in the USA, Canada and the UK have revealed a major disconnect in business ethics training.

For example, in a survey by the London based Institute of Business Ethics, 179 of the larger UK companies (known to have ethics programs such as a code of business ethics) were asked why having a corporate code of conduct was important to them. The prime motivation was that of “giving guidance to staff on how to respond to ethical dilemmas”, however, ironically, the survey also concluded that 59 per cent of companies did not offer any training to members of staff on the meaning and use of their corporate codes of conduct.

So, while organizations are increasingly recognizing that business ethics has an important role to play, they are failing to communicate this to staff; and how can staff possibly be expected to make the right decision on ethical issues, if they have little or no guidance from the company itself? These findings were echoed by surveys conducted by the Ethics and Compliance Officer Association in North America where the gap is perceived to be even wider.

Past experience in working with organizations worldwide, has proved that most companies and government agencies are genuinely concerned about ethics – and want to make it a high priority. Unfortunately, the mindset of many organizations is that creating a corporate code of conduct and publishing it on an intranet) is ‘a job well done’. Many also have audit and certification procedures, but their failure has been to recognize that they need to gain employee ‘buy-in’ to ethics, and that this requires a much more imaginative and proactive training approach. If an organization is serious about making an impact with corporate codes of conduct, they must ensure that all staff

• understand why ethics is important
• recognize the role it plays in the business
• are aware of their own responsibilities for ethics 
• feel capable to make decisions on basic ethical dilemmas
• know who to refer to for advice on ethical issues

But how do you communicate ethics in a coherent way, and avoid overload on the one hand and lip service on the other? And in a time of budget squeeze and tough competitive environments, what is the best way to get the ethical message to stick?

Issues around the development of an ethical training program. In recent years, with the advent of corporate scandals and substantive new legislation targeted on governance, the intensity of activity has increased enormously. What have been the key lessons from the field in this area?

The human element. The most important and by far the most neglected factor in corporate codes of conduct management. The first step is accepting that good ethics is good business, and that reputation management can be a source of real difference in a competitive market. The real challenge is getting these messages across in a way that is truly effective and makes them “stick”, but at the same time delivers rigorous adherence. Anecdotal evidence reveals that this area remains the last agenda item and rarely considered in the development of rules, policies and procedure.

Issues are often dealt with in pieces. They are either subject driven (whistle blowing, conflicts of interest, email abuse, privacy, health and safety) or owned by divisions and business units who perceive they have different issues and priorities. The uneven treadmill of legislation has also not helped. For employees, this often creates internal communication overload with competing demands for time and attention. There is a profound lack of clarity about expectations and priorities.

There is considerable confusion between information and understanding. Compliance professionals and legal departments generate substantive policies and procedures, as they must, but for the majority of employees the issue is simple: they need the answer to three basic questions – what is it, why is it important and how does it apply to me?

It’s not necessary for everyone to become experts, but they do need to know the key principles, and be able to recognize when they need help or are required to report or refer.

Diverse training approaches and methods contribute to a lack of unified and effective compliance programs. Combinations of offline, online and other forms of training are desirable but these need to be managed in context and as a whole. Training needs to be consistent with policy, procedure and culture. Rollout needs to be managed, and time and effort should be related to the importance of the subject.

Below par internal coordination on training and awareness is endemic. Large-scale organizations have a widely distributed workforce. Business ethics training requires cohesive internal coordination between various departments and business lines.

Managing exposure and training on an international basis is a major worry. For global or even regional organizations, business ethics oversight can be a patchwork quilt. Vulnerabilities have a tendency to increase away from the center, and stand-alone offices and specialist subsidiaries may need quite particular approaches.

Compliance standards can vary enormously and policies need to be integrated and matched to local needs while maintaining minimum standards.

Technology is seen as an obstacle to be overcome not as an aid to education and awareness. Only rarely do large organizations have consistent and current technology environments. Browsers, desktop builds, server environments and bandwidth all vary enormously. As a result, many online training initiatives flounder or deliver less than comprehensive coverage because of failures to coordinate technology with training.

Poor courseware, canned offerings and uneven implementation have hindered effective employee awareness and education. Good courseware needs to combine skillful instructional and graphic design.

The business case for truly effective training and awareness is often poorly articulated. This is partly because immediate metrics are not usually available, or are highly subjective.

Measurement of awareness and understanding is vital. Even before embarking on the development of a training program, carrying out an awareness audit can provide important indicators on the knowledge gaps that exist. More importantly, it is crucial to test awareness and understanding, post-training, to ensure that knowledge gaps have been filled effectively. Most on-line training solutions provide an audit/tracking system, or a Learning Management System (LMS) that will automatically track participation and understanding. These records can help to pin-point risk areas, and could also help mitigate any potential fines or penalties imposed if charges are fined against your organization for non-compliance with external regulations.

Helping you create a culture of compliance. Achieving ethics awareness and complying with relevant regulatory requirements can seem expensive and complicated – especially across differing jurisdictions. Wherever you do business, SAI Global’s Compliance Services division can help you to create a culture of compliance and vigilance. We specialize in making the complex issues of compliance, regulation and ethics easily accessible and meaningful to employees at all levels of an organization.

Solutions

In addition to creating custom courses, SAI Global offers a range of interactive web-based modules covering these critical business ethics issues:

• The Case for Business Ethics
• Identifying Organizational Core Values
• Safeguarding Company Resources
• Maintaining Confidentiality
• Dealing with Conflicts of Interest
• Working With Digital Resources
• Dealing With Bribery and Facilitation Payments
• Dealing With Insider Training
• Creating an Open and Respectful Working Environment
• Ensuring Environmental Protection
• Maintaining a Safe and Healthy Workplace
• Maintaining Supplier Relationships
• Whistleblowing
• Understanding Legal Compliance
  
  To learn more, contact us at info@easyi.com.

Ethical investment training

A new online course for financial planners will be one of the first in the world to deal with ethical investment. Targeted at financial advisers worldwide, the course will be delivered by SAI Global in partnership with the Ethical Investment Association (EIA).

The new programme will assist financial advisers in helping their clients make informed choices about investments that take into account social, ethical or environmental considerations as well as pure financial returns.

The course will utilize SAI Global’s Learning Management System technology, which enables cost-effective, simpler and faster training of financial planners worldwide”.

Conscious of the demand from retail investors for more information about ethical investing, financial planners are rapidly seeking qualifications in this new advisory discipline. The largest financial planning adviser’s network in Australia, AMP Financial Planning, recently signed up its dealer network to the only such qualification available in Australia - the EIA’s SRI Symbol certification program.

According to Chief Operating Officer at AMP Financial Planning, Neil Macdonald: “We are dedicated to achieving best practice in sustainable responsible investment. For several years now AMP advisers have been asking clients whether they would like to take environmental, social or ethical considerations into account in their investment decisions. The EIA’s new course will help improve the ethical investment skills of our financial advisory team which numbers more than 1,300 across the country”.

In selecting SAI Global, the Executive Director of the EIA, Louise O’Halloran, says: “It was vital we partnered with a training and compliance provider that has a proven global capability, real integrity and solid track record among the international financial services community.”

“In a first for the industry, the online delivery of the course will make it cost effective, simple to use and stands to greatly reduce the time it previously took to train advisers in this field. SAI will be responsible for the management and maintenance of the training portal, the creation and delivery in various formats, and the tracking and certification of user data,” says O’Halloran.