NACD Insight & Analysis for September 10, 2010

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As noted this week in national news headlines, the SEC has seen an uptick in fraud tips since the passing of the Dodd-Frank financial legislation. Previously, informants were rewarded with a maximum of 10 percent of sanctions. The new financial laws, however, raise this potential bounty to as much as 30 percent of the penalties paid to the SEC. The article notes that the new whistleblower reward program has the potential to create inefficiencies by inciting employees to report fraud directly to the government, rather than using the established channels within the organization.

To establish a healthy and productive corporate environment, directors must exemplify and encourage an ethical culture. According to the NACD Key Agreed Principles, “the tone of corporate culture is a key determinant of corporate success.” Governance practices that promote integrity and ethics are a feature of successful, sustainable organizations.

Signs* of a positive corporate culture include leaders who:

  • Provide employees access to information that is relevant to the strategic direction and performance of the company
  • Keep their promises and commitments
  • Make decisions openly
  • Accept responsibility for wrongdoing, and
  • Reward performance that supports transparency

*Findings from the Ethics Resource Center’s National Business Ethics Survey 2009, p. 22

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