Presentation on theme: "Business Ethics: A New Style of Management and Investment"— Presentation transcript:
1 Business Ethics: A New Style of Management and Investment Professor David M. ChenDepartment of Finance & International BusinessFu Jen Catholic UniversitySpring 2011Style:風格
2 PurposesTo appreciate the essential of Business Ethics through five main faucetsRecognizing socially acceptable business conduct from the global perspectivesEmbedding good business in treating people nice and fairReengineering corporate imageEnhancing professional ethicsInvesting in sustainable and socially responsible corporations
3 The course will be held in English Various global initiatives in areas related to corporate social responsibility (CSR) and their respective implementation guidance form the core of course materials.Cases: Social, Environmental and Related Reporting of Inditex Group and an IABThe course will be held in EnglishStudents are expected to communicate and present case studies or research reports in English.English proficiency is emphasized as another main product of the course.
4 Content Business Ethics as a Field of Study Code of Ethics (Guardsmark-ethics06)Code of Conduct (PwC-conduct05)Inditex 2010 & an IAB (cases for final)Caux Round Table Principles for BusinessNissan’s Approach to CSR (Nissan’sApproachCSR)Ethics Resource CenterNational Business Ethics Survey (NBES-09)Critical Elements of Organization Ethical Culture (ERC-OrgEthicalCuture06)Environmental Management SystemsISO 14000RoHS
5 Business Principles for Countering Bribery Working environmentSA8000The Switcher-Prem Group Experience in India (SwitcherPremIndia-02)SA8000: Tool to Improve Quality of Life (ToolImporveQualityLife-02)Business Principles for Countering BriberyTransparency International (CorruptionPerceptionsIndex-08, GlobalCorruptionBarometer-09, BribePayersIndex-08)(ICC-CombatBribery)NYSE/NASD IPO Advisory CommitteeNYSE Hearing (StockRatingResearchConflict, GuaranteedRepurchase, PriceInfluencing)EnronSEC report (SEC-Enron-02)TIAA CREF testimony (TIAA-CREF-Enron-02)
6 Dow Jones Sustainable Index Policy for Managing Conflicts of Interest in Relation to Investment ResearchMorgan StanleyInvestment research report disclosure requirements (GoldmanSach-Huandian)Dow Jones Sustainable Index(NewInvestmentStyle)World Resources Institute (SustainableSMEs, WaterScarcity)Socially responsible investing (SRI)International Financial Facility for immunizationEthical BankingMicrocreditUN principle for socially responsible investment (PRIoverview)
7 Others Code of conduct for credit rating agency (IOSCOCRA) Sound compensation practices (FSBcomp)
8 Business Ethics as a Field CaseA newly hired salesman on trainingHis trainer is used to making up the differences in restaurant and golf bills for procurement agents (common courtesy?).Being asked to add the extra expenses to cost of other items since no line on the form for this (yet the numbers don’t add up)*.Learned the differences between working directly with the federal government procurement agents and the companies with which his firm subcontracted (relay information).Ferrell, O. C., John Fraedrich, and Linda Ferrell, Business Ethics: Ethical Decision Making and Cases, Houghton Mifflin Company, 2005, Ch. 1.His superior has to sign off his performance. Bearings: 壓力 snifter: 小酒杯
9 RegulationThe Procurement Integrity Section of the Office of Federal Procurement Policy Act and the Federal Acquisition RegulationSection 27(a)(2) forbidding agents to “offer, give, or promise to offer or give, directly or indirectly, any money, gratuity, or other thing of value to any procurement officials of such agency; or (3) solicit or obtain, directly or indirectly, from any officer or employee of such agency, prior to the award of a contract any proprietary or source selection information regarding such procurement.”*Certificate of Procurement Integrity signed by procurement agentsLeaking information about the minimum acceptable bid price or bid prices of competitors. Integrity: 品格Is this an ethical issue in Taiwan? How to deal with it from the individual’s as well as enterprise’s perspective?
10 Recognize & deal with complex issues Public outrage about deception and fraudEnron, WorldCom, Arthur Andersen, TycoA crisis of confidence and trust: accounting fraud, insider trading, falsifying documents, deceptive advertising, defective products, bribery, & employee theft.Integrate business ethics and corporate responsibility into all business decisions.Business ethicsDeals with questions about whether specific business practices are acceptable.Should a salesperson omit facts about a product’s poor safety record?Should an accountant report inaccuracy discovered in an audit?Ephedra: 麻黃
11 By its nature, the field of business ethics is controversial and there is no universally accepted approach for resolving its issues.The goal is to help one understand and use one’s current values and convictions when making business decisions so that you think about the effects of those decisions on business and society.*Neither to moralize by telling you what is right or wrong on specific situation, nor to prescribe any one philosophy or process as best or most ethical.Focus on how organizational ethical decisions are made and on ways companies can improve their ethical conduct.Those who deals with others’ money have to be extremely careful. Be aware of the kind of life you are heading to. Conviction: 信仰
12 Definition Ethics Tayor The American Heritage Dictionary An inquiry into nature and grounds of morality where the term morality is taken to mean moral judgments, standards and rules of conduct.*The American Heritage DictionaryThe study of the general nature of morals and of specific moral choices; moral philosophy; and the rules or standards governing the conduct of the members of a profession.Distinction from ordinary decisionsAlderson: Lies in “the point where the accepted rules no longer serve, and the decision maker is faced with the responsibility for weighing values and reaching a judgment in a situation which is not quite the same as before.”Taylor, Paul W., Principles of Ethics: An Introduction to Ethics, 2nd ed., Encino, Calif.: Dickenson, 1975, p.1.Alderson, Wroe, Dynamic Marketing Behavior, Homewood, Ill.: Irwin, 1965, p.320. Nuances: meaning
13 The amount of emphasis decision makers place on their own values relative to accepted practices within their company.Business ethicsComprises the principles and standards that guide behavior in the world of business.Profit not realized through misconduct.Balance the desires for profits against the needs and desires of society.Right or wrong, ethical or unethical, is often determined by investors, employees, customers, interest groups, the legal system, and the community (they are not necessarily “right”, but their judgments influence society’s acceptance).Hence, it is important to understand business ethics and recognize ethical issues.
14 Reasons for studyingBusiness ethics is not merely an extension of an individual’s own personal ethics.An individual’s personal values and moral philosophies are only one factor in the ethical decision-making process.Normally a business does not establish rules or policies on personal ethical issues such as sex and the use of alcohol outside the workplace (may even be illegal).Only when a person’s preferences or values influence job performance do an individual’s ethics play a major role.A high level of personal moral development may not prevent an individual from violating the law in a complicated organizational context.*Peer pressure. Sense of association. Wearing religious symbol in work place that attempt to avoid religious conflict or discrimination.
15 Many business ethics decisions are close calls. E.g., there is considerable debate over what constitute antitrust, deceptive advertising, and violation of Foreign Corrupt Practices Act, even experienced lawyers debate the exact meaning.*Because organizations are culturally diverse and personal values must be respected, ensuring collective agreement on organizational ethics is as vital as any other effort.Many business ethics decisions are close calls.Studying business ethics will help to identify ethical issues when they arise and recognize the approaches available for resolving them.Learn more about the ethical decision-making process and about ways to promote ethical behavior within the organization.Begin to understand how to cope with conflicts between personal values and those of the organization.Promotion handouts can not be worth more than NT$20. Dialysis: 透析；洗腎
16 Development The 1920s The 1930s Before 1960 The Progressive Movement attempted to provide citizens with a “living wage,” defined as income sufficient for education, recreation, health, and retirement.*Businesses were asked to check unwarranted price increases and any other practices that would hurt a family’s “living wage.”The 1930sCame the New Deal which specifically blamed business for the country’s economic woes.Business was asked to work more closely with the government to raise family income.Check whether you can rent the movie “The Reds” from any store or buy it.A way to cope with communism. Deal: 政策 (New Deal from 羅斯福), progressive as opposed to revolutionary as termed by communism.
17 The 1950sThe New Deal had evolved into the Fair Deal by Harry S. Truman.This program defined such matters as civil rights and environmental responsibility as ethical issues that businesses had to address.OverallEthical issues related to business were often discussed within the domain of theology or philosophy.Religious leaders raised questions about fair wages, labor practices, and the morality of capitalism.Catholic colleges and universities began to offer courses in social ethics.Each religion applied its moral concepts not only to business but also to government, politics, the family, personal life, and all other aspects of life.Synagogues: 猶太教會堂; papal encyclicals: 天主教堂通告
18 The 1960s American society turned to causes. An antibusiness attitude developed as many critics attacked the so called military-industrial complex.The decay of inner cities and the growth of ecological problems such as pollution and the disposal of toxic and nuclear wastes.The rise of consumerism (Consumers’ Bill of Rights): John F. Kennedy delivered a “Special Message on Protecting the Consumer Interest,” which outlined four basic consumer rights: safety, informed, choose, and to be heard.Causes: 運動
19 Ralph Nader’s Unsafe at Any Speed, 1965, which criticized the auto industry as a whole, and GM in particular, for putting profit and style ahead of lives and safety.Consumer activist also helped secure the passage of several consumer protection laws, such as the Wholesome Meat Act of 1967, the Radiation Control for Health and Safety Act of 1968, the Clean Water Act of 1972,* and the Toxic Substance Act of 1976.Lyndon B. Johnson and the Great Society (national capitalism): the U.S. government’s responsibility was to provide the citizen with some degree of economic stability, equality, and social justice. Activities that could destabilize the economy or discriminate against any class of citizens began to be viewed as unethical and unlawful.People lived along the Great Lakes were buying drinking water. Wholesome: 有益健康
20 The 1970s Business ethics began to develop as a field of study. Business professors began to teach and write about corporate social responsibility: organization’s obligation to maximize its positive impact on stakeholders and to minimize its negative impact.Philosophers applied ethical theory and philosophical analysis to structure the discipline of business ethics.Companies became more concerned with their public images.The Nixon administration’s Watergate scandal focused public interest on the importance of ethics in government.Oxymoron: 矛盾修飾法
21 The 1980s Business ethics acknowledged as a field of study. The Foreign Corrupt Practices Act was passed during Jimmy Carter’s administration: illegal for U.S. businesses to bribe government officials of other countries.*A number of major ethical issues had emerged, such as bribery, deceptive advertising, price collusion, product safety, and the environment.The 1980sBusiness ethics acknowledged as a field of study.Business ethics organizations grew to include thousands of members.Many of leading companies established ethics and social policy committees.The Defense Industry Initiative on Business Ethics and Conduct (DII)** was developed to guide corporate support for ethical conduct (18 defense contractors drafted principles in 1986).Lockheed bribed 田中角榮Charge U.S. government with outrageous prices.
22 Six principlesDII supports codes of conduct and their widespread distribution. Must be understandable and provide details on more substantive areas.Member companies (50) are expected to provide ethics training for their employees as well as continuous support between training periods.Defense contractors must create an open atmosphere in which employees feel comfortable reporting violations without fear of retribution.Companies need to perform extensive internal audits and develop effective internal reporting and voluntary disclosure plans.Retribution: 秋後算帳, 報復
23 DII insists that member companies preserve the integrity of the defense industry. Member companies must adopt a philosophy of public accountability.Reagan/Bush erasSelf-regulation, rather than regulation by government, was in the public’s interest.Many tariffs and trade barriers were lifted, and business merged and divested within an increasingly global atmosphere.Corporations that once were nationally based began operating internationally and found themselves mired in value structures where accepted rules of business behavior no longer applied.Usher in: 引進，開始； mire: 陷入泥沼
24 The 1990sBill Clinton continued to support self-regulation and free trade.Unprecedented government action to deal with health-related social issues such as teenage smoking (restricting cigarette advertising, banning vending machine sales, and ending the use of cigarette logos in connection with sports events).SEC Chairman Arthur Levitt unsuccessfully pushed for many reforms that could have prevented the accounting ethics scandals.Federal Sentencing Guidelines for Organizations*FSGO approved by Congress in Nov. 91.Based on the six principles of the DII.Provide incentives for self-regulation.
25 Codifying into law incentives to reward organizations for taking action to prevent misconduct, such as developing effective internal legal and ethical compliance programs.Mitigate penalties for businesses that strive to root out misconduct and establish high ethical and legal standards.If a company lacks an effective ethical compliance program and its employees violate the law, it can incur severe penalties (carrot-and-stick).Focus on firms taking action to prevent and detect business misconduct in cooperation with government regulation.*A mechanical approach using legislative logic will not suffice to avert serious penalties. Must develop corporate value, enforces its code of ethics, and strive to prevent misconduct.Onerous: 繁重；煩苛. Experimentation before formalize the regulations.
26 The twenty-first century Falsifying financial reports and reaping questionable benefits had become part of the culture of many companies.Dennis Kozlowski, former CEO of Tyco, was indicted on 38 counts of misappropriating $170m of Tyco funds and netting $430m from improper sales of stock.Allegedly used the funds to purchase many personal luxuries, including a $15m vintage yacht and a $3.9m Renoir painting and to throw a $2m party for his wife’s birthday.Arthur Andersen was convicted of obstructing justice after shredding documents related to its role as Enron’s auditor.Venerable: 年高望重Tyco: A global leader in passive electronic components and major producer of active components (electronics), the number one worldwide company offering Fire and Security solutions (fire & security), one of the largest medical device and disposables companies in the world (healthcare), the world's number one producer of sprinklers, valves and actuation (engineered products & services).
27 Congress passed the Sarbanes-Oxley Act Also faced questions surrounding its audits of other companies that were charged with employing questionable accounting practices, including Halliburton, WorldCom, Global Crossing, Dynegy, Qwest, and Sunbeam.Congress passed the Sarbanes-Oxley Actin 2002, the most far-reaching change in organizational control and accounting regulations since the Securities and Exchange Act of 1934.Made securities fraud a criminal offense and stiffened penalties for corporate fraud.Created an accounting oversight board that requires corporations to establish codes of ethics for financial reporting and to develop greater transparency in financial reports to investors and other interested parties.Halliburton: oilfield services, Global Crossing: global long distance telecommunications facilities and services, Dynergy: energy management solution for utility digital metering for hydro, gas and water services, Qwest: communications, Sunbeam: manufacturer of small home appliances
28 Requires top executives to sign off on financial reports (risk fines and long jail sentences if misrepresented).Requires executives to disclose stock sales immediately and prohibits companies from giving loans to top managers.Current trendFrom legally based ethical initiatives to cultural or integrity-based initiatives that make ethics a part of core organizational values.*NYSE requires all member companies to have code of ethics.Many firms now have ethics officers, and some firms, including UPS, Raytheon, and Baxter International, take ethics seriously enough to have their ethic officers report directly to senior management or boards of directors.As a means to combating organizational fraud, enhance corporate image, and promote employee morale.Raytheon: missile defense, intelligence, surveillance and reconnaissance; precision strike; homeland security, Baxter:百特醫療產品
29 The growth of the Ethic Officer Association (EOA) to 850 members, representing 420 companies, highlights the increasing importance of this position (considering launching an ethics certification program).Global developmentBusinesses are working more closely together to establish standards of acceptable behavior.Some companies will not do business with organizations that do not support and abide by these standards.The Caux Round Table is a group of businesses, political leaders, and concerned interest groups that desire responsible behavior in the global community.
30 BenefitsBuilding an ethical reputation among employees, customers, and the general public pays off.Increased efficiency in daily operation, greater employee commitment, increased investor willingness to entrust funds, improved customer trust and satisfaction, and better financial performance.*Many believe a particular course of action is simply the right thing to do as a responsible member of society (feeling good is also a good business).To me, save a lot of time and energy from wasting on monkey businesses to constructive engagements.
31 Employee commitmentComes from employees who believe their future is tied to that of the organization and their willingness to make personal sacrifices for it.Safe work environment, competitive salaries, and the fulfillment of all contractual obligations toward employees.Work-family programs and stock ownership plans to community service.Productivity and teamwork: share a common vision of trust within and between departments; make individuals more willing to rely and act on the decisions and actions of their coworkers.Trusting relationships (honesty and respect) contribute to greater decision-making efficiencies.
32 Customer satisfaction Investor loyaltySocial responsible mutual funds and asset management firms.Investors recognize that an ethical climate provides a foundation for efficiency, productivity, and profits. Negative publicity, lawsuits, and fines can lower stock prices, diminish customer loyalty, and threaten a company’s long-term viability.*Customer satisfactionAlmost 60% of people focus on social responsibility ahead of brand reputation or financial factors when forming impressions of companies (boycott the company).May avoid the products of companies that are perceived as treating their employees unfairly (sweatshop and abuses in subcontracting, SA 8000 industry code of conduct).Lower risk at least. Taiwan government under DPP is a negative example.Diamond mining workers.
33 When an organization has a strong ethical environment, it usually focuses on the core value of placing customers’ interest first.Companies convicted of misconduct (failure to act responsibly toward various stakeholders) experience a significantly lower return on assets and on sales.Waddock, S., and S. Graves, “The Corporate Social Performance-Financial Performance Link,” Strategic Management Journal, 1997, pp Verschoor, Curtis C., “A Study of the Link between a Corporation’s Financial Performance and Its Commitment to Ethics,” Journal of Business Ethics, Oct. 1998, 1509.
34 Ethics Resource Center, ERC (reading) National Business Ethics Survey, NBES"Ethics and compliance programs can and do make a difference. However, their impact is related to the culture in which they are situated." NBES SummaryMisconduct: any behavior that violates the law or organizational ethics standards.21% observed abusive or intimidating behavior towards employees.19% observed lying to employees, customers, vendors, or the public.18% observed a situation that places employee interests over organizational interests.16% observed violations of safety regulations.Deluge: 淹沒，氾濫；adage:格言；malfeasance: 不法行為
35 16% observed misreporting of actual time worked. 12% observed discrimination on the basis of race, color, gender, age or similar categories.11% observed stealing or theft.9% observed sexual harassment.The six elements of a formal ethics and compliance program are based upon suggestion by the FSGOWritten standards of conductTraining on ethicsMechanisms to seek ethics advice or informationMeans to report misconduct anonymouslyDiscipline of employees who violate ethical standardsEvaluation of employees performance based on ethical conduct
36 www.workingvalues.com www.complianceweek.com www.ama-assn.org The NBES defines risk factors as:Employee's exposure to circumstances that invite misconduct.Employee's recognition of those situations as misconduct.Pressure to compromise the standards of the organization.Preparedness of employees to respond to these situations.
37 Every Guardsmark crest (reading) is emblazoned with our company core values: Truth, Courage, & Judgment.Our business success and ethical commitment are indivisible.Guardsmark was founded on the pillars of quality, excellence, diversity, opportunity, and doing the right thing; from day one, we wanted to work with individuals who had intellect, work ethic, and honesty.Every single member of our organization—from the security officer to the corporate executive—is committed to demonstrating our values and principles at all times.Through our Code of Ethics, the people of Guardsmark pledge to work always “to strengthen our weaknesses and build on our strengths” and to “lead by example.”Crest: 徽章，emblazon: 飾以紋章；Profane: 不敬，冒瀆；empathy: 同理心，slur: 污衊；viability: 作用；condone: 寬恕；surreptitious: 秘密Guardsmark is a 保全業者 leader in security services.
38 The Guardsmark Code of Ethics All Guardsmark employees subscribe to our comprehensive Code of Ethics, which is a product of top-down commitment and bottom-up involvement. First developed in 1980, this living document is revised annually by the entire workforce.The Code sets impeccable standards of behavior for employee conduct across:Employee relationsOur commitment to excellenceProfessionalism in the industryEmployee wellnessVendor relationsCommunity and government relationsIndustry commitmentInformation technologyImpeccable: 無瑕；完善
39 Ensuring understanding by employees, visitors and vendors Our code appears in our employment application, where it must be signed by every applicant. It is always available to our employees as a stand-alone document and promoted in:Our orientation handbookPeriodic educational publicationsEmployee manualsPlacards in all officesTo make the principles of this important document accessible to each Guardsmark team member, Guardsmark maintains an ethics committee and a dedicated ethics officer who can be reached through a toll-free number. We take every ethics concern or issue seriously and provide assistance about applying principles to any given situation.Placard: 公告
40 Understand our ethical foundation A true understanding of Guardsmark's commitment can only come from reviewing our Code of Ethics in its entirety.Guardsmark exceeds the requirements of the Sarbanes-Oxley Act of 2002 that mandates the disclosure by public companies of whether they have adopted written codes of ethics to deter wrongdoing and to promote honest and ethical conduct.Although a private company such as Guardsmark is not subject to the requirements of this bill, the organization publicly releases its Code of Ethics, which was established in 1980 and is rewritten annually with input from its employees and applies to all team members, without exception.
41 PricewaterhouseCoopers (reading) is one of the world’s pre-eminent professional services organisations.As professional advisers we help our clients solve complex business problems and aim to enhance their ability to build value, manage risk and improve performance.As business advisors we play a significant role in the operation of the world’s capital markets.We take pride in the fact that our services add value by helping to improve transparency, trust and consistency of business processes.
42 In order to succeed, we must grow and develop, both as individuals and as a business. Our core values of Excellence, Teamwork and Leadership help us to achieve this growth.As a result, we also have a Code of Conduct for all PwC people and firms.This Code is based on our values and it takes them to the next level - demonstrating our values in action.The Code also provides a frame of reference for PwC firms to establish more specific supplements to address territorial issues.
43 Ethics StatementsOne of BellSouth's greatest assets is our reputation. One of the key factors that contribute to our reputation and good name is our long-standing tradition of ethics -- a tradition which has built solid trust between us and our customers, our employees, our shareholders, and our communities. As we work to maximize shareholder value, we will not waver in maintaining our tradition of ethics.
44 BellSouth's ethical culture is rooted in our values BellSouth's ethical culture is rooted in our values. It is these values that guide our actions and relationships with each other, with our customers, and with our investors.While our values describe who we are and what we are about, it is our actions that make these values meaningful. Every action we take shapes the ethical character of BellSouth. That character is at the heart of our reputation and ultimately sets us apart in the marketplace.We understand each individual employee's actions contribute to the trust we have earned. We offer our employees a variety of resources to help them make ethical decisions and maintain the highest level of integrity.
45 BellSouth's Office of Ethics & Compliance is available to answer questions concerning ethics, or take reports of possible ethical violations. Employees and other concerned individuals can contact Ethics by completing this online form or by calling the Ethicsline atBoth these methods are available 24 hours a day, 7 days a week You may remain anonymous if you prefer, but this sometimes limits the investigation due to insufficient information.
46 Texas InstrumentsEmployees placed their personal imprint on the ethics of the company, more than 60 years ago.They chose to conduct themselves to the highest standards of personal integrity, and they demanded the same of others.Today, those principles and values still permeate all of TI's actions and decisions.As TI grew, management recognized a need to formalize and communicate company standards.In 1961, TI published its first written code of ethics, a booklet titled "Ethics in the Business of TI."Imprint: 痕跡
47 Though it has been revised several times to reflect changes in the business environment, the basic message contained in that first booklet has never changed, nor has TI's emphasis on maintaining a track record of ethics and integrity.About 20 years ago, an increasing number of difficult issues, challenges and close calls in modern business were recognized, but clear choices of action did not always exist.Employees and their business associates needed to better understand TI's expectations and where they could go for help if they had a question or a concern.TI believes maintaining the highest ethical standards requires a partnership between employees and employers.
48 The employer proactively supports employees by communicating values and giving individual guidance, while empowered employees participate actively in problem-solving.In 1987, TI decided to actively support employees by establishing a TI Ethics Office and appointing a TI Ethics Director.The TI Ethics Office has three primary functions:Ensure that business policies and practices continue to be aligned with ethical principles;Clearly communicate ethical expectations; &Provide multiple channels for feedback through which people can ask questions, voice concerns and seek resolution to ethical issues.
49 A reputation and track record for ethics and integrity is vital for establishing the trust that is the basis for all successful business relationships. All people associated with TI—employees, customers, suppliers, governments and communities—need to understand and appreciate the importance of these principles.TI has strong documented requirements for ethical business practices:TI Standard Policies and ProceduresThe TI Commitment"The Values and Ethics of TI" bookletThe direction is clear, and the message is firmly and credibly supported by our highest levels of management and by our Board of Directors.
50 HCA announced the development of the Ethics, Compliance and Corporate Responsibility Department in OctAlan Yuspeh was named Senior Vice President for Ethics, Compliance and Corporate Responsibility. The department oversees the development and implementation of a comprehensive corporate Ethics and Compliance Program.Articulating standards of compliance and ethical conduct through a Code of Conduct and a series of company Policies and Procedures.Creating awareness of these standards among everyone in the company through high quality ethics training, compliance training, and other ongoing communication efforts.Healthcare Company.
51 Providing a means to report exceptions (i. e. , possible misconduct) Providing a means to report exceptions (i.e., possible misconduct). We maintain an Ethics Line ( ) to receive reports from anyone who is aware of a violation of our Code of Conduct or Policies and Procedures. This line is answered at all times.Monitoring and auditing performance in areas of compliance risk to ensure that established policies and procedures are being followed and are effective.Establishing organizational supports, including necessary committees, responsible executives and facility ethics and compliance officers, for this entire effort.Overseeing implementation of and adherence to a Corporate Integrity Agreement.*And undertaking other efforts, such as clinical ethics and pastoral care services.hcahealthcare.comPastoral: 田園，居家 Required by the FDA.
52 Starbucks: It’s the way we do business Contributing positively to our communities and environment is so importantthat it’s a guiding principle of our mission statement.We jointly fulfill this commitment with partners (employees), at all levels of the company, by getting involved together to help build stronger communities and conserve natural resources.In our communities Starbucks has many community building programsthat help us be good neighbors and contribute positively to the communities where our partners (employees) and customers live, work and play.
53 Environmental Affairs We encourage and reward volunteerism and participation in organizations that are important to our partners, including local schools, literacy programs, walk-a-thons and Earth Day activities.Environmental AffairsStarbucks integrates policies and programs throughout all aspects of operations to minimize our environmental impact.From promoting conservation in coffee growing countries to recycling, Starbucks is committed to contributing positively to the environment.Supplier DiversityBy working with qualified diverse suppliers, Starbucks has regularly met and exceeded its goals for purchases with women and minority-owned suppliers. Embracing diversity is our foundation for providing a world-class supplier program that supports our Mission Statement.Walk-a-thons: 步行長久(不開車)
54 Mission StatementEstablish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow. Six guiding principles:Provide a great work environment and treat each other with respect and dignity.Embrace diversity as an essential component in the way we do business.Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee.Develop enthusiastically satisfied customers all of the time.Contribute positively to our communities and our environment.Recognize that profitability is essential to our future success.Purveyor: 伙食承包人，供應者
55 Committed to a role of environmental leadership in all facets of our business. Understanding of environmental issues and sharing information with our partners.Developing innovative and flexible solutions to bring about change.Striving to buy, sell and use environmentally friendly products.Recognizing that fiscal responsibility is essential to our environmental future.Instilling environmental responsibility as a corporate value.Measuring and monitoring our progress for each project.Encouraging all partners to share in our mission.
56 The Caux Round Table Business Principles of Ethics IntroductionCRT principles are rooted in two basic ethical ideals: kyosei and human dignity.The Japanese concept of kyosei meansliving & working together for the common good enabling cooperation and mutual prosperity to coexist with healthy and fair competition.“Human dignity” refers to the sacredness or value of each person as an end, not simply as a means to the fulfillment of others' purposes or even majority prescription.Kyosei: 共生，舉世: kyosei
57 The document owes a substantial debt to The Minnesota Principles, a statement of business behavior developed by the Minnesota Center for Corporate Responsibility. The Center hosted and chaired the drafting committee, which included Japanese, European, and United States representatives.CRT principles offer a foundation for dialogue and action for business leaders worldwide and affirm the necessity for moral values in business decision-making. Without moral values, stable business relationships and a sustainable world community are impossible.
58 CompetitorsResponsibilitiesSuppliersCommunitiesEconomic &social impactOwner/investorsCRT BusinessPrinciples of EthicsBusiness behaviorEmployeesRespect for rulesCustomersRespect for theenvironmentSupport formultilateral tradeAvoidance ofillicit operations
59 Principle 1. The responsibilities Beyond shareholders toward stakeholdersThe value of a business to society is the wealth and employment it creates and the marketable products and services it provides to consumers at a reasonable price commensurate with quality.To create such value, a business must maintain its own economic health and viability, but survival is not a sufficient goal.Businesses have a role to play in improving the lives of all their customers, employees, and shareholders by sharing with them the wealth they have created.
60 Principle 2. The economic and social impact Suppliers and competitors as well should expect businesses to honor their obligations in a spirit of honesty and fairness.As responsible citizens of local, national, regional, and global communities in which they operate, businesses share a part in shaping the future of those communities.Principle 2. The economic and social impactToward innovation, justice, and world communityBusinesses established in foreign countries to develop, produce, or sell should also contribute to the social advancement of those countries by creating productive employment and helping to raise the purchasing power of their citizen.
61 Principle 3. Business behavior Businesses also should contribute to human rights, education, welfare, and vitalization of the countries in which they operate.Businesses should contribute to economic and social development not only in the countries in which they operate, but also in the world community at large, through effective and prudent use of resources, free and fair competition, and emphasis upon innovation in technology, production methods, marketing, and communications.Principle 3. Business behaviorBeyond the letter of law toward a spirit of trustAccepting the legitimacy of trade secrets, businesses should recognize that sincerity, candor, truthfulness, the keeping of promises, and transparency contribute not only to their own credibility and stability but also to the smoothness and efficiency of business transactions, particularly on the international level.Candor: 坦白、誠意，公正
62 Principle 4. Respect for rules To avoid trade frictionand to promote free trade, equal conditions for competition, and fair and equitable treatment for all participants, business should respect international and domestic rules.In addition, they should recognize that some behavior, although legal, may still have adverse consequences.Principle 5. Support for multilateral tradeShould support the multilateral trade systemsof the GATT/World Trade Organization and similar international agreements.They should cooperate in efforts to promote the progressive and judicious liberalization of trade, and to relax those domestic measures that unreasonably hinder global commerce, while giving due respect to national policy objectives.Judicious: 明智
63 Principle 6. Respect for the environment Should protect and, where possible,improve the environment, promote sustainable development, and prevent the wasteful use of natural resources.Principle 7. Avoidance of illicit operationsShould not participate in or condone bribery,money laundering, or other corrupt practices; indeed, should seek cooperation with others to eliminate them.Should not trade in arms or other materials used for terrorist activities, drug traffic, or other organized crime.Principle 8. CustomersWe believe in treating all customers with dignityirrespective of whether they purchase our products and services directly from us or otherwise acquire them in the market.Illicit:不法，不當；condone: 寬恕，原諒
64 Principle 9. Employees We therefore have a responsibility to provide our customers with the highest quality products and services consistent with their requirements;treat our customers fairly in all aspects of our business transactions, including a high level of service and remedies for their dissatisfaction;make every effort to ensure that the health and safety of our customers, as well as the quality of their environment, will be sustained or enhanced by our products and services;assure respect for human dignity in products offered, marketing, and advertising; andrespect the dignity of the culture of our customers.Principle 9. EmployeesWe believe in the dignity of every employeeand in taking employee interest seriously.
65 We therefore have a responsibility to provide jobs and compensation that improve workers’ living conditions;provide working conditions that respect each employee’s health and dignity;be honest in communications with employees and open in sharing information, limited only by legal and competitive restrains;listen to and, where possible, act on employee suggestions, ideas, requests, and complains;engage in good faith negotiations when conflict arises;avoid discriminatory practices and guarantee equal treatment and opportunity in areas such as gender, age, race, and religion;promote in the business itself the employment of differently abled people in places of work where they can be genuinely useful;
66 Principle 10. Owners/investors protect employees from avoidable injury and illness in the workplace;encourage and assist employees in developing relevant and transferable skills and knowledge; andbe sensitive to serious unemployment problems frequently associated with business decisions, and work with governments, employee groups, other agencies and each other in addressing these dislocations.Principle 10. Owners/investorsWe believe in honoring the trustour investors place in us.We therefore have a responsibility toapply professional and diligent management in order to secure a fair and competitive return on our owners’ investment;conserve, protect, and increase the owners/investors’ assets;
67 Principle 11. Suppliers Our relationship with suppliers disclose relevant information to owners/investors subject only to legal requirements and competitive constrains; andrespect owners/investors’ requests, suggestions, complains, and formal resolutions.Principle 11. SuppliersOur relationship with suppliersand subcontractors must be based on mutual respect.We therefore have a responsibility toseek fairness and truthfulness in all of our activities, including pricing, licensing, and rights to sell;ensure that our business activities are free from coercion and unnecessary litigation;foster long-term stability in the supplier relationship in return for value, quality, competitiveness, and reliability;
68 Principle 12. Competitors* share information with suppliers and integrate them into our planning processes;pay suppliers on time and in accordance with agreed terms of trade; andseek, encourage, and prefer suppliers and subcontractors whose employment practices respect human dignity.Principle 12. Competitors*We believe that fair economic competitionis one of the basic requirement for increasing the wealth of nations and, ultimately, for making possible the just distribution of goods and services.We therefore have a responsibility tofoster open markets for trade and investments;promote competitive behavior and demonstrates mutual respect among competitors;Respectable competitors
69 Principle 13. Communities refrain from either seeking or participating in questionable payments of favors to secure competitive advantages;respect both tangible and intellectual property rights; andrefuse to acquire commercial information by dishonest or unethical means, such as industrial espionage.Principle 13. CommunitiesWe believe that as global corporate citizens,we can contribute to such forces of reform and human rights as are at work in the communities in which we operate.We therefore have a responsibility torespect human rights and democratic institutions, and promote them wherever practicable;
70 recognize government’s legitimate obligation to the society at large and support public policies and practices that promote human development through harmonious relations between business and other segments of society;collaborate with those forces in the community dedicated to raising standards of health, education, workplace safety, and economic well-being;promote and stimulate sustainable development and play a leading role in preserving and enhancing the physical environment and conserving the earth’s resources;support peace, security, diversity, and social integration;respect the integrity of local culture; andbe a good corporate citizen through charitable donations, educational and cultural contributions, and employee participation in community and civic affairs.
71 ISO 14000What is it?International Organization for Standardization (ISO)ISO 9000 seriesInternational standards dealing with quality management systems.ISO seriesEnvironmental management systems.Finalized in September 1996.The key to a successful ISO EMS is having documented procedures that are implemented, maintained, monitored, reviewed, and corrected.
72 Specifies requirements for establishing an environmental policy, determining environmental aspects & impacts of products/activities/services, planning environmental objectives & measurable targets, implementation & operation of programs to meet objectives & targets, checking & corrective action, and management review.Why is the concern?May become a contractual requirement of customers in both the U.S. and the EC.It is a continuation of the ISO-9000, may eventually become a requirement for obtaining ISO-9001 recertification.It is a logical next step because it is very similar to ISO-9001 and the principles of TQM.The U.S. EPA may provide incentives under its Common Sense Initiative (CSI) programs to benefit companies certified.Aspect: 面向，環節, initiative: 倡議
73 What is the benefit? Help remain competitive Competitors, customers and suppliers are seeking registration.Identify areas for reduction in energy and other resource consumption, reduce environmental liability & risk, help to maintain consistent compliance with legislative & regulatory requirements, benefit from regulatory incentives, prevent pollution & reduce waste, response to pressure from customers & shareholders, improve community goodwill, profit in the market for green products, response to insurance company pressure, and demonstrate commitment to high quality.
74 EPA Guidance In Enforcement Settlements EMS as injunctive relief to return violators to complianceand minimize or eliminate the potential for repeat violations by addressing the root causes of noncompliance.Where EPA determines that the root cause of a defendant’s or respondent’s violations is the absence of a systematic approach to identifying, understanding, and managing the regulated entity’s compliance with applicable environmental requirements.GuidanceEPA-03 injunctive relief: 命令強制改善, settlement: 裁決
75 Regulatory requirements Where specific elements or requirements common to EMSs are independently required by law or regulation, such elements/ requirements should be sought as injunctive relief whether or not a compliance-focused EMS, per se, is sought.Regulatory requirementsClean Water Act, Clean Air Act, Resource Conservation and Recovery Act.12 Elements of Compliance-Focused Environmental Management System (CFEMS):An environmental policy with an express statement of management’s intent to provide adequate EMS personnel and resources.Processes and monitoring to ensure sustained compliance.Written targets, objectives, and action plans, for each organizational subunit, to achieve and maintain compliance with all environmental requirements.Hallmarks: 正字標記；precursor: 前兆，先驅
76 EMSs as Supplemental Environmental Projects (SEPs) A mandatory pollution prevention program.A program for ongoing community education and involvement in the environmental aspects of the defendants’ operations.Procedures for investigating and promptly correcting violations and their root causes.Ongoing evaluation of facility compliance, including periodic compliance audits by independent 3rd party auditors.EMSs as Supplemental Environmental Projects (SEPs)for small businesses and state and local governmentsEMSs that meet the SEP Policy criteria are eligible for penalty mitigation credit as “Other Types of Projects” without advance approval.The SEP Policy, and federal law, require SEPs to be “supplemental” projects that the violators are “not otherwise legally required to perform.”
77 The SEP Policy’s “environmentally beneficial projects” and “public benefits” SEP criteria can generally be satisfied when the terms of settlement require the violators to implement their EMSs for at least one full EMS cycle, identify and report performance results on two or more EMS targets and objectives promoting beyond-compliance results with public benefits, ensure that issues and priorities of concern to the communities in which the facilities are located are identified and considered, and submit to EPA SEP Completion Reports describing what the violators have done to develop, implement, and act on their EMSs.SEP credit should be extended only to EMS expenditures that produce significant benefits accruing primarily to the public.Redact: 編輯修訂, credit: penalty mitigation
78 EPA personnel have the discretion to calculate a settlement penalty that reflects relevant actions by violators. With respect to EMSs, the range of possible scenarios where a violator’s actions may be considered in adjusting a penalty downward from the preliminary penalty amount include where a company discovers a violation through an existing EMS and corrects the violation prior to EPA’s discovery or the company lacks a preexisting EMS but puts one into place before concluding settlement negotiations.It may also be appropriate to consider whether and to what extent a violator has implemented an EMS in assessing the degree of willfulness and/or negligence.
79 RoHS European Directive The Restrictions of the use of certain Hazardous Substances in electrical and electronic equipmentban the putting on the EU marketof new Electrical and Electronic Equipment (EEE) containing more than the permitted levels (maximum concentration values) of lead, cadmium, mercury, hexavalent chromium and both polybrominated biphenyl (PBB,多溴化聯苯 ) and polybrominated diphenyl ether (PBDE,多溴聯苯醚 ) flame retardants from 1 July 2006.RoHS-UKGuide-06, China will have a similar regulation soon.Cadmium: 鎘；hexavalent chromium:六價鉻腐蝕抗化剤會致癌；bromine:溴；biphenyl: 苯，diphenyl ether:乙醚
80 There are a number of exempted applications for these substances (and an exemption for spare parts for the repair of equipment put on the market before 1 July 2006; the regulations do not apply to the re-use (capacity expansion or update) of equipment that was put on the market before the same date.Producers must be able to demonstrate compliance by submitting technical documentation or other information to the enforcement authority on request and retain such documentation for a period of four years after the EEE is placed on the market.Responsibility for the enforcement will lay with the Secretary of State for Trade & Industry, who has appointed the National Weights and Measures Laboratory (NWML), an executive agency of the Department of Trade and Industry, to act on his behalf.
81 Definition Maximum concentration value Homogeneous material A maximum concentration value of up to 0.1% by weight in homogeneous materials for lead, mercury, hexavalent chromium, PBB and PBDE and of up to 0.01% by weight in homogenous materials for cadmium will be permitted in the manufacture of new EEE. These values were established through the adoption of a Commission Decision on 18 August 2005.Homogeneous materialA material that cannot be mechanically disjointed into different materials.Abrasive: 摩擦；resin: 樹脂；connivance: 姑息；默認；縱容
82 Scope Categories of EEE covered Large household appliances Small household appliancesIT and telecommunication equipmentConsumer equipmentLighting equipmentElectric and electronic toolsToys, leisure and sports equipmentAutomatic dispensers (自動??)Reflect eight of the ten categories in Annex 1 of the Waste Electrical and Electronic Equipment (WEEE) Directive.Apply both to electric light bulbs and to household luminaries.Dispenser: 販賣機，提款機, Mangle: high pressure sodium: 高壓鈉燈；metal halide lamp: 金屬鹵化物燈；shearing:剪；riveting:用柳钉固結；ballast: 定壓
83 The two categories of the WEEE Directive not included are Medical Devices and Monitoring & Control Instruments. Article 6 of the RoHS Directive places an obligation on the European Commission to present proposals for including EEE falling within those two categories within the scope of the RoHS Directive, once scientific and technical evidence has demonstrated that such proposals are feasible.The criteria for assessing “grey area” products (those whose inclusion is in doubt) have been discussed in the Technical Adaptation Committee (TAC) of Member States and is reflected in the Commission’s non-legally binding Frequently Asked Questions document on the WEEE and RoHS Directives
84 Outside the scopeIntended for a specific national security and/or military purpose. This exemption would not apply to any equipment that is not designed exclusively for these purposes.Products where electricity is not the main power source: Many products contain electrical and electronic components, either for additional functionality or as peripheral parts, e.g., a combustion engine with an electronic ignition.Products where the electrical or electronic components are not needed to fulfil the primary function: particularly toys and novelty items contain an electrical or electronic element that gives added value to the product. Often there are similar products on the market fulfilling the same function, but without these components.Munitions: 軍需品
85 Electrical and electronic equipment that is part of another type of equipment: Examples of such equipment would be lighting or entertainment equipment for use in vehicles, trains or aircraft. The elements of a system that are not discernible EEE products in their own right or that do not have a direct function away from the installation are excluded from the scope of the Regulations.Batteries: includes batteries that are permanently fixed into the product, as well as disposable batteries. The text of the draft Directive on Batteries and Accumulators & Waste Batteries and Accumulators is currently being finalised, with an expectation that it will be adopted shortly and come into effect in 2008.ExemptionsLarge scale stationary industrial toolsMercury in compact fluorescent lamps not exceeding 5 mg per lamp.Mg: milligram
86 10 mg in halophosphate lamps Mercury in straight fluorescent lamps for general purposes not exceeding:10 mg in halophosphate lamps5 mg in triphosphate lamps with a normal lifetime8 mg in triphosphate lamps with a long lifetime.Mercury in straight fluorescent lamps for special purposes.Mercury in other lamps (high intensity discharge HID) not specifically mentioned here.Lead in glass of cathode ray tubes, electronic components and fluorescent tubes (viable alternatives for these applications have not yet been identified).Lead as an alloying element in steel containing up to 0.35% lead by weight, aluminum containing up to 0.4% lead and as a copper alloy containing up to 4% lead.Halophosphate: 磷酸鹽；amalgam:汞合金
87 Lead in high melting temperature type solders (i. e Lead in high melting temperature type solders (i.e. lead based alloys containing 85% by weight or more lead). Viable lead-free alternatives have not yet been identified.‘Solder’ is defined as “alloys used to create metallurgical bonds between two or more metal surfaces to achieve an electrical and/or physical connection”. In this context, the term ‘solder’ also includes all materials that become part of the final solder joint, including solder finishes on components or printed circuit boards.Lead in solders for servers, storage and storage array systems, network infrastructure equipment for switching, signaling, transmission as well as network management for telecommunication.Ductile: 可延展，malleable: 可鍛的
88 For professional, high reliability applications. Lead in electronic ceramic parts (e.g. piezoelectronic devices)Cadmium and its compounds in electrical contacts and cadmium plating except for applications banned under Directive 91/338/EEC relating to restrictions on the marketing and use of certain dangerous substances and preparations (products manufactured in the household goods and central heating and air conditioning plant sectors).‘Cadmium plating’ means any deposit or coating of metallic cadmium on a metallic surface.”Piezoelectronic: 壓電；zirconate: 鋯酸鹽；titanate:鈦，dielectric: 誘電(非導電)，dissipation: 分散
89 Deca BDE in polymeric applications. Hexavalent chromium as an anti-corrosion of the carbon steel cooling system in absorption refrigerators.Absorption fridges are often used in recreational vehicles (e.g. motor homes and caravans) or remote places where electricity is not available. Another typical application is for minibars in hotel rooms as these fridges are virtually noiseless.The applied heat and use of a water-ammonia mixture results in a corrosive environment that warrants the use of hexavalent chromium. This exemption has been introduced, since viable alternatives for this specific application have so far not been identified.Deca BDE in polymeric applications.Deca BDE brominated diphenyl ether : 十溴聯苯醚 ；polymeric: 聚合
90 Lead in lead-bronze bearing shells and bushes. Used, amongst others, in compressors for stationary refrigeration and air conditioning equipment.Need excellent self-lubrication properties to meet the high durability and reliability requirements.So far no suitable alternative has been identified, although other materials have been extensively tested.Lead used in compliant pin connector systems.Used to attach connectors or components to a double-sided printed circuit board.Avoids the need for soldering during manufacturing, thereby avoiding the overheating of components and damaging the integrity of the connectors and board material and allows separation for repair.Suitable alternatives to the tin-lead alloy have not yet been identified.Bush: 軸襯
91 Lead as a coating material for the thermal conduction module c-ring. Such modules are the key components of a mainframe central processing unit and typically contain multiple chips. The c-ring functions as a hermetical seal, continuously dissipating heat and preventing oxidation of solder joints.No feasible alternative has so far been identified.Lead and cadmium in optical and filter glass.To obtain specific properties and meet quality standards, for a wide variety of applications including in the photo industry (e.g. camera lenses), in projectors, scanners, printers and copiers.Suitable alternatives for many of these applications have not yet been identified.Hermetical: 密封
92 Lead in solders consisting of more than two elements for the connection between the pins and the package of microprocessors with a lead content of more than 80% and less than 85% by weight.Microprocessors are mounted onto boards or substrates by way of a socket. Such sockets require that a large number of pins (up to 950) are mounted onto the microprocessor for completing the necessary electrical connections.This exemption has been introduced to allow for the development of alternative designs without generating excessive amounts of waste.Lead in solders to complete a viable electrical connection between semiconductor die and carrier within integrated circuit Flip Chip packages.Brittle: 易碎
93 The external solder connections between packages and PCB known as level 2 are excluded from this exemption as viable alternatives have been developed.Lead in linear incandescent lamps (using a glowing filament) with silicate coated tubes.Lead halide as radiant agent in High Intensity Discharge lamps for professional reprography applications.HID lamps produce light by striking an electrical arc across tungsten electrodes housed inside a specially designed inner fused quartz or fused alumina tube. This tube is filled with both gas and metals. The gas aids in the starting of the lamps and the metals produce the light once they are heated to a point of evaporation. Certain HID lamp types contain lead-iodide (PbI2) as a component in the filling.Incandescent lamp: 白熱燈；silicate: 矽酸鹽，glow:炙熱； filament:細線；鎢絲；reprography電子翻印；tungsten: 鎢, iodide: 碘離子電極
94 These lamps are used in professional U. V These lamps are used in professional U.V. applications: the curing, reprography and label printing industries. The lead is used for creating the correct lamp emission spectrum and lamp effectiveness.Lead as activator in the fluorescent powder (1% lead by weight or less) of discharge lamps when used as sun tanning lamps containing phosphors such as BSP (BaSi2O5:Pb) as well as when used as specialty lamps for diazo-printing reprography, lithography, insect traps, photochemical and curing processes containing phosphors such as SMS ((Sr,Ba)2MgSi2O7:Pb).Lead with PbBiSn-Hg and PbInSn-Hg in specific compositions as main amalgam and with PbSn-Hg as auxiliary amalgam in very compact Energy Saving Lamps.Lead oxide in glass used for bonding front and rear substrates of flat fluorescent lamps used for Liquid Crystal Displays.Lithography: 石版印刷；diazo:二氮化合物
95 Lead is currently used in the glass panel of Liquid Crystal Display (LCD) screens. Two glass substrates are bonded with high precision by inserting glass spacers in between, to keep the same gap. Lead is used there to prevent overheating of the glass, which would result in image distortion and malfunction.It is found in the form of a solder with a concentration of 70% lead by weight, used to create a safe electrical contact on the plane glass surface. Lead containing glass solder is also used to assemble the flat-panel glass envelope.
96 Social Accountability International Founded in 1997Mission: promote human rights for workers around the world.About SAI,A non-governmental, international, multi-stakeholder organization.Convenes key stakeholders to develop consensus-based voluntary standards, conducts cost-benefit research, accredits auditors, provides training and technical assistance, and assists corporations in improving social compliance in their supply chains.Convene: 召集Violations may not happen in Taiwan, but often occur in overseas facilities.
97 Social Accountability 8000 A comprehensive and flexible system for managing ethical workplace conditions throughout global supply chains.Provide both practical and visionary solutions for ethical supply chain management.Based on the principles of thirteen international human rights conventions.The first auditable social standard and creates a process that is truly independent.The benefits of adopting SA8000 are significant and may include improved staff morale, more reliable business partnerships, enhanced competitiveness, less staff turnover and better worker-manager communication.SA8000® CertificationAvailable only through SAI-accredited, independent organizations, known as a Certification Body.®: trade mark, convention:公約
98 Bases International Labor Organization ILO Conventions 29 and 105 (Forced & Bonded Labour)ILO Convention 87 (Freedom of Association)ILO Convention 98 (Right to Collective Bargaining)ILO Conventions 100 and 111 (Equal remuneration for male and female workers for work of equal value; Discrimination)ILO Convention 135 (Workers’ Representatives Convention)ILO Convention 138 & Recommendation 146 (Minimum Age and Recommendation)
99 ILO Convention 155 & Recommendation 164 (Occupational Safety & Health) ILO Convention 159 (Vocational Rehabilitation & Employment/Disabled Persons)ILO Convention 177 (Home Work)ILO Convention 182 (Worst Forms of Child Labour)United NationsUniversal Declaration of Human RightsThe United Nations Convention on the Rights of the ChildThe United Nations Convention to Eliminate All Forms of Discrimination Against Women
100 SA 8000Purpose and scopeThis standard specifies requirements for social accountability to enable a company to:develop, maintain, and enforce policies and procedures in order to manage those issues which it can control or influence;demonstrate to interested parties that policies, procedures and practices are in conformity with the requirements of this standard.2001 version.May purchase SA8000 Guidance Document at $30.
101 Definition Child Young worker Child labor Any person less than 15 years of age,unless local minimum age law stipulates a higher age for work or mandatory schooling, in which case the higher age would apply.If, however, local minimum age law is set at 14 years of age in accordance with developing-country exceptions* under ILO Convention 138, the lower age will apply.Young workerAny worker over the age of a child and under the age of 18. (old workers?)Child laborAny work by a child younger than the age(s) specified except as provided for by ILO Recommendation 146.**Economy and educational facilities are insufficiently developed.Temporary assistance.
102 Remediation of children All necessary support and actions to ensure the safety, health, education, and development of childrenwho have been subjected to child labour, as defined above, and are dismissed.Forced laborAll work or service that is extracted from any person under the menace of any penalty for which said person has not offered him/herself voluntarilyor for which such work or service is demanded as a means of repayment of debt.Menace: 脅迫
103 Social accountability WorkinghoursChildlaborRemunerationSocial accountabilityrequirementsDisciplinarypracticesForcedlaborHealth& safetyDiscriminationFreedom ofassociation
104 Social accountability requirements Child laborShall not engage in or support the use of child labour.Shall establish, document, maintain, and effectively communicate to personnel and other interested parties policies & proceduresfor remediation of children found to be working and shall provide adequate support to enable such children to attend and remain in school until no longer a child as defined above.for promotion of education for children covered under ILO Recommendation 146 and young workers who are subject to local compulsory education laws or are attending school,
105 including means to ensure that no such child or young worker is employed during school hours and that combined hours of daily transportation (to and from work and school), school, and work time do not exceed 10 hours a day.Shall not expose children or young workers to situations in or outside of the workplace that are hazardous, unsafe, or unhealthy.Forced laborShall not engage in or support the use of forced labour,nor shall personnel be required to lodge ‘deposits’ or identity papers upon commencing employment with the company.Lodge: 寄存
106 Health and safetyBearing in mind the prevailing knowledge of the industry and of any specific hazards,shall provide a safe and healthy working environment and shall take adequate steps to prevent accidents and injury to health arising out of, associated with or occurring in the course of work, by minimizing, so far as is reasonably practicable, the causes of hazards inherent in the working environment.Shall appoint a senior management representative responsible for the health and safety of all personnel, and accountable for the implementation of the Health and Safety elements of this standard.Shall ensure that all personnel receive regular and recorded health and safety training, and that such training is repeated for new and reassigned personnel.
107 Freedom of association Shall establish systems to detect, avoid or respond to potential threats to the health and safety of all personnel.Shall provide, for use by all personnel, clean bathrooms, access to potable water, and, if appropriate, sanitary facilities for food storage.Shall ensure that, if provided for personnel, dormitory facilities are clean, safe, and meet the basic needs of the personnel.Freedom of association& right to collective bargainingShall respect the right of all personnel to form and join trade unions of their choice and to bargain collectively.Shall, in those situations in which the right to freedom of association and collective bargaining are restricted under law, facilitate parallel means of independent and free association and bargaining for all such personnel.Potable: drinkable
108 Discrimination Shall not engage in or support discrimination Shall ensure that representatives of such personnel are not the subject of discrimination and that such representatives have access to their members in the workplace.DiscriminationShall not engage in or support discriminationin hiring, remuneration, access to training, promotion, termination or retirement based on race, caste, national origin, religion, disability, gender, sexual orientation, union membership, political affiliation, or age.Shall not interfere with the exercise of the rights of personnel to observe tenets or practices, or to meet needs relating to race, caste, national origin, religion, disability, gender, sexual orientation, union membership, or political affiliation.Tenets:教義 , caste: 階級
109 Disciplinary practices Shall not allow behaviour, including gestures, language and physical contact, that is sexually coercive, threatening, abusive or exploitative.Disciplinary practicesShall not engage in or support the use ofcorporal punishment, mental or physical coercion, and verbal abuse.Working hoursShall comply with applicable laws and industry standards on working hours.The normal workweek shall be as defined by law but shall not on a regular basis exceed 48 hours.Personnel shall be provided with at least one day off in every seven-day period.All overtime work shall be reimbursed at a premium rate and under no circumstances shall exceed 12 hours per employee per week.Corporal: 肉體
110 Where the company is party to a collective bargaining agreement freely negotiated with worker organizations (see ILO) representing a significant portion of its workforce,it may require overtime work in accordance with such agreement to meet short-term business demand. Any such agreement must comply with the above requirementsOther than as permitted above,overtime work shall be voluntary.RemunerationShall ensure that wages paid for a standard working week shall always meet at least legal or industry minimum standardsand shall be sufficient to meet basic needs of personnel and to provide some discretionary income.
111 Shall ensure that deductions from wages are not made for disciplinary purposes,* and shall ensure that wage and benefits composition are detailed clearly and regularly for workers.Shall also ensure that wages and benefits are rendered in full compliance with all applicable laws and that remuneration is rendered either in cash or check form, in a manner convenient to workers.**Shall ensure that labour-only contracting arrangements and false apprenticeship schemes are not undertaken in an effort to avoid fulfilling its obligations to personnel under applicable laws pertaining to labour and social security legislation and regulations.Use bonuses and rewards rather than punishment.Not in products of the company.
113 Management systems Policy Top management shall define the company’s policy for social accountability and labour conditions to ensure that it:includes a commitment to conform to all requirements of this standard;includes a commitment to comply with national and other applicable law, other requirements to which the company subscribes and to respect the international instruments and their interpretation;includes a commitment to continual improvement;Instruments: 公約
114 Management review Top management shall periodically review is effectively documented, implemented, maintained, communicated and is accessible in a comprehensible form to all personnel, including directors, executives, management, supervisors, and staff, whether directly employed, contracted or otherwise representing the company;is publicly available.Management reviewTop management shall periodically reviewthe adequacy, suitability, and continuing effectiveness of the company’s policy, procedures and performance results vis-a-vis the requirements of this standard and other requirements to which the company subscribes.System amendments and improvements shall be implemented where appropriate.Subscribe: 服膺
115 Company representatives Shall appoint a senior management representative who,irrespective of other responsibilities, shall ensure that the requirements of this standard are met.Shall provide for non-management personnel to choose a representative from their own group to facilitate communication with senior management on matters related to this standard.Planning and implementationShall ensure that the requirements of this standard are understood and implemented at all levels of the organisation; methods shall include, but are not limited to:clear definition of roles, responsibilities, and authority;
116 Control of suppliers/subcontractors and sub-suppliers training of new and/or temporary employees upon hiring;periodic training and awareness programs for existing employees;continuous monitoring of activities and results to demonstrate the effectiveness of systems implemented to meet the company’s policy and the requirements of this standard.Control of suppliers/subcontractors and sub-suppliersShall establish and maintain appropriate proceduresto evaluate and select suppliers/subcontractors (and, where appropriate, sub-suppliers) based on their ability to meet the requirements of this standard.
117 Shall maintain appropriate records of suppliers/subcontractors’ (and, where appropriate, sub-suppliers’) commitments to social accountability, including, but not limited to, the written commitment of those organizations to:conform to all requirements of this standard (including this clause*);participate in the company’s monitoring activities as requested;promptly implement remedial and corrective action to address any nonconformance identified against the requirements of this standard;promptly and completely inform the company of any and all relevant business relationship(s) with other suppliers/subcontractors and sub-suppliers.Meaning the whole supply chain.
118 Shall maintain reasonable evidence that the requirements of this standard are being met by suppliers and subcontractors.Where the company receives, handles or promotes goods and/or services from suppliers/subcontractors or sub-suppliers who are classified as homeworkers, the company shall take special steps to ensure that such homeworkers are afforded a similar level of protection as would be afforded to directly employed personnel under the requirements of this standard. Such special steps shall include but not be limited to:establishing legally binding, written purchasing contracts requiring conformance to minimum criteria (in accordance with the requirements of this standard);Homeworkers: 居家勞工
119 Addressing concerns and taking corrective action ensuring that the requirements of the written purchasing contract are understood and implemented by homeworkers and all other parties involved in the purchasing contract;maintaining, on the company premises, comprehensive records detailing the identities of homeworkers; the quantities of goods produced/services provided and/or hours worked by each homeworker;frequent announced and unannounced monitoring activities to verify compliance with the terms of the written purchasing contract.Addressing concerns and taking corrective actionShall investigate, address, and respondto the concerns of employees and other interested parties with regard to conformance/ nonconformance with the company’s policy and/or the requirements of this standard;
120 Outside communication The company shall refrain from disciplining, dismissing or otherwise discriminating against any employee for providing information concerning observance of the standard.Shall implement remedial and corrective action and allocate adequate resources appropriate to the nature and severity of any nonconformance identified against the company’s policy and/or the requirements of the standard.Outside communicationShall establish and maintain procedures to communicate regularlyto all interested parties data and other information regarding performance against the requirements of this document, including, but not limited to, the results of management reviews and monitoring activities.Observance: compliance
121 Access for verification Where required by contract, shall provide reasonable information and accessto interested parties seeking to verify conformance to the requirements of this standard; where further required by contract, similar information and access shall also be afforded by the company's suppliers and subcontractors through the incorporation of such a requirement in the company's purchasing contracts.RecordsShall maintain appropriate recordsto demonstrate conformance to the requirements of this standard.
122 Business Principles for Countering Bribery An initiative of Transparency International and Social Accountability InternationalDecember 2002
123 ForewordDevelopmentIn a partnership project undertaken with a Steering Committee drawn from companies, academia, trade unions and other non-governmental bodies.Growing corporate awareness of the risks posed by bribery, particularly in the light of recent scandals, and the public is expecting greater accountability and probity from the corporate sector. (Bribery: An offer or receipt of any gift, loan, fee, reward or other advantage to or from any person as an inducement to do something which is dishonest, illegal or a breach of trust, in the conduct of the enterprise’s business.)*耐斯集團為取得國票金；SOGO經營權；ETC；金控經營權；力霸:loans, Probity: 正直；廉節
124 Give practical effect to recent initiatives A practical tool to which companies can look for a comprehensive reference to good practice (as opposed to best) to counter bribery.Give practical effect to recent initiativesThe OECD Convention on Combating Bribery of Foreign Public Officials in International Business TransactionsThe ICC Rules of Conduct to Combat Extortion and BriberyThe anti-bribery provisions of the revised OECD Guidelines for Multinationals.PurposeProvide practical guidance for countering bribery, creating a level playing field and providing a long-term business advantage.Apply to bribery of public officials and to private-to-private transactions.®: trade mark, extortion:勒索，強取, initiative: 倡議. ICC: International Commerce Commission
126 Countering Bribery Business principles Shall prohibit bribery in any form whether direct or indirect.Shall commit to implementation of a Programme to counter briberybased on a commitment to fundamental values of integrity, transparency and accountability.Shall aim to create and maintain a trust-based and inclusive internal culture in which bribery is not tolerated.The Programme is the entirety of an enterprise’s anti-bribery efforts including values, policies, processes, training and guidance.
127 AimsProvide a framework for good business practices and risk management strategies for countering bribery.Assist enterprises toeliminate briberydemonstrate their commitment to countering briberymake a positive contribution to improving business standards of integrity, transparency and accountability wherever they operate.Lodge: 寄存
128 Program developmentReflecting the size, business sector, potential risks and locations of operation,which should, clearly and in reasonable detail, articulate values, policies and procedures to be used to prevent bribery from occurring in all activities under effective control.Should be consistent with all laws relevant to countering bribery in all the jurisdictionsin which the enterprise operates, particularly laws that are directly relevant to specific business practices.In consultation with employees, trade unions or other employee representative bodies.Ensure that the enterprise is informed of all matters material to the effective development of the Programme by communicating with relevant interested parties.
129 ScopeShould analyse which specific areas pose the greatest risks from bribery.Should address the most prevalent forms of bribery relevant to the enterprise but at a minimum should cover the following areasBribesShould prohibit the offer, gift, or acceptance of a bribe in any form, including kickbacks, on any portion of a contract payment, or the use of other routes or channels to provide improper benefits to customers, agents, contractors, suppliers or employees of any such party or government officials.
130 Political contributions Should prohibit an employee from arranging or accepting a bribe or kickback from customers, agents, contractors, suppliers, or employees of any such party or from government officials, for the employee’s benefit or that of the employee’s family, friends, associates or acquaintances.Political contributionsThe enterprise, its employees or agents should not make direct or indirect contributions to political parties, organisations or individuals engaged in politics, as a way of obtaining advantage in business transactions.Should publicly disclose all its political contributions.Charitable contributions and sponsorshipsShould ensure that charitable contributions and sponsorships are not being used as a subterfuge for bribery.Subterfuge: 藉口
131 Facilitation payments Should publicly disclose all its charitable contributions or sponsorships.Facilitation paymentsAlso called “facilitating”, “speed” or “grease” payments, these are small payments made to secure or expedite the performance of a routine or necessary action to which the payer of the facilitation payment has legal or other entitlement.Recognising that facilitation payments are a form of bribery, should identify, minimise and preferably eliminate them.Gifts, hospitality and expensesShould prohibit the offer or receipt of gifts, hospitality or expenses whenever such arrangements could affect the outcome of business transactions and are not reasonable and bona fide expenditures.Facilitation: 通融
132 Implementation requirements Should meet, at a minimumOrganization and responsibilitiesThe Board of Directors or equivalent body should base their policy on the Business Principles and provide leadership, resources and active support for management’s implementation of the Programme.The Chief Executive Officer is responsible for ensuring that the Programme is carried out consistently with clear lines of authority.The Board of Directors, Chief Executive Officer and senior management should demonstrate visible and active commitment to the implementation of the Business Principles.Tenets:教義 , caste: 階級
133 Business relationships Should apply its Programme in its dealings with subsidiaries, joint venture partners, agents, contractors and other third parties with whom it has business relationships.Subsidiaries and joint venturesShould conduct due diligence before entering into a joint venture.Should ensure that subsidiaries and joint ventures over which it maintains effective control adopt its Programme.Where an enterprise does not have effective control it should make known its Programme and use its best efforts to monitor that the conduct of such subsidiaries and joint ventures is consistent with the Business Principles.
134 Should not channel improper payments through an agent.* AgentsShould not channel improper payments through an agent.*Should undertake due diligence before appointing an agent.Compensation paid to agents should be appropriate and justifiable remuneration for legitimate services rendered.The relationship should be documented.The agent should contractually agree to comply with the enterprise’s Programme.Should monitor the conduct of its agents and should have a right of termination in the event that they pay bribes.Contractors and suppliersShould conduct its procurement practices in a fair and transparent manner.白手套
135 Should undertake due diligence in evaluating major prospective contractors and suppliers to ensure that they have effective anti-bribery policies.Should make known its anti-bribery policies to contractors and suppliers. It should monitor the conduct of major contractors and suppliers and should have a right of termination in the event that they pay bribes.*Should avoid dealing with prospective contractors and suppliers known to be paying bribes.Waste disposal, dirt and mud out of construction sight.
136 Human resources Training Recruitment, promotion, training, performance evaluation and recognition should reflect the enterprise’s commitment to the Programme.The human resources policies and practices relevant to the Programme should be developed and undertaken in consultation with employees, trade unions or other employee representative bodies as appropriate.Should make it clear that no employee will suffer demotion, penalty, or other adverse consequences for refusing to pay bribes even if it may result in the enterprise losing business.Should apply appropriate sanctions for violations of its Programme.TrainingManagers, employees and agents should receive specific training on the Programme.Where appropriate, contractors and suppliers should receive training on the Programme.
137 Raising concerns and seeking guidance To be effective, the Programme should rely on employees and others to raise concerns and violations as early as possible. To this end, should provide secure and accessible channels through which employees and others should feel able to raise concerns and report violations (“whistle blowing”) in confidence and without risk of reprisal.These channels should also be available for employees and others to seek advice or suggest improvements to the Programme. To support this process, should provide guidance to employees and others with respect to the interpretation of the Programme in individual cases.CommunicationsShould establish effective internal and external communication of the Programme.
138 Internal controls and audit Should, on request, publicly disclose the management systems it employs in countering bribery.Should be open to receiving communications from relevant interested parties with respect to the Programme.Internal controls and auditShould maintain accurate books and records, available for inspection, which properly and fairly document all financial transactions. Should not maintain off-the-books accounts.Should establish feedback mechanisms and other internal processes supporting the continuous improvement of the Programme.Should subject the internal control systems, in particular the accounting and record keeping practices, to regular audits to provide assurance that they are effective in countering bribery.
139 Monitoring and reviewSenior management should monitor the Programme and periodically review the Programme’s suitability, adequacy and effectiveness and implement improvements as appropriate.Should periodically report to the Audit Committee or the Board the results of the Programme review.The Audit Committee or the Board should make an independent assessment of the adequacy of the Programme and disclose its findings in the Annual Report to shareholders.
140 Transparency International Founded in 1993The leading international organisation devoted to curbing bribery.With the mission to build coalitions of civil society, governments and the private sector to join in the fight against corruption.TI’s work is based on the belief that corruption is a major threat to human rights, development and international trade, and that containing corruption to manageable levels calls for the creation of a broad coalition. Engagement with the private sector is key to its mission.
141 References (reading) TI, Corruption Perceptions Index, Nov. 6, 2006 A strong correlation between corruption and poverty, with a concentration of impoverished states at the bottom of the ranking.Chair Huguette Labelle. “Despite a decade of progress in establishing anti-corruption laws and regulations, today’s results indicate that much remains to be done before we see meaningful improvements in the lives of the world’s poorest citizens.”Scores countries on a scale from zero to ten, with zero indicating high levels of perceived corruption. Almost three-quarters of the countries in the CPI score below five (including all low-income countries and all but two African states).
142 The facilitators of corruption continue to assist political elites to launder, store and otherwise profit from unjustly acquired wealth, which often includes looted state assets.TI advocates strong measures to curb bribery’s supply side, including the criminalisation of overseas bribery under the OECD Anti-Bribery Convention, as well as its demand side, including disclosure of assets for public officials and adoption of codes of conduct.But the transaction is often enabled by professionals from many fields. Corrupt intermediaries link givers and takers, creating an atmosphere of mutual trust and reciprocity; they attempt to provide a legal appearance to corrupt transactions, producing legally enforceable contracts; and they help to ensure that scapegoats are blamed in case of detection.
143 TI, Global Corruption Barometer,* Dec.7, 2006 The police are the sector most affected by bribery, with 17 percent of those who have had contact paying a bribe. Police are most commonly bribed in Africa and Latin America.Bribery for access to services is most common in Africa. The most commonly bribed sectors in Africa are the police, tax revenue and utilities.People around the world tend to be very negative about their government’s attempt to fight corruption. Only one in five surveyed worldwide think that their government is effective to some degree in fighting corruption; nearly two in five say the government is ‘not effective’ in its anti-corruption work.One in six surveyed globally thinks that their government actually encourages corruption rather than fighting it.Barometer: 氣壓；偵測，illicit:不法不義, -ridden:折磨；denigrating:污名Explores how corruption affects ordinary people. The survey was carried out on behalf of TI by Gallup International.The CPI and BPI reflect the opinions of experts and business leaders, and focus on the perception of public sector and political corruption, and the supply side of bribery, respectively.
144 Despite relatively good scores on the Corruption Perceptions Index 2006, nearly one in five respondents in the United States and the United Kingdom thinks that their government encourages corruption rather than fighting it.The public views political parties as the most corrupt institution, followed by parliament/legislature.Police are considered to be the sector most affected by corruption in both Africa and the Newly Independent States.The Taiwanese public reports an increase in levels of corruption in most of the institutions and sectors covered by the Barometer 2006 during the last two years. The public in Hong Kong and Croatia also view corruption as worse in a number of sectors, while, in contrast, in India there have been some perceived improvements.
145 Political life is viewed as being most affected by corruption, followed closely by the business environment.*Corruption is reported as affecting family life very little in EU+ countries and the Newly Independent States, but a great deal in Africa and South East Europe.Perceived corruption in political life in the United States has increased in the last two years; perceived corruption in Iceland’s business environment and family life has increased; perceived corruption has increased in Spain and Japan’s political life and business environment.官商勾結：private-public partnership.
146 NYSE/NASD IPO Advisory Committee Report and Recommendations May 2003At the request of U.S. SECChairman: GEOFFREY C. BIBLERetired Chairman and CEO, Altria Group, Inc.Members:JOHN J. BRENNAN, Chairman and CEO, The Vanguard Group and Member, NASD Board of GovernorsPETER A. BROOKE, Chairman, Advent International CorporationHarvey L. Pitt, then-Chairman of the U.S. SEC.
147 RICHARD M. BURNES, JR., General Partner, Charles River Ventures Inc. MYRA DRUCKER, CEO, GM Asset Management, GM Trust Co., and Chairman, NYSE Pension Managers Advisory CommitteeWILLIAM R. HAMBRECHT, Founder, Chairman, and CEO, WR Hambrecht + CoMARTIN LIPTON, Partner, Wachtell, Lipton, Rosen & Katz, and Chairman, NYSE Legal Advisory CommitteeJOHN D. MARKESE, President, American Association of Individual InvestorsLEON E. PANETTA, Director, Panetta Institute for Public Policy; Member, NYSE Board of Directors; Co-Chairman, NYSE Corporate Accountability and Listing Standards Committee; and Chairman, NYSE Public Policy and Review Committees
148 ROBERT C. MENDELSON, Partner, Morgan, Lewis & Bockius LLP JAY R. RITTER Eminent Scholar, Finance, Insurance & Real Estate, University of FloridaLARRY W. SONSINI, Chairman and CEO, Wilson Sonsini Goodrich & Rosati and Member, NYSE Board of DirectorsDANIEL P. TULLY, Former Chairman and CEO, Merrill Lynch & Co., Inc.JOHN L. VOGELSTEIN, Vice Chairman, Warburg Pincus LLCEx-Officio Members:ROBERT R. GLAUBER, Chairman and CEO, NASDDICK GRASSO, Chairman and CEO, New York Stock Exchange, Inc.
149 Fairness, integrity, and efficiency Make the U.S. capital markets the most successful in the world.In the past decade, more than 5,600 domestic and foreign enterprises raised an aggregate of over $500 billion through IPOs in U.S. markets.These IPOs served as an engine for corporate growth and active participation by all sectors of the investment community, from venture capitalists to large institutions and individual investors.Critical to the success of the U.S. capital markets and to innovation in the economy.Integrity: 廉節
150 In recent years, public confidence in the integrity has eroded significantly. Misconduct contrary to the best interests of investors and markets, some was unlawful.More frequent during the IPO ‘‘bubble’’ of the late 1990s and 2000, an unusually large number of offerings traded at extraordinary and immediate aftermarket premiums.These large first-day price increases in turn affected the allocation process by creating a pool of instant profits for underwriters to distribute.Some did so improperly: in exchange for a share of these profits, or perhaps for a promise of future business.In turn, some institutional investors were willing to participate in improper arrangements in order to receive the essentially guaranteed profit that ‘‘hot’’ IPOs came to represent.
151 Public concern (loss of confidence)# Arising from the ‘‘bookbuilding’’ IPOThe predominant method for conducting IPOs in the United States and worldwide.Not to imply that it is inherently flawed or inferior to other methods.The capital markets, and not regulators, should determine the most desirable method for bringing a company public.The most harmful practicesSpinningCertain underwriters allocated ‘‘hot’’ IPO shares to directors and/or executives of potential investment banking clients in exchange for investment banking business.Spinning:利益交換，旋轉門
152 Unlawful Quid Pro Quo Arrangements Underwriters unlawfully allocated IPO shares based on a potential investor’s agreement to pay excessive commissions on trades of unrelated securities.Artificial Inflation of Aftermarket PricesSome underwriters engaged in inequitable or unlawful tactics to support aftermarket prices and boost aftermarket demand. E.g.,Allocating IPO shares based on a potential investor’s commitment to purchase additional shares in the aftermarket at specified prices.Imposing penalties on retail brokers in connection with immediate ‘‘flipping’’ by retail IPO investors but not by other categories of IPO participants (such as institutions).Quid pro quo: 回報，flipping: 轉手賣出
153 Widespread perception Biased Recommendations by Research AnalystsWith their compensation and promotion tied to the success of their firms’ investment banking business, some research analysts apparently agreed to issue and maintain ‘‘buy’’ recommendations on certain stocks despite aftermarket prices that jumped to multiples of their IPO prices.Widespread perceptionIPOs are parceled out disproportionately to a few, favored investorsLarge institutions, powerful individuals or ‘‘friends and family’’ of the issuer.
154 SEC request Review the IPO underwriting process Committee’s response Particularly price setting and allocation practices, in light of recent experience.And to recommend to the securities industry community such changes as may be necessary to address the problems that have been observed.Committee’s responseExamined & evaluated from the perspective of various participants.20 recommendations follow four basic themesComplement various legislative and regulatory initiatives
155 Global Settlement among regulators and major investment banks The Sarbanes-Oxley Act of 2002 & related SEC rulesNew SRO (securities self regulatory organizations) rules dealing with analyst conflicts*Proposed NASD rules regarding activities of registered representativesPending NYSE and Nasdaq rules relating to corporate governance.Because of the pendency of these matters, the Committee did not address issues of analyst research or conflicts of interest, and the Committee’s recommendations do not cover this area.
156 RecommendationsPromote Transparency in Pricing and Avoid Aftermarket Distortions*Require each issuer to establish an IPO pricing committee of its board of directors (including at least one director who is independent of management, if any director qualifies) to oversee the pricing process.Require underwriters to provide to the pricing committee all indications of interest before the issuer determines the IPO price.Redress & prevent prohibited IPO laddering.The Committee’s mandate was not to engage in the debate (under- or overpricing) but rather to propose forward-looking reforms to eliminate the potential for future abuse. Hence, do not assume that bubble period IPOs were deliberately underpriced to the detriment of issuers. (Some expressed a different view, arguing that the subsequent dramatic declines in the price of many of these bubble period IPOs, in many cases to zero, indicates that these shares were in fact overpriced.)
157 The pricing of an IPO is a business decision reached by the issuer in consultation with the underwriter. The issuer’s directors and management have a fiduciary duty to act in the best interests of the corporation and its shareholders. It is the board’s responsibility to use its good faith business judgment when disposing of the issuer’s assets, including its capital stock.The pricing committee’s responsibilities should include receiving periodic updates from the underwriters and management, reviewing the IPO order book during the marketing period and making the final pricing decision (or recommendation to the full board), as well as reviewing the final allocation of shares.
158 A key component of the issuer’s pricing decision is understanding investors’ demand for the offering at different price levels, as demonstrated by the indications of interest that the underwriter’s team gathers during the marketing period.SROs should require underwriters to share this information with the issuer in a timely manner.Encourage underwriters to engage in an open discussion with the issuer’s pricing committee, explaining to the issuer the context and significance of indications of interest from various investors, as well as sharing their perspective on this demand.
159 Collecting information about investors’ long-term interest in, & valuation of, a prospective issuer is an essential part of the bookbuilding process.Regulation M and the general anti-fraud and anti-manipulation provisions of the federal securities laws prohibit underwriters, while engaged in the bookbuilding process, from attempting to induce purchases in the aftermarket for IPO shares.The term ‘‘laddering’’ has been used to describe one form of this prohibited conduct, namely, inducing investors to give orders to purchase shares in the aftermarket at particular prices in exchange for receiving IPO allocations.Encourage underwriters, in consultation with the regulators, to develop effective internal policies and procedures to prevent prohibited secondary market activity.Laddering: 撐盤
160 Prohibit the inequitable imposition of ‘‘flipping’’ penalties. Prohibit, for the first trading day following the IPO, the placing of unpriced orders to purchase an issuer’s shares.Prohibit the inequitable imposition of ‘‘flipping’’ penalties.Establish clear parameters for underwriters’ sales of returned shares after secondary market trading has commenced.Raise the SEC’s threshold requirement for amendment to the prospectus from 20% to 40% in cases of increases to the offering price or number of shares offered.Eliminate regulatory impediments to the development of alternatives to bookbuilding.Flipping: 反手賣出
161 IPO issues are inherently more volatile than stocks with a public trading history. Such orders may result in purchases by individual investors at prices that reflect neither their true investment decisions nor their reasonable expectations.Allow the market to develop some trading information, thereby making subsequent uncapped orders more appropriate.Limit orders at prices substantially above the IPO price, however, may in effect amount to market orders; for this reason, brokers should pay special attention to the ‘‘know your customer’’ obligations and suitability rules that govern their day-to-day practices.
162 Current SEC & SRO rules generally permit underwriters to impose penalty bids on syndicate members, which allow the managing underwriter to reclaim a selling concession from a syndicate member if its customers sell the IPO shares originally allocated to them shortly after the IPO, a practice known as ‘‘flipping,’’ intended to promote the development of a stable aftermarket.In cases where penalty bids have not been imposed on syndicate members, individual members apparently have imposed penalties on individual brokers in connection with flipping by the broker’s small retail customers, while not imposing penalties in connection with flipping by other categories of IPO participants.Bid: 索價
163 In some instances, individual syndicate members have made clear to retail brokers that they will be penalized, through withdrawn commissions or otherwise, and possibly excluded from future IPO allocations, if their retail clients show a high level of flipping activity.Faced with these potential penalties, brokers in turn may discourage their retail customers from immediately selling their IPO shares.Should address this discrimination by requiring that in the absence of a penalty bid on a syndicate member, that member may not impose penalties on a retail broker or investor.Proposed NASD Rule 2712(d) would prohibit underwriters from imposing a flipping penalty upon a registered representative (broker) in connection with a sale to a retail investor unless a penalty bid has been imposed on the entire underwriting syndicate in connection with sales to all participants in the IPO.
164 IPO shares are sometimes returned to the underwriter after secondary trading commences, due to factors such as mistaken allocations, incomplete information or other problems relating to the delivery of shares or the settlement of trades.If IPO shares trade at an immediate aftermarket premium, the underwriter is in a position to allocate any returned shares to favored customers at the IPO price.Should first be allotted to reducing any existing syndicate short position. Should further provide that underwriters must sell the remaining returned shares on the open market and return any net profits on such sales to the issuer.Where the market price does not rise above the offering price, the underwriter should be permitted to sell the shares for its account or retain the shares by placing them in its investment account.
165 Regulatory impediments to accurate pricing of IPOs should be as few as possible. Under current SEC rules, issuers often must amend their registration statement or file a new registration statement not eligible for immediate effectiveness when the number of shares to be offered or the offering price in the aggregate change by more than 20%.These rules can operate to discourage increases to the offering price or number of shares offered in excess of 20%, since issuers generally avoid risking the possibility of even a short delay that could result from the SEC filing process.
166 A late-stage increase in proceeds essentially indicates a significant level of excess investor demand at the prior price. Issuers and the investing public would be well served by more flexibility in upward adjustments.Any amended or supplemental filing should be immediately effective, without the need for SEC staff review and without the need to delay the offering unless the increase results in a material change in the prospectus disclosure beyond that related to price or number of shares offered.Do not recommend a comparable change in the case of decreases to the aggregate offering price or shares offered because of the possible greater materiality of these changes to other disclosure.
167 Most notably Dutch auctions, pricing and allocation are removed from the realm of issuer and underwriter discretion. Investors express their interest level and price threshold, and the offering price is set at the highest level at which all of the shares to be offered can be sold. The final IPO price in an auction represents, or is at least close to, the maximum price that the market is willing to pay for the issuer’s security.The SEC and the SROs should review their rules with a view to addressing provisions that may impede the use of such alternative pricing methods.The SEC should consider to eliminate an underwriter’s obligation to reconfirm an offer outside the initial price range from a bidder who has already indicated a willingness to purchase at a higher price.
168 Eliminate Abusive Allocation Practices Underwriters face competing objectives and conflicting interests in allocating IPO sharesThe issuer generally desires that shares be placed with long-term investors.On the other hand, the availability of an aftermarket for the stock is part of the inducement to participate in the IPO.By definition, however, trading requires that there be a first seller.Finally, underwriters may desire to allocate at least some shares to their best customers in order to maintain client relationships.Greater transparency in the allocation process will help ensure a proper balance of these competing objectives and a fair resolution of these conflicting interests
169 Prohibit the allocation of IPO shares to executive officers and directors (and their immediate families) of companies that have an investment banking relationship with the underwriter, or as a quid pro quo for investment banking business.Provide that a listed company’s code of business conduct and ethics should include a policy regarding receipt of IPO shares by the company’s directors and executive officers.Strengthen existing prohibitions on unlawful quid pro quo allocations.
170 In addition, NASD’s free-riding and withholding interpretation generally imposes restrictions on allocations of ‘‘hot issues’’ to money managers, such as venture capitalists and hedge fund managers, who are in a position to direct business to a broker-dealer. NASD’s proposed Rule 2790 (replace the interpretation) imposes additional restrictions on such persons by, for example, eliminating an investment bank’s ability to allocate IPOs to such persons even if such allocations are consistent with the person’s ‘‘normal investment practice.’’The proposed spinning restrictions should be expanded to include selected affiliates of an executive officer or director, such as members of the covered person’s immediate family.
171 In addition, the very existence of an investment banking relationship should bar all directors and executive officers of the underwriter’s investment banking client from receiving any IPO shares from the underwriter.Encourage the SEC and SROs to consider if and to what extent the existence of a previous investment banking relationship should trigger similar restrictions on allocations to directors and executive officers.In connection with the Global Settlement, the ten settling firms entered into a voluntary initiative regarding spinning, includes a comprehensive ban on allocations of ‘‘hot’’ IPO securities to executive officers and directors of public companies and a restriction on participation of investment banking personnel in allocation decisions.
172 Although the proposed ban on spinning would prohibit a wide range of potential misconduct, the burden should not fall exclusively on the underwriters and SROs.Issuers and their boards should provide investors with comfort that IPO allocations do not unduly interfere with the fulfillment of directors’ and officers’ fiduciary duties.Companies should carefully examine whether to take affirmative steps to limit or prohibit practices that may be characterized as spinning. Such steps may take the form of a company pre-approval policy or a complete ban on such practices.
173 Companies and institutions that are not bound by SRO corporate governance standards will similarly evaluate their policies regarding potential spinning practices.The National Venture Capital Association recommends that its members adopt a code of ethics regarding receipt of IPO allocations by general partners and employees of venture capital organizations.Recommend that federal, state and local jurisdictions consider whether restrictions or pre-approval policies would be appropriate with respect to IPO allocations to elected officials and political appointees.
174 SEC rules prohibit an underwriter’s allocation of IPO shares based on the recipient’s agreement to ‘‘kick back’’ to the underwriter, either through excess commissions or otherwise, a portion of the flipping profits.Proposed NASD Rule 2712 would add a more explicit restriction by specifically prohibiting the allocation of IPO shares as consideration or inducement for the payment of excessive compensation for other services provided by the underwriter.
175 Impose substantive limits on issuers’ ‘‘friends and family’’ programs. Level the Playing Field: Improve the IPO Information Flow and Information AccessThe exchange of information between the underwriter and the issuer should be characterized by transparency, not opaqueness.Require issuers to make a version of their IPO roadshow available electronically to unrestricted audiences.Require that the underwriter disclose the final IPO allocations to the issuer.
176 An IPO often includes an issuer-directed allocation of a portion of the offering. This portion of the offering may be used to permit company employees to invest in their employer at the IPO price, or to permit strategic business partners to have a small investment in the issuer.Historically, these ‘‘friends and family’’ programs represented two to three percent of the IPO offering. During the bubble period, the size of these programs at times increased to over ten percent of the offering.The SEC and the SROs should establish reasonable parameters for the fair use of issuer directed share programs by:Imposing a five percent maximum size for an issuer’s directed share programAnd, requiring that any lock-up that applies to shares owned by officers and directors include the shares purchased by those individuals.
177 Roadshows have traditionally been considered a key opportunity for large, primarily institutional, investors to gather additional information about IPO issuers, enjoy face-to-face exposure to senior management and learn management’s view of the most important aspects of the company and the offering.Under the current regulatory scheme, the SEC considers roadshows (including any slides used as part of the presentation) to be permitted oral communications under the Securities Act of 1933, provided that no written materials are distributed to attendees.An electronic or broadcast transmission, however, raises concerns regarding ‘‘written’’ offers under existing SEC interpretations and therefore is allowed during the offering period only pursuant to significant conditions established by the SEC staff in ‘‘no-action’’ letters. Thus, electronic roadshows often are not made available to retail investors.
178 Whether or not there is an actual disadvantage, there is a strong perception that critical information is communicated to institutional investors at roadshows and is not included in the prospectus for the benefit of other investors, for example, management’s explanation of its enthusiasm for the company’s prospects. Indeed, even the opportunity to see and hear senior management may provide significant information.The SEC should amend current rule interpretations to state affirmatively that electronic roadshows, although subject to the general anti-fraud provisions of the securities laws, are permissible offers under the Securities Act, thus enabling wide access to these presentations.Should also require that any issuer that elects to use a roadshow as part of its marketing of the offering post the roadshow on its website, accompanied by a web link to the prospectus, or otherwise make the roadshow widely accessible without charge.
179 To preserve the importance of the prospectus and full investor disclosure, the electronic roadshow should be required to contain a link to the available prospectus, an appropriate notice to viewers that an offer of the issuer’s securities may only be made through a prospectus and advice to read the full prospectus before indicating an interest in the offered securities.Three members of the Committee would further recommend that issuers that provide projections of future earnings to any investor be required to include such projections in the prospectus, provided that there is a statutory safe harbor to address liability concerns. Two would require additional prospectus disclosure by the underwriters where IPO allocations are based in whole or in part on commissions earned by the underwriting firms.
180 To assure trust in the allocation decision process, the SROs should require, subject to any applicable financial privacy limitations, that the managing underwriter (serves as bookrunner retains the discretion to determine the final IPO share allocations) disclose and explain to the issuer the final allocation of its IPO shares.Help the issuer evaluate this aspect of the bookrunner’s performance, which may be an important consideration for the issuer when embarking on any future capital-raising transaction.
181 Require that the prospectus include a clear description of lock-up agreements and of whether the underwriter expects to grant exceptions relating to hedging or other transactions.Reiterate existing requirements that all collars and other custom derivatives relating to initial insider holdings be promptly filed electronically with the SEC on Form 4.Require improved disclosure regarding exemptions by an underwriter to an IPO lock-up agreement. Specifically:Require that underwriters notify issuers prior to granting any exemption to a lock-up, and require issuers to file a current report on Form 8-K at least one business day prior to the time the insider commences the transaction.
182 Lock-up agreements restrict sale of company shares by directors, officers and certain pre-IPO shareholders of an issuer for a specified period, typically six months (disclosed in broad terms in the prospectus and are often highlighted during the marketing process), usually contain certain exceptions and may be waived in whole or part by the lead underwriter in its discretion.Ending, or granting exceptions to, previously disclosed lock-up agreements is at least as material to shareholders as the initial agreement.Prospective investors should be more fully informed of the terms of all lock-up agreements between the underwriter and the covered persons, including whether the lockups permit the effective hedging or collaring of the locked-up shares without the underwriter’s consent.Any preexisting plans by the underwriter to exempt a director or officer from a lock-up agreement should also be disclosed.
183 Underwriters or other investment bankers may make available to an issuer’s directors and executives various transactions relating to their locked-up securities, generally take the form of collars and other types of derivative contracts.Any such transaction that has occurred shortly following an IPO constitutes important market information that should be readily accessible to all investors.Under current SEC rules, company directors, executive officers and large shareholders must report transactions in the issuer’s securities on Form 4 within two business days of completion of the transaction.All collars and derivative contracts relating to a director’s or an officer’s shares in an issuer are reportable on Form 4 as ‘‘derivative securities.’’ The SEC should consider whether additional clarification or other measures are needed to reinforce these rules.
184 Require that, prior to the transaction, the lead underwriter announce the exemption by broad communication to the investment community through a major news service.Require more complete prospectus disclosure about the nature and size of the issuer’s ‘‘friends and family’’ program.Improve the Quality of Underwriter Performance and Public Awareness Regarding IPOsThe basic and most essential ingredients to ensure the integrity of IPOs areAn issuer’s awareness and discharge of its obligations in the IPO context, an underwriter’s ethical and fair performance of its duties, and the participation of an informed investing public that understands the inherent volatility in the IPO market and the risks of IPO investing.
185 Investors should be made aware in a timely manner of any development that would counter the established expectation that the issuer’s directors, officers and large pre-IPO shareholders who entered into lock-ups will be bound by them for the stated period.Underwriters should communicate this information to investors through announcements on a major news service.These pre-transaction disclosure requirements will ensure that the market has the information at the appropriate time, not after the sale by the executive.
186 Possible additional categories for disclosure include the total size of the program, the number of individuals or institutions who participated, the largest, smallest and average purchase under the program, the minimum percentage being allocated to employees, the categories of recipients and allocations to participants that exceed a specified threshold.
187 Launch an education campaign for new issuers and IPO investors. Impose additional requirements to promote the highest standards of conduct for underwriters, including:Enhanced periodic internal review by the underwriter of its IPO supervisory procedures.And, a heightened focus on the IPO process in SRO examinations for investment banking personnel.Launch an education campaign for new issuers and IPO investors.
188 These steps would emphasize to underwriters the importance of a high level of diligence and an awareness of the underwriting team’s obligations under the securities laws and SRO regulations in the context of an IPO.Boards and senior management of underwriting firms should reinforce, through continuing education and internal policies, the need for high standards of integrity, ethical conduct and professional responsibility when serving as an underwriter of an IPO.
189 The SEC and SROs should establish educational and information programs for new issuers. Such programs could provide prospective issuers with an overview of the IPO process and the rules applicable to it, the different types of IPOs available to issuers, and the issuer’s responsibilities once the company has gone public.Retail investors need to better understand the inherent risks in IPO investing, and may require education in how to read prospectuses and evaluate roadshow materials. It is therefore essential that the SEC and the SROs promote ways to educate investors as to the potential benefits and disadvantages of IPO investing, including through the dissemination of historical information regarding returns on IPOs over time as compared to returns on stocks with longer trading histories.
190 SROs should emphasize to broker-dealers that, consistent with their ‘‘know-your-customer’’ obligations, these institutions should also participate in efforts to educate the retail investor.Investors should be encouraged to regard IPOs not as products in and of themselves (potentially giving rise to immediate profits upon flipping), but rather as an opportunity to participate in the long-term growth of the specific enterprise issuing the shares.
191 Morgan Stanley & Co. Incorporated Policy for Managing Conflicts of Interest in Relation to Investment ResearchMorgan Stanley & Co. Incorporated
192 IntroductionScopeApplies to investment research published by the global Equity Research and Fixed Income Research departments of Morgan Stanley and its affiliated companies.DefinitionResearch analyst or analyst: research analysts who publish research reports.Research Management: the senior management teams of the respective research departments.
193 Morgan Stanley & Co. Incorporated Is party to the equity research settlement with U.S. federal and state regulators of April 2003.The Research Settlement applies to equity research analysts based in North America and to analysts publishing equity research relating to companies incorporated or headquartered in the United States or whose principal equity trading market is in the United States (U.S. Companies).Have voluntarily applied many of the requirements to research relating to issuers that are not U.S. Companies taking into account the specific characteristics of fixed income and other nonequity products and markets, as well as local regulatory requirements and market practices outside the United States.
194 Morgan Stanley & Co. International Limited Our policies are also designed to comply with and in many respects go beyond the Guiding Principles to Promote the Integrity of Fixed Income Research published by The Bond Market Association.Morgan Stanley & Co. International LimitedThis policy represents the conflict management policy required by the Principles for Businesses issued by its regulator, the Financial Services Authority,and its Conduct of Business Rule , with respect to the management of conflicts of interest in connection with the publication of impartial investment research.Morgan Stanley & Co. International Limited does not itself distribute research that has not been published from the London office.*Distribution of research published from abroad.
196 Identification and disclosure Possible and appearance of conflictsthat might affect or raise questions about the impartiality of our research.Provide training for research analysts and other Firm personnel with whom analysts interact.Research Management and the Law Division provide assistance and guidance as issues arise.Individual personnel are responsible for raising identified or potential conflicts with their supervisors to ensure that all conflict questions are referred to and considered at the appropriate level within the Firm.
197 Compliance monitors the application of the policy regarding the publication of research in the period before, during and after investment banking (capital markets and corporate broking) transactions.Have automated systems that facilitate the required disclosures of interests and activities of the Firm which may appear to represent a conflict of interest.The primary analyst responsible for a research report is required to ensure that the views expressed accurately reflect personal views.Disciplinary procedures apply in case of breaches of the policies; may result in a range of sanctions, up to and including termination of employment.capital markets and corporate broking.
198 Supervision and remuneration Supervised by Research ManagementNot to be directly supervised by (or report to) personnel from other areasin particular investment banking or trading personnel, whose interests or functions may conflict with those of the research analysts.Senior Research Management personnel report either directly to Firm Management or to the most senior management level in the related sales and trading business.*The evaluation and appraisal for career advancement, remuneration and promotion is structured so that nonresearch personnel do not exert inappropriate influence over analysts.Analyst’s supervisor may still be subject to the pressure from its superior.
199 The remuneration is determined on the basis of a number of factors, including quality, accuracy and value of research, productivity, experience, individual reputation, and evaluations by investor clients and employees in other parts of the Firm with whom analysts interact.May not be directly linked to specific transactions or the profitability of particular trading desks or investment banking groups, but will in part reflect the overall profitability of the Firm as a whole.Do not permit investment banking personnel to participate in the evaluation of research analysts.
200 Activities of Analysts Restrict from performing roleswhich could prejudice, or appear to prejudice, the independenceNo pitchesAre not permitted to participate in sales pitches for investment banking mandates or to prepare or review materials for those pitches. Pitch materials may not contain the promise of research coverage.No promotion of issuers’ transactionsMay not be involved in promotional or marketing activities of an issuer of a relevant investment that would reasonably be construed as representing the issuer.Pitch: 推銷宣傳
201 Are not permitted to attend roadshow presentations by issuers. May, however, observe roadshows without asking questions by videolink or telephone in order to help ensure that they have access to the same information as their investor clients.Fixed income research analysts, with Research Management’s prior approval, may attend roadshows passively (i.e. as a member of the audience, neither asking nor responding to questions).Are permitted to attend ordinary course investor presentations by issuers that do not relate to offerings of securities or other investment banking transactions, provided that (except in the case of widely –attended conferences mentioned below) investment banking personnel are not present.
202 No three-way meetingsAs a general rule, analysts (other than economists and strategists who do not analyze specific issuers) are not permitted to attend meetings with corporate finance clients of the Firm jointly with investment banking personnel.After the Firm has been awarded a mandate for a securities offering or other investment banking transaction, our policies permit these three-way meetings to occur only for the purposes of fact finding, due diligence and verification, or certain others with Research Management approval (not permitted for equity research analysts based in North America and certain other jurisdictions or with respect to transactions involving U.S. Companies, for which the analysts’ due diligence must be conducted outside the presence of investment banking personnel).
203 Widely-attended conferences Permitted to attend and speak at widely attended conferences (may include some investor presentations by corporate clients of the Firm) at which investment banking colleagues and clients, among others, may also be present.Other permitted activitiesMay be consulted by investment banking and sales and trading personnel on matters such as market and industry trends, conditions and developments and the structuring, pricing and expected market reception of securities offerings or other market operations.May also carry out preliminary due diligence and vetting of issuers which may be prospective subjects of research or prospective investment banking clients, or both, and may meet issuers at that time for this purpose (or otherwise upon the issuer’s request) provided investment bankers are not present.
204 May not, however, be provided with material or confidential non-public information regarding an issuer or investment, unless the analyst is brought “over the wall” (variously known as the “information barrier”, “ethical wall” or “Chinese wall”) in accordance with our procedures.This requires the prior consent of Research Management and a record to be made by Compliance, and potentially results in restrictions on the analyst’s activities until the relevant non-public information has become public or stale.In connection with a securities offering or other transaction and during the course of such an offering or transaction, our policies permit analysts to meet and speak with potential investors, at meetings and in conversations not involving the issuer or investment banking colleagues, for purposes of investor education and information.*Brought over the wall: 入闈May still be construed as assisting the securities offering.
205 Analysts’ personal dealings Are prohibited from trading in securities or related derivatives of any issuer which they cover or which is in the analyst’s global coverage sector (i.e., similar issuers, usually the MSCI sub-industry categories for the issuers covered by the analyst).Exceptions may be made with the prior approval of Research Management and Compliance in special circumstances such as for disposal ofpositions already held under a previous policy, when joining the Firm or when initiating coverage andpositions obtained as a result of a merger, fund distribution or other involuntary acquisition.
206 Required to disclose their interests in research reports and are permitted to trade only during prescribed window periods away from the time of publication of a research report.Any trades that analysts make must be in line with their recommendation(s), if any.Are also required to disclose all other material personal conflicts relevant to the issuers or investments that are the subject of their research.Prohibited from covering an issuer if the analyst serves as an officer, director or member of the board of the issuer.If an analyst’s household member serves in such a capacity, the analyst is required to disclose that fact in any relevant research report and Research Management will consider whether, based on the facts and circumstances, the analyst should cease covering the issuer.
207 Where permitted within the rules described above, analysts are required to comply with the Firm’s rules and procedures on personal account dealing, which include requirements for dealings to be conducted through an account with the Firm (or, in limited circumstances, in other permitted accounts held outside the Firm) and to be precleared with Research Management.Pre-clearance is not required for certain transactions, including transactions in many liquid sovereign and government-related fixed income securities, Morgan Stanley stock (during permitted window periods), diversified mutual funds, or for permitted trading in a discretionary account or blind trust where the analyst has ceded all investment discretion to an investment manager or financial adviser.
208 Inducements and inappropriate influences Prohibit from soliciting or receivingRestrict certain communicationswhich might be perceived to result in inappropriate influence on analysts’ views.Remuneration and other benefitsProhibited from accepting any remuneration or other benefit from an issuer or any other party in respect of the publication of research and from offering or accepting any inducement (including the selective disclosure by an issuer of material information not generally available) for the publication of favourable research.These restrictions do not preclude the acceptance of reasonable hospitality in accordance with the Firm’s general policies on entertainment, gifts and corporate hospitality.
209 Inappropriate influences Policies and procedures to regulate communications.Analysts have office space separate from that of investment bankers. Equity research analysts globally and European-based fixed income research analysts are located in separate space from that of sales and trading personnel. Fixed income analysts in other regions will also shortly have space separate from sales and trading.There are also security restrictions on access to the analysts’ segregated areas by non-analysts and to investment banking areas by analysts.Investment bankers, salespeople and traders are prohibited from attempting to influence the timing or content of an research report, and analysts are prohibited from disclosing to any other business area (other than the Law Division) the timing or content of a research report prior to its publication.
210 Traders are prohibited from disclosing non-public trading positions to analysts. Investment bankers are prohibited from providing analysts with material non-public information regarding an issuer or investment, unless the analyst is brought “over the wall”.Investment bankers are prohibited from asking an analyst to initiate coverage of an issuer or investment and from using equity analysts to identify or strategize about potential investment banking business.Provide compliance notices and training to the relevant personnel on these policies.To reinforce this, require certain conversations to be logged in advance with Compliance or chaperoned by a member of the Law Division (all conversations between investment bankers and equity research analysts (i) based in North America or (ii) based outside North America but with respect to U.S. Companies).Chaperon: 伴隨
211 Coverage decisionsDecisions to initiate, resume, suspend or discontinue research coverage of an issuer or investment are made by Research Management in conjunction with the analyst concerned.Research Management is permitted to take into account input with respect to research coverage from other business areas, including investment banking and sales and trading.Input from investment banking with respect to equity research coverage involving North America-based analysts or of U.S. Companies is limited to a discussion of the merits of coverage of particular sectors or other general categories and may not be issuer specific.
212 Certification on each research report The primary analyst responsible is required to certify, at the time of publication, that the views expressed in the report accurately reflect his or her personal views about the subject securities, instruments or issuers, and that no part of his or her compensation was, is or will be directly or indirectly related to the specific views or recommendations contained therein.This certification can be found on each such research report.
213 Review and comment on research Ensure that parties with interestswhich may potentially conflict with those of recipients of researchare not able to review or comment on research in a manner which might affect the impartiality.Review of researchPrior to publication, all research reports are reviewed by a supervisory analyst.Equity research is also reviewed by a member of the equity research editorial team.The purpose of these reviews is to confirm compliance with the Firm’s editorial guidelines and regulatory requirements, including the requirement that research be clear, fair and not misleading.
214 Thereafter, all such reports that contain any discussion of a company or other entity in relation to which we have an investment banking mandate (which would not necessarily be limited to the issuer the Firm represents in that mandate) are reviewed by the Law Division to monitor compliance with any legal or policy restrictions on timing or content.The supervisory analyst/editor is primarily responsible for ensuring that the appropriate disclosures are included in the research reports.Compliance assists in monitoring compliance with applicable disclosure requirements.Investment bankers are not permitted to review any research report prior to publication, except research prepared by non-North American based analysts to be published in advance of an initial public offering of a non-U.S. Company’s shares (may review such research solely for the purposes of verification of factual statements).
215 May check the accuracy of factual statements with the relevant issuer that is the subject of a research report, prior to publication. This may be achieved by providing the issuer with a summary of facts for checking or a redacted version of the draft research report that contains no valuation, investment conclusion, recommendation or price (or spread) target.Require to record the reasons for any subsequent material change made to a research report after factual matters have been reviewed by issuers or investment bankers (where review is permitted as provided above). This record must be submitted to and approved by both Research Management and Compliance prior to publication of the report.
216 Role of review committees A Stock Selection Committee for Equity Research and a Research Review Committee for Fixed Income Research.Each committee is made up of senior members of the relevant research department and may include members of other departments (excluding investment banking).Each committee aims to improving the quality of research content and delivery and to reinforce the prevention of undue influence on analysts from other employees, issuers and investors.Committee approval is required for all initiations, resumptions, suspensions and discontinuations of coverage, changes to ratings (including industry views) and certain changes to price targets and model portfolios, publication of new research periodicals and certain other matters.
217 Complaints Retaliation policy Any complaints concerning the content of research reports should be referred to, and are dealt with by, the relevant research department, where appropriate in conjunction with Compliance in compliance with the complaint handling procedures, and not by investment banking personnel.Retaliation policyNeither the Firm nor investment banking personnel may retaliate or threaten to retaliate against any analyst for negative or otherwise unfavourable research that may adversely affect the Firm’s present or potential investment banking relationships.
218 Timing and content of research Designed to ensurethat decisions on the timing and content of research are not made, or inappropriately influenced, by persons with interests conflicting with those of users of research and that new researchand other material statements of a analyst’s views are not disclosed selectively before being made generally available.The timing of publication is determined primarily by the analyst on the basis of events affecting the issuer or investment concerned, perceived investment opportunities for research clients and developments in the analyst's opinion.
219 Investment bankers and sales and trading personnel have no control over, or input into, decisions on timing of publication of individual research reports.Has policies that may restrict the publication of research or the inclusion of opinions and/or recommendations in research, relating to the issuer or its related parties, at certain times when involved in investment banking transactions.In the case of a merger or acquisition, the restriction may be applied both to bidder and target, regardless of which we are advising.The nature, timing and length of the restriction will depend on the nature of the transaction. E.g., we generally restrict the publication of research on an issuer for a short period after the announcement of a material merger, acquisition or restructuring in which we are involved, and during the pendency of the deal we may limit our analysts' ability to publish opinions or recommendations.
220 In relation to offerings of securities, we follow the customary practice, and in some jurisdictions we are required by law, to impose a "quiet period" or "blackout period" before and/or after the offering.A longer period is usual for initial public offerings of shares than for offerings involving listed issuers, and the period is typically shorter still (or there may be no quiet period) for offerings of investment grade debt securities.Once advised of our role in a transaction by investment banking, Compliance is responsible for monitoring compliance with the appropriate quiet periods and other restrictions.
221 Dow Jones Sustainability Indexes The DJSI World was launched in 1999The first global indexes tracking the financial performance of the leading sustainability-driven companies.Based on the cooperation of Dow Jones Indexes, STOXX Limited and SAM.SAM Indexes GmbH is the operating company for the DJSI.The DJSI World Index Design Committee and the DJSI STOXX Index Design Committee are responsible for all decisions affecting the indexes, including changes to the composition and methodology.on Sept 8
222 The DJSI STOXX family was launched on October 15, 2001 to provide sustainability benchmarks for European portfolios.They provide asset managers with reliable and objective benchmarks to manage sustainability portfolios.A license is required for the commercial use of any aspects of the DJSI.Currently 56 DJSI licenses are held by asset managers in 14 countries to manage a variety of financial products including active and passive funds, certificates and segregated accounts.In total, these licensees presently manage 3.6 billion EUR based on the DJSI.
223 FAQs Corporate sustainability Purpose A business approach to create long-term shareholder value.Sustainability leaders embrace opportunities and manage risks which derive from economic, environmental and social (EES) developments.As the importance of these trends increases, a growing number of investors integrate EES criteria into their stock analysis and use sustainability as a proxy indicator for innovative and future-oriented management.PurposeProvide objective benchmarks for the financial products that are linked to EES criteria.
224 They offer both, a performance baseline as well as an investment universe, for the increasing number of mutual funds, certificates, separate accounts and other investment vehicles which are based on the concept of sustainability.Components selectionFollows a best-in-class approach comprising the sustainability leaders in the investable universe from each industry.Categorized into 58 DJSI sectors, companies are assessed in line with general and industry-specific criteria.They are compared against their peers and ranked accordingly. The leading companies are included in the DJSI.The investable stocks universe of the DJSI World consists of the 2,500 largest capitalized companies in the Dow Jones Global Index. The leading 10% are selected.
225 The starting universe for the DJSI STOXX is the Dow Jones STOXX 600 Index. Includes the leading 20%. The DJSI family is reviewed on an annual basis.Once the components are selected, they are continuously monitored throughout the year to verify the involvement in and management of critical areas.Benefits of inclusionPublic recognition of being an industry leader in strategic areas covering EES.Recognition by important stakeholders such as legislators, customers and employees (a better customer and employee loyalty).Highly visible results, both internal and external to the company, as all components are publicly announced by the index publisher and companies are entitled to use the official "Member of DJSI" label.
226 Increasing financial benefit because of investments based on the index Increasing financial benefit because of investments based on the index. By being a member of the DJSI, companies become eligible to be included in DJSI-based portfolios.AssessmentThe research starts by defining sustainability trends which SAM sees as having a growing impact on the long-term success of companies.Based on this understanding of future EES developments, the analysts develop a set of general and industry-specific criteria to assess companies. The analyzed companies are assigned a sustainability score and are ranked accordingly within their sector.Analysts identify specific challenges for the 58 DJSI sectors and subsequently select criteria that enable them to identify the leading companies in terms of EES issues.
227 Examples of Sustainable trends Climate Change (reading)Escalating demand for energy propels economic development, but threatens the Earth's climate. The 2002 flooding in Germany, the Czech Republic and Austria demonstrated the impact and disorder created by extreme climatic events.The events left many of the population and local companies with massive clean up costs and a major effort rebuilding their capacity to generate value again.WaterFreshwater is growing scarce amidst competing human needs. Water scarcity is also pressurizing many industries who rely on access to water for their production processes.
228 Food Accountability Health Intensive agricultural systems lead to increasing pressure on land, soil and biodiversity. The agriculture and food manufacturing industry are challenged to find more sustainable production methods which guarantee long-term food supply without undermining their natural capital.AccountabilityRecent corporate scandals have strengthened civil society's demand for greater accountability and transparency from business.HealthLife expectancy is rising, but preventable diseases limit development in certain areas. Health challenges of preventable disease coupled with the HIV/AIDS epidemic pose not only challenges for pharmaceutical companies regarding access to drugs, but also to industries that rely on a healthy workforce and society for their productivity and success.
229 Socially Responsible Investing (SRI) An investment strategy whichcombines the intentions to maximizeboth financial return and social good.*In general, socially responsible investors favor corporate practices which are environmentally responsible, support workplace diversity, and increase product safety and quality.Some (not all) also avoid businesses involved in alcohol, tobacco, gambling, weapons and other military industries, and/or abortion.HistoryMany believe social investing began with the Religious Society of Friends (Quakers).Summarized from Wikipedia. UK, France, Italy, Sweden and Belgium have the 63.7% of the world SRI funds. Gray, Hillel. New Directions in the Investment and Control of Pension Funds. DC: Investor Responsibility Research Center, p
230 In 1758, the Quaker Philadelphia Yearly Meeting prohibited members from participating in the business of buying or selling humans.One of the most articulate early adopters of SRI was John Wesley ( ), one of the founders of the Methodist Church. A sermon entitled “The Use of Money,” outlined his basic tenets of social investing: not to harm your neighbor through your business practices and to avoid industries like tanning and chemical production that pollute rivers and streams.Modern SRI movement began during the Vietnam War. Many people living during the era remember a picture in June of 1972* of a naked nine year-old girl, Phan Thị Kim Phúc, running towards a photographer screaming, her back burning from the napalm dropped on her village.In the late 1970s, SRI activism turned its attention to nuclear power and automobile emissions control.Sermon: 佈道, Tanning: 染棕色, napalm: 凝固汽油彈. That photograph channelled outrage against the manufacturer Dow Chemical, and prompted protests across the country against it and other companies profiting from the Vietnam War.
231 During the 1950s and 1960s, labor unions deployed multiemployer pension funds for targeted investments. E.g., The United Mine Workers fund invested in medical facilities, and the ILGWU and IBEW financed union-built housing projects. They also sought to leverage pension stocks for shareholder activism on proxy fights and shareholder resolutions.*Presidential candidates Jimmy Carter, Ronald Reagan and Jerry Brown advocated some type of social orientation for pension investments in ’80.After the Sharpeville Massacre in 1960, international opposition to apartheid strengthened. In 1976 the United Nations imposed a mandatory arms embargo against South Africa. In 1971, Reverend Leon Sullivan (at the time a board member for General Motors) drafted a code of conduct for practicing business in South Africa which became known as the “Sullivan Principles.”International Ladies Garment Workers Union, Internatlional Brotherhood of Electrical Workers. In 1978, SRI efforts by pension funds was spurred by The North will Rise Again: Pensions, Politics, and Power in the 1980s and the subsequent organizing efforts of authors Jeremy Rifkin and Randy Barber.
232 Reports documenting the application of the Sullivan Principles discovered that US companies were not attempting to lessen discrimination within South Africa. Cities, states, colleges, faith-based groups and pension funds throughout the US began divesting (or removing their investments) from companies operating in South Africa.The negative flow of investment eventually forced a group of businesses, representing 75% of South African employers, to draft a charter calling for an end to apartheid. While the SRI efforts alone didn't bring an end to apartheid, it did focus persuasive international pressure on the South African business community.Modern applicationsSRI is a booming market in both the US and Europe. SRI in the US remained robust during 2001 and 2002, even as the rest of the investment world was stagnant.
233 Government-controlled (pension) funds Assets in socially screened portfolios climbed to $2.15t in 2003, an increase over the $2.01t counted in 2001 (7% growth). Community investing and shareholder advocacy contribute additional assets, resulting in a total of $2.18t professionally managed assets for all SRI.*The broader universe of all professionally managed portfolios fell 4% during the same period, according to the Social Investment Forum’s 2003 Report on Socially Responsible Investing Trends in the US.Research estimates by financial consultancy Celent predict that the SRI market in the US will reach $3t by The European SRI market grew from €1t in 2005 to €1.6t in 2007.Government-controlled (pension) fundsAre being pressured by the citizenry and by activist groups to adopt investment policies which encourage ethical corporate behaviour.Start raising community investment fund.
234 I.e., respect the rights of workers, take environmental concerns into account, and generally avoid violations of human rights.One outstanding endorsement is the Norwegian Government Pension Fund, which is mandated to avoid "investments which constitute an unacceptable risk that the Fund may contribute to unethical acts or omissions, such as violations of fundamental humanitarian principles, serious violations of human rights, gross corruption or severe environmental damages."Mutual fundsSocially responsible mutual funds counted by the 2003 Trends Report increased in number to 200 in 2003, up from 181 in 2001, 168 in 1999, and 139 in Assets grew by 19%, to $162 bn, up from $136 bn in 2001, 51% of this growth is attributed to both newly identified and newly created funds, and 49% represents growth in existing assets.
235 Separately managed accounts In terms of attracting investor assets, socially screened mutual funds grew on a net basis in 2002 ($1.5b according to Lipper) while U.S. diversified equity funds contracted ($10.5b).Separately managed accountsOf the $2.15t in socially screened portfolios, $1.99t are found in separate accounts (portfolios privately managed for individuals and institutions) with the remaining $162b residing in mutual funds. Assets in socially screened separate accounts grew by 7% since the “2001 Report” ($1.87t in 2001, $1.34t in 1999, and just $433b in 1997).Shareholder advocacyBetween 2001 and 2003, shareholder advocacy activity increased by 15%, growing from 269 social and crossover resolutions (combined aspects of both “social” and traditional corporate governance issues) filed in 2001 to 310 in 2003.Advocacy: 擁護
236 The average percentage of votes received on these resolutions increased from 8.7% in 2001 to 11.4% in Of the total $2.15t in all socially screened portfolios, $441b are in portfolios controlled by investors who are also involved in shareholder advocacy.Shareholder resolutions are filed by a wide variety of institutional investors, including public pension funds, faith-based investors, socially responsible mutual funds, and labor unions. In 2004, faith-based organizations filed 129 resolutions, while socially responsible funds filed 56 resolutions.Regulations governing shareholder resolutions in the US are determined by the SEC, which also requires mutual funds to disclose how they voted on behalf of their investors.
237 Community investing Investing strategies U.S. shareholders have organized various groups to facilitate jointly filing resolutions. These include the Council of Institutional Investors, the Interfaith Center on Corporate Responsibility, and the Social Investment Forum.Community investingClimbed 84% between 2001 and Assets held and invested locally by community development financial institutions (CDFIs) based in the US totaled $14b in 2003, up from $7.6b in 2001.Investing strategiesScreening: excludes certain securities from investment consideration based on social and/or environmental criteria.Divesting: removes stocks from a portfolio based on mainly ethical, non-financial objections to certain business activities of a corporation.
238 Recently, CalSTRS (California State Teachers' Retirement System) announced the removal of more than $237m in tobacco holdings from its investment portfolio after 6 months of financial analysis and deliberations.Shareholder activism: efforts attempt to positively influence corporate behavior, include initiating conversations with corporate management on issues of concern, and submitting and voting proxy resolutions.These activities are undertaken with the belief that social investors, working cooperatively, can steer management on a course that will improve financial performance over time and enhance the well being of the stockholders, customers, employees, vendors, and communities.*Recent movements have also been reported of "investor relations activism", in which investor relations firms assist shareholder activists in an organized push for change within a corporation.Stakeholders
239 Satire and pro-market response This is done typically by leveraging their enhanced knowledge of the corporation, its management (often via direct relationships), and the securities laws as a whole.Positive investing: involves making investments in activities and companies believed to have a high and positive social impact, tends to target underserved communities. These efforts may support activities designed to provide mortgage and small business credit to minority and low-income communities.Satire and pro-market responseAt least one mutual fund, the Vice Fund (VICEX), was created specifically to contrast with the trend in SRI. VICEX specializes in investing in the defense, alcohol, tobacco, and gambling industries, and has greatly outperformed both the S&P 500 and most socially responsible mutual funds.Satire: 諷刺，vice: 邪惡
240 The Free Enterprise Action Fund files shareholder resolutions which oppose the general trend of SRI, e.g., by asking GE to "justify lobbying for global warming regulation.“*Do not automatically accept it, want to GE to justify it.
241 International Finance Facility for Immunization (IFFIm) protection from diseasethrough immunisation is taken for granted in the developed world,But every year in poorer countriessome 24m children miss out on vaccinations against the most common diseases, making them vulnerable to sickness, disability and death.Approximately 2.3m children die from easily-preventable diseases such as diphtheria, pneumonia, diarrhea and yellow fever -- a massive and inexcusable loss of human potential.Diphtheria: 白喉, cholera: 霍亂, dysentery: 痢疾, malaria: 瘧疾, diarrhea: 腹瀉(痢疾), yellow fever (蚊蟲傳播)
242 One of the main reasons for this global failure is a lack of predictable, long-term funding that allows developing countries to plan and implement programmes to protect and improve their children’s health.IFFIm exists to rapidly accelerate the availability and predictability of fundsThe funds raised by IFFIm are used by the GAVI Alliance* (Global Alliance for Vaccines and Immunisation), a public-private partnership which aims to reduce the number of vaccine-preventable deaths and illness among children under five.A total anticipated IFFIm disbursement of US$4b is expected to protect more than 500m children through immunisation.E.g., “Vaccine Bonds” launched in Japan, 11 December 2008.Provides funds to purchase and deliver vaccines and strengthen health services in 72 of the world's poorest countries.
243 Ethical Banking Ethical bank A.k.a social, alternative, civic or sustainable bankA bank concerned about the social use of its investments and loans.Shares a common set of principles, the most prominent being the transparency and the social or environmental aim of the projects they finance. Some are specialized in microcredits.Usually work with narrower profit margins than traditional ones, and tend to have few offices and operate mostly by phone, Internet or mail.Christopher J. Cowton & Paul Thompson, "Do Codes Make a Difference? The Case of Bank Lending and the Environment", Journal of Business Ethics, v.24, n.2 (March 2000). Paul Thompsn & Christopher J. Cowton, "Bringing the Environment into Bank Lending: Implications for Environmental Reporting", British Accounting Review, v.36, n.2, pp (June 2004).
244 An extreme case of this is Smile (a branch of Co-operative Bank of UK): it was the first ethical bank that operates exclusively by Internet, followed by eBay Microplace.Green banking is ethical banking specialized in green energy, to address global warming.
245 Microcredit The extension of very small loans to the unemployed, poor entrepreneurs and others living in povertywho are not considered bankable.These individuals lack collateral, steady employment and a verifiable credit history and therefore cannot meet even the most minimal qualifications to gain access to traditional credit.Microcredit is a part of microfinance, which is the provision of a wider range of financial services to the very poor.A financial innovation originated in Bangladesh to enable extremely impoverished people to engage in self-employment projects.Arthur F Raper, Rural Development in Action: The Comprehensive Experiment at Comilla, East Pakistan, Cornell University Press: Ithaca. Microcredit, microresults The Left Business Observer #74, October Goetz, A.M. and R. Sen Gupta. "Who takes the Credit? Gender, power and control over loan use in rural credit programmes in Bangladesh." World Development Vol. 24, January Hillary Miller. The paradox of savings mobilization in microfinance: why microfinance institutions in Bolivia have virtually ignored savings. Development Alternatives Inc. and USAID, Washington, Yale Economic Review. Microcredit in South Africa, Summer The Economist. The hidden wealth of the poor: A survey of microfinance, November Helms, Brigit. Access For All: Building Inclusive Financial Systems, The World Bank, Sapovadia, Vrajlal K., "Micro Finance: The Pillars of a Tool to Socio-Economic Development" . Development Gateway.
246 Many in the traditional banking industry have begun to realize that these microcredit borrowers should more correctly be categorized as pre-bankable, and are contemplating microcredit projects as a source of future growth.It was begun in its modern incarnation as pilot projects with ACCION and Muhammad Yunus in the mid-1970s. The United Nations declared 2005 the International Year of Microcredit.*HistoryThe concept can be traced back to portions of the Marshall Plan at the end of World War II or even back to the mid-1800s and the writings of abolitionist/legal theorist Lysander Spooner who wrote concerning the benefits of numerous small loans for entrepreneurial activities to the poor as a way to alleviate poverty.Abolitionist: 廢奴主義‧Almost everyone in larger development organizations discounted the likelihood of success at the beginning.Prebankable: 未達, nonbankable: 不能
247 Opportunity International Dr. Akhtar Hameed Khan, a social scientist, is credited for pioneering and microfinance through Comilla Co-operatives in 1960.PrinciplesTool for socio-economic development with emphasis on Building Capacity of Micro Entrepreneur, Employment Generation, Trust Building and Help to Micro Entrepreneur on initiation and during difficult times.*Focus on WomenThe reasoning behind this is the observation that loans to women tend to more often benefit the whole family than loans to men do, and raises their socio-economic status.**Opportunity InternationalIn 1971, Al Whittaker resigned as president of Bristol Myers and established Opportunity International’s first US office in Washington DC.Sapovadia, Vrajlal K., "Micro Finance: The Pillars of a Tool to Socio-Economic Development" . Development Gateway, 2006According to the Microcredit Summit Campaign, "1.2 bn people are living on less than a dollar a day. Women are often responsible for the upbringing of the world’s children and the poverty of the women generally results in the physical and social underdevelopment of their children. Experience shows that women are a good credit risk, and that women invest their income toward the well being of their families. At the same time, women themselves benefit from the higher social status they achieve within the home when they are able to provide income."
248 The first loan was made to Carlos Moreno in Colombia to expand his one-man spice and tea business. About the same time Australian philanthropist, David Bussau, began making microloans in Indonesia.The two men met and formed Opportunity International, which provides opportunities for people in chronic poverty to transform their lives by creating jobs, stimulating small businesses, and strengthening communities.Small loans ranging from $25 to $500 helped poor families lift themselves out of poverty.Other Opportunity International offices are in Australia, Great Britain and Canada, each targeting countries within their region.ACCION InternationalIn 1973 Accion International, a Peace Corps-like group, started to switch focus toward providing economic opportunity to poor people.
249 Self Help Group, Indian expereince Instead of working on construction/infrastructure projects in order to create lasting improvements in the lives of those they were helping.Their plan first appeared in Recife, Brazil in 1973 when ACCION staff began to offer microloans to poor people eager to start small businesses (avoid the exploitive lending practices of loan sharks).Within four years, the experiment had shown its success in having provided 885 loans with a repayment rate of over 90%. The loans also helped to create or stabilize 1,386 new jobs.Since this beginning, ACCION has expanded its microlending operation to countries throughout South and Central America, US, Africa and India.*Self Help Group, Indian expereinceIn India, micro credit is extended by Self Help Groups and Cooperatives linkages.ACCION claims that these loans were the first modern pioneers of microcredit.
250 The National Bank for Agriculture and Rural Development (NABARD), and apex developmental bank cum government agency focussing on rural and agricultural development has been a great force through these linkages.Grameen BankAround the same time as ACCION's experiment, and apparently independently, Muhammad Yunus, a professor of economics at Chitagong University started a similar experiment.Around 1974, during a famine in his native Bangladesh, Yunus discovered that very small loans could make a difference in a poor person's ability to survive, but that traditional banks were not interested in making such tiny loans.His first loan consisted of $27 from his own pocket which he lent to 42 people including a woman who made bamboo furniture, which she sold to support herself and her family.
251 Close to 96 percent of Grameen loans have gone to women. In 1976, Yunus founded the Grameen Bank to make loans to poor Bangladeshis. Since then, it has issued more than $5b in loans to several million borrowers.* At the close of 2005 the number of outstanding loans is more than $4m.To ensure repayment, the bank uses a system of solidarity lending through "solidarity groups": small informal groups, nearly all of them exclusively female, that meet weekly in their villages to conduct business with representatives of the bank and that support each other's efforts at economic self-advancement.Has also developed other systems of alternate credit which serve the poor, such as housing loans, financing for fisheries, irrigation projects, venture capital, textiles, etc.The success of the Grameen model has inspired similar efforts throughout the developing world and even in industrialized nations.Close to 96 percent of Grameen loans have gone to women.
252 Development Gateway, USA Originally, the program started with men and women but later focused on women when data showed a dramatically lower credit risk.In 2006, Yunus and the Grameen bank were honored with the Nobel Peace Prize.*Development Gateway, USAA portal assisting many socio-economic activities, having a community forum, Micro Finance community that serves knowledge center for global activities (share experience in any particular country without any cost).Women's World Banking (WWB)Founded in New York in 1976 by Ela Bhatt (India), Esther Ocloo (Ghana) and Michaela Walsh, an American investment banker.Bhatt had earlier founded the Mahila SEWA Cooperative Bank in 1974, and she served as WWB's chair from 1980 until 1998.The press release states: "The Norwegian Nobel Committee has decided to award the Nobel Peace Prize for 2006, divided into two equal parts, to Muhammad Yunus and Grameen Bank for their efforts to create economic and social development from below. Lasting peace can not be achieved unless large population groups find ways in which to break out of poverty. Micro-credit is one such means. Development from below also serves to advance democracy and human rights. Muhammad Yunus has shown himself to be a leader who has managed to translate visions into practical action for the benefit of millions of people, not only in Bangladesh, but also in many other countries. Loans to poor people without any financial security had appeared to be an impossible idea. From modest beginnings three decades ago, Yunus has, first and foremost through Grameen Bank, developed micro-credit into an ever more important instrument in the struggle against poverty. Grameen Bank has been a source of ideas and models for the many institutions in the field of micro-credit that have sprung up around the world. Every single individual on earth has both the potential and the right to live a decent life. Across cultures and civilizations, Yunus and Grameen Bank have shown that even the poorest of the poor can work to bring about their own development. Micro-credit has proved to be an important liberating force in societies where women in particular have to struggle against repressive social and economic conditions. Economic growth and political democracy can not achieve their full potential unless the female half of humanity participates on an equal footing with the male. Yunus’s long-term vision is to eliminate poverty in the world. That vision can not be realised by means of micro-credit alone. But Muhammad Yunus and Grameen Bank have shown that, in the continuing efforts to achieve it, micro-credit must play a major part."
253 The WWB president was reported in 2002 as claiming that of half the microcredit loans made worldwide to 25 million people, three-quarters of them were made to women, and had been made by WWB.Friends of Women's World Banking, an affiliate to WWB, was established in the year 1982 by Ela Bhatt as a non-profit organization to promote direct participation of poor women in the economy through access to financial services. It was created to extend and expand informal credit supports and networks within India to link them to a global movement.As of now it is working in 14 states of India, with 104 partner organizations with a total client outreach of 5 million. Some of the biggest MFIs in India like Share Microfin, Spandana, Bandhan, SKS received their initial support from FWWB and still continue their association with FWWB.
254 According to Consultative Group to Assist the Poor (CGAP), FWWB's niche lies in its proven capability in identifying and hand holding fledgling startup MFIs and grow them to a stage where they become self sustainable.FINCA InternationalIn the 1980s FINCA International continued the successful trend of microcredit in Bolivia.John Hatch, founder, had worked on other international credit programs and started doing microcredit on his own, stressing local autonomy and putting the poor in charge of the programs.* He called it village banking.After Hatch had assembled a team, within four weeks, they had created 280 village banks serving 14,000 families with loans worth $630,000. While the original program was shut down, it was not because of a lack of success, but because its backers felt uncollateralized lending was too risky.Fledgling: 無經驗、雛鳥. “Give poor communities the opportunity, and then get out of the way!” he said.
255 Despite this setback, Hatch continued to pursue his work and incorporated FINCA in 1985, this time working in El Salvador, focused on women.The mission is to provide financial services to the world's lowest-income entrepreneurs so they can create jobs, build assets, and improve their standard of living.In 2005, FINCA reached more than 400,000 clients, providing in excess of $100 mn in small loans averaging $360. FINCA currently operates programs in 21 countries in Africa, Latin America and the Caribbean, Eastern Europe and Central Asia. Women comprise 80% and the organization has a loan repayment rate of 97%.Thengamara Mohila Sabuj Sangha*TMSS is a women-oriented NGO from Bangladesh, established in Bogra District, 1964.The history says a lady with the lamp who was a day laborer formed along with other poor women in Thengamara village.
256 In 1980, a botany professor Dr In 1980, a botany professor Dr. Hosne-Ara Begum came forward to redirect the NGOs social activty. She engaged herself as the Founder Executive Director of TMSS.With the main patronizer [Palli Karma Shahayak Foundation] (PKSF),TMSS is engaged in uplifting the living condition of the most distressed poor people particularly women and children of both urban and rural areas.TMSS believes in self-help sustainable development of the targeted beneficiaries through their own efforts and resources.TMSS has emerged as one of the most efficient and dynamic NGOs in the country. It has extensive network and a large contingent of well-trained and skilled manpower, including 9000 regular staffs, 7,000 voluntary and part-time staffs. The number of target beneficiaries increased from 126 in 1980 to more than 1.8 million in 2005.
257 The microcredit loan disbursement increased from $8,000 to $125 mn during the same period with a recovery rate of 99%.SKS IndiaSKS Microfinance was founded in 1998 by Vikram Akula to provide loans to women living in poor regions of India. According to its website, SKS has provided over $205 mn in loans to nearly 632,000 clients.Borrowers take loans in order to develop a variety of income-generating farming and home-based manufacturing activities.Interest-free loans for emergencies and life insurance are also offered to borrowers.SKS runs an affiliated program to improve education for poor children.In May 2006, Vikram Akula was named to TIME Magazine’s Top 100 List of Most Influential People for the year 2006.
258 Some recent developments in India In 2006, SKS Microfinance attracted the attention and investment of Venture Capitalists such as Vinod Khosla, Small Industries Development Bank of India, Unitus Equity Fund, and Sequoia Capital.Some recent developments in IndiaThe Government of India is mulling some regulation for the Microfinance industry.*TodayThe World Bank estimates that there are now more than 7,000 microfinance institutions, serving some 16 million poor people in developing countries.CGAP experts estimate that 500 million households benefit from these small loans, Cambodia and Kenya as examples.Asia and the Pacific region represent 83% of the opened accounts in developing countries, which is equivalent to 17 accounts for 100 persons.Mulling: 深思熟慮. Consultative Group to Assist the Poor. In his budget speech on 28 February 2006, the Finance Minister P Chidambaram said "I had proposed major initiatives in respect of micro finance in the last Budget. RBI has since issued guidelines to enable banks to appoint banking correspondents and banking agents. A window to access ECB funds has also been opened. A Bill to provide a formal statutory framework for the promotion, development and regulation of the micro finance sector will be introduced in this session.” At a seminar on microfinance organised by the Confederation of Indian Industry (CII) and the Small Industries Development Bank of India (SIDBI) in Delhi, in September 2006, the Chairman & Managing Director of the Indian Bank, K C Chakrabarty, said "Micro Finance Institutions are limited in their delivery - most are simply engaged in lending. Micro finance is also about saving, insurance, and investment. Sadly, these products are not being delivered. So far, micro finance initiatives have failed to link the beneficiaries to the capital market, and have met with little success when it comes to developing micro-entrepreneurship. In most of rural India, people still borrow to meet their daily consumption, not to fund an income generating enterprise.”
259 The Economic and Social Council In Nov.1997, more than 2000 delegates from 100 countries gathered at a Microcredit Summit in Washington, DC, with the goal of reaching 100 million of the world's poorest families, with credit for self-employment and other financial and business services by the year 2005.The Economic and Social Councilof the United Nations proclaimed the year 2005 as the International Year of Microcredit to call for building inclusive financial sectors and strengthening the powerful, but often untapped, entrepreneurial spirit existing in communities around the world. There are five goals:Assess and promote the contribution of microfinance and microcredit to the MDGs.Increase public awareness and understanding of as vital parts of the development equation.Promote inclusive financial sectors.Support sustainable access to financial services.MDGs: most depressed groups.
260 Web 2.0 and Microfinance Merger Encourage innovation and new partnerships by promoting and supporting strategic partnerships to build and expand the outreach and success of microcredit and microfinance for all.Web 2.0 and Microfinance MergerKiva.org, was the first person-to-person micro-lending Website that enabled an individual to lend money to a micro-entrepreneur in the developing world. This came to be known as "the merger between Microfinance and Web 2.0" due to its ability to create a transparent, connective and affordable option for anyone on the Internet to lend directly to the working poor.Kiva is non-profit as it's very difficult to become a SEC-registered broker/dealer.MicroPlace.com, a wholly-owned subsidiary of eBay, was launched on October The big difference between MicroPlace and Kiva is that loans will be securitized.
261 Fundamental Principles I.e., lenders invest in microloans by purchasing securities (potentially tradable) and will earn interest. Funds generated by these sales are then invested in microcredit institutions around the world. MFIs, in turn, solicit clients, make loans and collect payments.Once client payments are in, the institutional investors receive their loan (plus interest) who can then pay back their investors.Fundamental PrinciplesSavings|investment as preferable aidIndependent borrowers earn the dignity and lasting self-confidence associated with responsible loan repayment. Institutional managers are more careful to ensure borrower success and generally perform better when there are risks involved.
262 Traditional private banks should not be expected to offer microcredit Entrepreneurial talent and energy are scarce invaluable resources for economic growthOur economies cannot afford not to find and develop independently responsible entrepreneurs and public bankers who are financial critical thinkers. These individuals can be attracted to the microcredit industry, but they are individuals with options, they will not risk their future on short-term or unpredictable bureaucratic support.Traditional private banks should not be expected to offer microcreditExisting banks with a traditional operating philosophy typically have significant investments in facilities and costly operating structures. Because of the significant overhead of such banking operations, these bank operations naturally gravitate to large, profitable transactions with affluent borrowers.
263 A new generation of banking institutions and professionals to run them is arising Banking institutions motivated by a less myopic vision of profitably serving the common good can be capitalized for the primary purpose of entry-level economic development. By lowering the transaction costs through institutional specialization and innovation in delivery systems, they will be able to operate profitably in markets characterized by very small transaction sizes and less affluent clients.Poor entrepreneurs possess the same survival skills as the toughest, most affluent business operatorsPoor entrepreneurs are not only prebankable, they represent the population of those individuals who will be aggressively pursued as successful, very affluent captains of enterprise in 10, 25 or 50 years from now.
264 Beyond enterprise lending and savings A radically efficient, large-scale, new banking operating infrastructure requiredSimply modifying old methods will not successfully expand poor people's participation in their country's economy. Investment in self- sustaining institutions that finance poor residents is a comparatively cost-effective use of scarce subsidies for economic development.The costs of doing research in the microcredit and microenterprise areas are extremely low compared to other strategies to stimulate economic development such as tax abatement or continued support for welfare programs.Beyond enterprise lending and savingsMicrofinance is expanding beyond its roots in savings and business lending and now offers other forms of financial services, including most notably insurance and housing microfinance.
265 Microfinance offers the promise that it could eventually evolve into a specialized form of banking catering to economically active poor people who currently happen to be unbanked.Some new microfinance focused-organizations, for instance the Development Innovations Group (DIG), have embraced this more expanded vision of microfinance and speak of financial services for the poor or of development finance, rather than of microfinance.StrengthsIn the past few years, savings-led microfinance has gained recognition as an effective way to bring very poor families low-cost financial services. E.g., in India NABARD finances more than 500 banks that on-lend funds to self-help groups (SHGs) which comprise twenty or fewer members, of whom the majority are women from the poorest castes and tribes.
266 Members save small amounts of money, as little as a few rupees a month in a group fund. Members may borrow from the group fund for a variety of purposes ranging from household emergencies to school fees.As SHGs prove capable of managing their funds well, they may borrow from a local bank to invest in small business or farm activities.Banks typically lend up to four rupees for every rupee in the group fund. Groups pay a reasonable 11-12% annual rate of interest.Nearly 1.4 million SHGs comprising approximately 20 million women now borrow from banks, which makes the Indian SHG-Bank Linkage model the largest microfinance program.Similar programs are evolving in Africa and Southeast Asia with the assistance of Opportunity International, Catholic Relief Services, CARE, APMAS, Oxfam, etc.
267 Microfinancing also helps in the development of an economy by giving everyday people the chance to establish a sustainable means of income. Eventual increases in disposable income will lead to economic development and growth.CriticismGina Neff of the Left Business Observer has described the microcredit movement as a privatization of public safety-net programs.*Neff maintains that the success of the microcredit model has been judged disproportionately from a lender's perspective (repayment rates, financial viability) and not from that of the borrowers.E.g., the Grameen Bank's high repayment rate does not reflect the number of women who are repeat borrowers and have become dependent on loans for household expenditures rather than capital investments.Enthusiasm for microcredit among government officials as an anti-poverty program can motivate cuts in public health, welfare, and education spending.
268 Studies of microcredit programs have found that women often act merely as collection agents for their husbands and sons, such that the men spend the money themselves while women are saddled with the credit risk (and are kept out of waged work and pushed into the informal economy).Bangladesh's Finance and Planning Minister M. Saifur Rahman charges that some microfinance institutions use excessive interest rates.Many studies have shown that risks like sickness, natural disaster and overindebtedness are a critical dimension of poverty, and that very poor people rely heavily on informal savings to manage these risks.*It might be expected that MFIs would provide safe, flexible savings services to this population, but they have been very slow to do so (with exceptions like Grameen II). Some argue that they are overly dependent on external capital.The Microfinance Revolution: Sustainable Finance for the Poor by Marguerite Robinson.
269 Role of Developing Country, a recent Forbes ranking E.g., a study in Bolivia in 2003 found that MFIs were very slow to deliver quality microsavings services because of easy access to cheaper forms of external capital. Global data tables from The Microbanking Bulletin show that savings represent a small source of funds for microcredit institutions in most developing nations.Role of Developing Country, a recent Forbes rankingForbes named seven India MFIs in the first ever list of world's top 50, highest for a country.*Bangalore-based Bandhan was at the second position. Bandhan, as well as two other Indian MFIs, Microcredit Foundation of India (13th) and Saadhana Microfin Society (15th), have been placed even above Bangladesh-based Grameen Bank (17th, topped by another Bangladesh-based institution ASA).**After billionaires and household names like Ambanis and Mittals.Other Indian entries include Grameen Koota (19th), Sharada's Women's Association for Weaker Section (23rd), SKS Microfinance Private Ltd (44th) and Asmitha Microfin Ltd (29th). Grameen Koota and SKS Microfinance are working on the same model adopted by Grameen Bank.
270 India, along with Bangladesh, are jointly home to the maximum number of MFIs to be featured in the list. Among others, there are five from Bosnia and Herzegovina, four each from Morocco and Peru, three from Colombia and two each from Equador, Ethiopia and Serbia.One each from 15 other countries, including Russia, Pakistan, Mexico and Brazil have also been named in the list.The magazine said that the list was made after going through data available with the Microfinance Information Exchange and the analysis from rating firms Micro-Credit Ratings International Limited and MicroRate."Each microfinance institution earned scores in four equally weighted categories -- scale, efficiency, portfolio risk and profitability. Rankings were then based on the combined average score of those four categories".Buzzword: 行話. Forbes magazine said that "microfinance has become a buzzword of the decade, raising the provocative notion that even philanthropy aimed at alleviating poverty can be profitable to institutional and individual investors." "Billionaires, global leaders and Nobel Prize recipients are hailing these direct loans to uncollateralised would-be entrepreneurs as a way to lift them out of poverty while creating self-sustaining businesses," it noted.
271 The ranking was based on six key variables: gross loan portfolio, operating expense, operating expenses divided by the average number of active borrowers as a percentage of gross national income per capita, the outstanding balance of loans overdue by more than 30 days as a per cent of gross loan portfolio, return on assets, and return on equity.
272 Credit Rating Agencies (CRAs) Code of Conduct FundamentalsIOSCO’s Technical Committee publisheda Statement of Principles Regarding the Activities of Credit Rating Agencies in September 2003.*Designed to be a useful tool for securities regulators, rating agencies and others wishing to articulate the terms and conditions under which CRAs operate and the manner in which opinions of CRAs should be used by market participants.Laid out high-level objectives to improve investor protection and the fairness, efficiency and transparency of securities markets and reduce systemic risk.THE TECHNICAL COMMITTEE OF THE INTERNATIONAL ORGANIZATION OF SECURITIES COMMISSIONS, CODE OF CONDUCT FUNDAMENTALS FOR CREDIT RATING AGENCIES, DECEMBER At (IOSCOPD151).
273 To take into account the different market, legal and regulatory circumstances in which CRAs operate, and the varying size and business models of CRAs, the manner in which the Principles were to be implemented was left open.A variety of mechanisms could be used, including both market mechanisms & regulation.Along with the Principles, the Committee also published a Report on the Activities of Credit Rating Agencies that outlined the activities of CRAs, the types of regulatory issues that arise relating to these activities, and how the Principles address these issues.*Highlighted the growing and sometimes controversial importance placed on CRA assessments and opinions, and found that, in some cases, CRAs activities are not always well understood by investors and issuers alike.At (IOSCOPD153).
274 CRAs typically are subject to little formal regulation or oversight in most jurisdictions, concerns have been raised regarding the manner in which CRAs protect the integrity of the rating process, ensure that investors and issuers are treated fairly, and safeguard confidential material information provided them by issuers.The Code Fundamentals offer a set of robust, practical measures that serve as a guide to and a framework for implementing the Principles’ objectives.*The fundamentals should be included in individual CRA codes of conduct, and the elements contained in the Code Fundamentals should receive the full support of CRA management and be backed by thorough compliance and enforcement mechanisms.CRAs and regulators should consider whether or not additional measures may be necessary in a specific jurisdiction.Developed out of discussions among IOSCO members, CRAs, representatives of the Basel Committee on Banking Supervision, the International Association of Insurance Supervisors, issuers, and the public at large.
275 Not designed to be rigid or formulistic, but to offer a degree of flexibility in how these measures are incorporated into the individual codes of conduct.CRAs should disclose how each provision of the Code Fundamentals is addressed in the CRA’s own code of conduct, explain if and how their own codes of conduct deviate from the Code Fundamentals and how such deviations nonetheless achieve the objectives laid out. Should keep in mind that the laws and regulations of the jurisdictions in which they operate vary and take precedence.*Permit market participants and regulators to draw their own conclusions about whether the CRA has implemented the Code Fundamentals to their satisfaction, and to react accordingly.A consultation draft of the Code Fundamentals was published for public comment in October This document (IOSCOPD173) and a list of public comments IOSCO received on the consultation draft (IOSCOPD177) can be downloaded.
276 Do not address the equally important obligations issuers have of cooperating with and providing accurate and complete information to the marketplace and the CRAs.TermsApply to any CRA and any person employed by a CRA in either a full-time or part-time capacity.A “credit rating” is an opinion regarding the creditworthiness of an entity, a credit commitment, a debt or debt-like security or an issuer of such obligations expressed using an established and defined ranking system.Not recommendations to purchase, sell, or hold any security.CRAs should endeavor to issue opinions that help reduce the asymmetry of information that exists between borrowers (and debt and debt-like securities issuers) and lenders (and the purchasers of debt and debt-like securities).
277 Quality and Integrity of the Rating Process Stale ratings that fail to reflect changes to an issuer’s financial condition or prospects may mislead market participants. Likewise, conflicts of interest or other undue factors – internal and external – that might, or even appear to, impinge upon the independence of a rating decision can seriously undermine a CRA’s credibility.Quality and Integrity of the Rating ProcessQuality of the Rating Process1.1 The CRA should adopt, implement and enforce written procedures to ensure that the opinions it disseminates are based on a thorough analysis of all information known to the CRA that is relevant to its analysis according to the CRA’s published rating methodology.Stale: 陳舊
278 1.2 Should use rating methodologies that are rigorous, systematic and, where possible, result in ratings that can be subjected to some form of objective validation based on historical experience.1.3 In assessing an issuer’s creditworthiness, analysts involved in the preparation or review of any rating action should use methodologies established by the CRA. Analysts should apply a given methodology in a consistent manner, as determined by the CRA.1.4 Credit ratings should be assigned by the CRA and not by any individual analyst employed by the CRA; ratings should reflect all information known, and believed to be relevant, to the CRA, consistent with its published methodology; and the CRA should use people who, individually or collectively have appropriate knowledge and experience in developing a rating opinion for the type of credit being applied.
279 1.5 Should maintain internal records to support its credit opinions for a reasonable period of time or in accordance with applicable law.1.6 The CRA and its analysts should take steps to avoid issuing any credit analyses or reports that contain misrepresentations or are otherwise misleading as to the general creditworthiness of an issuer or obligation.1.7 Should ensure that it has and devotes sufficient resources to carry out high-quality credit assessments of all obligations and issuers it rates. When deciding whether to rate or continue rating an obligation or issuer, it should assess whether it is able to devote sufficient personnel with sufficient skill sets to make a proper rating assessment, and whether its personnel likely will have access to sufficient information needed in order make such an assessment.
280 Monitoring and Updating 1.8 Should structure its rating teams to promote continuity and avoid bias in the rating process.Monitoring and Updating1.9 Except for ratings that clearly indicate they do not entail ongoing surveillance, once a rating is published the CRA should monitor on an ongoing basis and update the rating by: a. regularly reviewing the issuer’s creditworthiness; b. initiating a review of the status of the rating upon becoming aware of any information that might reasonably be expected to result in a rating action (including termination of a rating), consistent with the applicable rating methodology; and, c. updating on a timely basis the rating, as appropriate, based on the results of review.
281 Integrity of the Rating Process 1.10 Where a CRA makes its ratings available to the public, the CRA should publicly announce if it discontinues rating an issuer or obligation. Where a CRA’s ratings are provided only to its subscribers, the CRA should announce to its subscribers if it discontinues rating an issuer or obligation. In both cases, continuing publications by the CRA of the discontinued rating should indicate the date the rating was last updated and the fact that the rating is no longer being updated.Integrity of the Rating Process1.11 The CRA and its employees should comply with all applicable laws and regulations governing its activities in each jurisdiction in which it operates.1.12 The CRA and its employees should deal fairly and honestly with issuers, investors, other market participants, and the public.
282 1.13 The CRA’s analysts should be held to high standards of integrity, and the CRA should not employ individuals with demonstrably compromised integrity.1.14 The CRA and its employees should not, either implicitly or explicitly, give any assurance or guarantee of a particular rating prior to a rating assessment. This does not preclude a CRA from developing prospective assessments used in structured finance and similar transactions.1.15 Should institute policies and procedures that clearly specify a person responsible for the CRA’s and the CRA’s employees’ compliance with the provisions of the CRA’s code of conduct and with applicable laws and regulations. This person’s reporting lines and compensation should be independent of the CRA’s rating operations.
283 1.16 Upon becoming aware that another employee or entity under common control with the CRA is or has engaged in conduct that is illegal, unethical or contrary to the CRA’s code of conduct, a CRA employee should report such information immediately to the individual in charge of compliance or an officer of the CRA, as appropriate, so proper action may be taken. A CRA’s employees are not necessarily expected to be experts in the law. Nonetheless, its employees are expected to report the activities that a reasonable person would question. Any CRA officer who receives such a report from a CRA employee is obligated to take appropriate action, as determined by the laws and regulations of the jurisdiction and the rules and guidelines set forth by the CRA.CRA management should prohibit retaliation by other CRA staff or by the CRA itself against any employees who, in good faith, make such reports.
284 CRA Independence and Avoidance of Conflicts of Interest General2.1 Should not forbear or refrain from taking a rating action based on the potential effect (economic, political, or otherwise) of the action on the CRA, an issuer, an investor, or other market participant.2.2 The CRA and its analysts should use care and professional judgment to maintain both the substance and appearance of independence and objectivity.2.3 The determination of a credit rating should be influenced only by factors relevant to the credit assessment.Forbear: 克制、避免
285 2.4 The credit rating a CRA assigns to an issuer or security should not be affected by the existence of or potential for a business relationship between the CRA (or its affiliates) and the issuer (or its affiliates) or any other party, or the non-existence of such a relationship.2.5 Should separate, operationally and legally, its credit rating business and CRA analysts from any other businesses of the CRA, including consulting businesses, that may present a conflict of interest. The CRA should ensure that ancillary business operations which do not necessarily present conflicts of interest with the CRA’s rating business have in place procedures and mechanisms designed to minimize the likelihood that conflicts of interest will arise.
286 CRA Procedures and Policies 2.6 Should adopt written internal procedures and mechanisms to (1) identify, and (2) eliminate, or manage and disclose, as appropriate, any actual or potential conflicts of interest that may influence the opinions and analyses the CRA makes or the judgment and analyses of the individuals the CRA employs who have an influence on ratings decisions. The CRA’s code of conduct should also state that the CRA will disclose such conflict avoidance and management measures.2.7 The CRA’s disclosures of actual and potential conflicts of interest should be complete, timely, clear, concise, specific and prominent.2.8 Should disclose the general nature of its compensation arrangements with rated entities.
287 Where a CRA receives from a rated entity compensation unrelated to its ratings service, such as compensation for consulting services, the CRA should disclose the proportion such non-rating fees constitute against the fees the CRA receives from the entity for ratings services.2.9 The CRA and its employees should not engage in any securities or derivatives trading presenting conflicts of interest with the CRA’s rating activities.2.10 In instances where rated entities (e.g., governments) have, or are simultaneously pursuing, oversight functions related to the CRA, the CRA should use different employees to conduct its rating actions than those employees involved in its oversight issues.
288 CRA Analyst and Employee Independence 2.11 Reporting lines for CRA employees and their compensation arrangements should be structured to eliminate or effectively manage actual and potential conflicts of interest. The CRA’s code of conduct should also state that a CRA analyst will not be compensated or evaluated on the basis of the amount of revenue that the CRA derives from issuers that the analyst rates or with which the analyst regularly interacts.2.12 Should not have employees who are directly involved in the rating process initiate, or participate in, discussions regarding fees or payments with any entity they rate.2.13 No CRA employee should participate in or otherwise influence the determination of the CRA’s rating of any particular entity or obligation if the employee:
289 Owns securities or derivatives of the rated entity, other than holdings in diversified collective investment schemes;Owns securities or derivatives of any entity related to a rated entity, the ownership of which may cause or may be perceived as causing a conflict of interest, other than holdings in diversified collective investment schemes;Has had a recent employment or other significant business relationship with the rated entity that may cause or may be perceived as causing a conflict of interest;Has an immediate relation (i.e., a spouse, partner, parent, child, or sibling) who currently works for the rated entity; orHas, or had, any other relationship with the rated entity or any related entity thereof that may cause or may be perceived as causing a conflict of interest.
290 2.14 The CRA’s analysts and anyone involved in the rating process (or their spouse, partner or minor children) should not buy or sell or engage in any transaction in any security or derivative based on a security issued, guaranteed, or otherwise supported by any entity within such analyst’s area of primary analytical responsibility, other than holdings in diversified collective investment schemes.2.15 CRA employees should be prohibited from soliciting money, gifts or favors from anyone with whom the CRA does business and should be prohibited from accepting gifts offered in the form of cash or any gifts exceeding a minimal monetary value.2.16 Any CRA analyst who becomes involved in any personal relationship that creates the potential for any real or apparent conflict of interest
291 CRA Responsibilities to the Investing Public and Issuers (including, for example, any personal relationship with an employee of a rated entity or agent of such entity within his or her area of analytic responsibility), should be required to disclose such relationship to the appropriate manager or officer of the CRA, as determined by the CRA’s compliance policies.CRA Responsibilities to the Investing Public and IssuersTransparency and Timeliness of Ratings Disclosure3.1 Should distribute in a timely manner its ratings decisions regarding the entities and securities it rates.3.2 Should publicly disclose its policies for distributing ratings, reports and updates.3.3 Should indicate with each of its ratings when the rating was last updated.
292 3.4 Except for “private ratings” provided only to the issuer, the CRA should disclose to the public, on a non-selective basis and free of charge, any rating regarding publicly issued securities, or public issuers themselves, as well as any subsequent decisions to discontinue such a rating, if the rating action is based in whole or in part on material non-public information.3.5 Should publish sufficient information about its procedures, methodologies and assumptions (including financial statement adjustments that deviate materially from those contained in the issuer’s published financial statements) so that outside parties can understand how a rating was arrived at by the CRA. This information will include (but not be limited to) the meaning of each rating category and the definition of default or recovery, and the time horizon the CRA used when making a rating decision.