Essay on Legal and Regulatory Requirements

Published: 2021/11/16
Number of words: 1548

It is vital for company executives to familiarize themselves with laws that regulate their industry. These laws aim to protect investors and other users of financial information from falling prey to manipulated financial statements. Accounting acts became necessary after the corporate accounting scandals at Arthur Andersen, Enron, Adelphia, and WorldCom Companies. This paper analyzes Kellogg Company’s code of ethics and its compliance with state laws.

Corporate Social Responsibility

The code of ethics at Kellogg is not lacking when it comes to corporate social responsibility. The firm’s ethics code outlines the specific steps that the company undertakes to protect the environment and contribute to the community. Kellogg Company has put in place all the necessary measures to ensure that it complies with the applicable environmental laws (“Kellogg Company’s global code of ethics,” 2013). In addition, it encourages its employees to take part in political processes as active citizens.

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Compliance with Legal Mandates

The code of ethics observes strict compliance with legal mandates. According to its documented ethical guidelines, it does not use or improperly disclose financial materials for use in buying and of selling securities. Neither does it manipulate the prices of publicly traded items (“Kellogg Company’s global code of ethics,” 2013). The Sarbanes-Oxley Act requires that financial information of a company be presented in a manner that does not contain a statement of a material fact that is inaccurate (“Sarbanes-Oxley act of 2002,” 2014).

  • Implications of Being Noncompliant With Legal Mandates

Being non-compliant with legal mandates damages the reputation of an organization. The public loses trust with such a company and investors may be unwilling to invest in it. Additionally, such a trend may end up completely distorting financial markets (“Kellogg Company’s global code of ethics,” 2013). A company that engages in repeated noncompliant activities attracts huge penalties from the government and risks closure.

  • Ethical Safeguards

Kellogg Company has numerous ethical safeguards. Their Ethics Alert line enables employees to anonymously report any actual or suspected ethical violations (“Kellogg Company’s global code of ethics,” 2013). This ensures that ethics violators are brought to the attention of the company’s management without risking the security of the whistleblower. Moreover, Kellogg has an ethical close that bars managers from disclosing confidential, proprietary, or privileged information.

How the Code of Ethics Facilitates an Ethical Culture

The outlined code of ethics at the firm allows for the development of a culture that is ethical. Most of the activities have an ethical basis. In place is a system of shared assumptions, values, and beliefs that govern how the staff and employees behave while in the organization. Kellogg advocates for respect for humanity and the creation of a better world. The Code of ethics enables the staff to operate efficiently, behaving appropriately and acting in the company’s best interest.

Raising an Ethical Concern in Kellogg

When an employee notices a violation of ethics at Kellogg Company, he or she should notify the manager or the legal and compliance department immediately (“Kellogg Company’s global code of ethics,” 2013). When reporting, the person may choose to either identify him or herself or do it anonymously. There is an Ethic Alert line maintained by a third party confidential reporting company. Employees who would wish to report anonymously need to do it via the Alert line.

  • Available Resources for Employees

To ensure safe reporting and overall wellbeing of employees, Kellogg avails various resources to its employees. One of them is The Office of Ethics and Compliance (“Kellogg Company’s global code of ethics,” 2013). The office was established to offer training on ethics and compliance and receive reports on ethics violations from employees. There is a legal and compliance department that addresses employees’ harassment cases and acts on them. The human resource department provides guidance on the code of ethics to employees.

  • My Preferred Resource at Kellogg

I would prefer to use The Office of Ethics and Compliance resource over other resources as it addresses cases where there are conflicts of interest. In most situations, personal interests may coincide with the company’s interests. When this happens I can get help from them. Moreover, it is a comprehensive office that handles all sorts of legal and ethical cases at the company.

Factors to Consider Before Blowing the Whistle

Before deciding to blow the whistle, employees should consider a number of factors. One of them is the severity of the ethics violation (Gupta & Chaudhary, 2017). Some ethical violations such as financial irregularities are dangerous and may completely damage the image of the company if not addressed urgently. When an employee notices such a violation, he or she should report to the relevant department immediately for action to be taken. In addition, the employee should consider contextual features before deciding to take action (Gupta & Chaudhary, 2017). If the organization has a history of hostility towards whistleblowers, then one can consider reporting ethical concerns to external authorities.

Whistleblowing Process

When an employee notices an issue of ethical concern in a company, he or she should ensure that the relevant authorities are made aware. One has to assess the severity of the violation. If it is extreme, the whistleblower should notify the legal and ethics department. If managers are involved in such activity and there are fears of victimization, the whistleblower should report such activity to third party authorities.

Advantages and Disadvantages of Paying Whistleblowers

Paying whistleblowers encourages employees to report ethical irregularities in an organization. This preserves the reputation of such organizations and protects the public from falling prey to manipulated financial information. Through these incentives, companies minimize fraudulent activities such as financial misappropriations.

On the negative side, whistleblowing can have financial shortcomings in terms of costly court cases. This may happen in cases where the whistleblower provides inaccurate information to get rewarded. Whistleblowing may also expose staff and managers to criminal proceedings, a factor that could damage the organization’s reputation and lower employee morale.

Impact of US Sentencing Guidelines on an Organization

The impact of federal sentencing guidelines on organizations is significant. The guidelines have been successful in compelling various organizations to comply with ethical requirements. They provide them with incentives to mitigate penalties through self-reporting of criminal activity and ensuring cooperation with investigators (Sample, 2015). Organizations in fear of being fined might end up establishing internal mechanisms for investigating and acting on ethics violations. The sentencing guidelines will help in restoring public confidence in the financial organizations.

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Culpability Factors that are used to Determine Fines under the U.S. Sentencing Guidelines

Various culpability factors determine fines under the U.S. sentencing guidelines. One of them is the organization’s involvement in or tolerance of criminal activity (Saris et al., 2016). In determining this culpability score, the number of employees and specific individuals is considered. The previous history of an organization is used to determine fines under the sentencing guidelines (Saris et al., 2016). The court looks at previous violations including civil and administrative dispositions. Moreover, the court looks into the obstruction of justice (Saris et al., 2016). It seeks to find out if the organization willfully obstructed or attempted in any way to aid, impend, or abet obstruction of justice during the investigation, prosecution, or sentencing.

Evidently, a comprehensive code of ethics is necessary for an organization. Organizations should ensure compliance with legal mandates and corporate social responsibility. Kellogg Company is an example of an organization whose code of ethics addresses these two requirements. It is advisable for financial institutions to devise methods that seek to promote an ethical culture. Such methods include paying whistleblowers and providing employees with the necessary platforms to report ethics violations. Failure by organizations to adhere to ethics may necessitate the intervention of the government. This could result in penalties and unnecessary court cases which are within the organization’s ability to prevent.


Gupta, K., & Chaudhary, N. (2017). Prioritizing the factors influencing whistleblowing intentions of teachers in higher education institutes in India. Procedia Computer Science, 122, 25-32.

Kellogg Company’s global code of ethics. (2013). Kellogg company. Retrieved April 24, 2018, from

Sample, J. (2015). Compliance and ethics programs and the Federal Sentencing Guidelines for Organizations in the United States: implications for international HRD specialists. Human Resource Development International, 18(3), 295-307.

Saris, P., Breyer, C., Barkow, R., Pryor, W., Morales, M., & Smoot, P. (2016). United States sentencing commission guidelines manual. Retrieved 24 April 2018, from

Sarbanes-Oxley Act of 2002. (2014). Retrieved April 24, 2018, from

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