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GOVERNANCE
One of the more significant but often overlooked aspects of the Sarbanes- Oxley Act is its mandate for a code of ethics. Even though they are not currently bound by law to comply with the provisions of Sarbanes-Oxley, health care organizations and their boards may wish to use the Act's guidelines to conduct an internal audit of ethics policies and conflict-of-interest procedures that will protect and better position the organization in this era of reform.
The provision in Sarbanes-Oxley that addresses codes of ethics, Section 406, became effective for public companies reporting for the fiscal year ending on or after July 15, 2003. Section 406 requires that companies disclose whether they have adopted a code of ethics for their principal executive, financial and accounting officers or persons performing similar functions for the company. If a company has a code, it must be made public. If a company chooses not to adopt a code, it must disclose its reason for deciding not to do so in its annual report.
While the Securities and Exchange Commission (SEC) does not proscribe language for a code of ethics, it does require that companies include written standards that would reasonably deter wrongdoing and would promote:
* Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships
* Full, fair, accurate, timely and understandable disclosure in a company's SEC filings and other public communications
* Compliance with applicable government laws, rules and regulations
* Prompt internal reporting of violations to the code to a specific staff person named in the code of ethics
* Accountability for adherence to the code of ethics.
In addition, Section 406 has specific reporting requirements for a company's waiver of the code.
Codes of Ethics in the Industry
Most health care organizations already have a code, including a conflict-of-interest policy, because professional and regulatory entities demand it. For example, the American Hospital Association's Code recommends a conflict-of-interest policy, which applies to officers, governing board members and...