A federal law requiring publicly traded firms to disclose whether they have adopted codes of ethics for their senior financial officers may be useful, but a Penn State researcher says its impact is often limited.
A firm's board of directors needs to be the driving force behind creating and implementing the program in most cases for it to truly be successful.
"According to my research, firms with ethics programs overseen by their boards of directors disclose more credible financial information—as perceived by financial analysts—than do firms having ethics programs not overseen by their boards, and firms not having ethics programs," said Andrew Felo, assistant professor of accounting at Penn State Great Valley graduate school in suburban Philadelphia.