Cardinal Health

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Cardinal Health

• By Team Gattica

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Introduction

• Present an overview of Cardinal Health and its
  objectives.
• Take a look at Cardinal Health from an ethical
  standpoint.
• What is ethics?
• Do they live up to their own standard of ethics?
• Comparing Cardinals Code of Ethics with its
  competitors.

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Description of Cardinal Health

• Founded in 1971 by Robert D. Walter
• Started as a Food Distributor Cardinal Foods
• Limited Growth in 70s forced a new direction
• Robert D. Walter bought first Regional
  Pharmaceutical Distributor
• Changed name to Cardinal Health
• Today-Leading provider of products and services
  supplying the health care industry
• Ranked 17th on the current 2004 Fortune 500
• Ranked 1 in its category on 2004 Fortune 100
  Most Admired Companies
• Annual Revenues of more than 56 billion

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Description of Cardinal Health (cont.)

• Cardinal is Large and Diverse
• Headquartered in Dublin, Ohio
• Employs 55,000 people in 22 different countries
  and on 5 different continents
• 42 of all employees live outside the U.S.
• Cardinal Operates through 4 Business Segments
• Pharmaceutical Distribution Provider Services
• Pharmaceutical Technologies Services
• Automation Information Services
• Medical Products Services

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What Cardinal Health Stands For
http//www.cardinal.com/aboutus/what/promise/index
.asp
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What is Ethics?

• According to Rob
• Ethics involves a discipline that examines good
  or bad practices within the context of a moral
  duty.
• The book definition is as follows
• The branch of philosophy that tries to develop a
  logical and systematic set of principles that
  defines what is ethical behavior and what is not
  (Champoux, 51).
• Ethical behavior is judged to be good, right,
  just, honorable and praiseworthy.

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Cardinals Ethical Practices in Accounting

• Financial Integrity Disclosures in periodic
  reports and other documents
• Cardinal Health is committed to presenting its
  financial information fairly and accurately. As
  a public company, Cardinal Health files annual
  and periodic reports and makes other filings fit
  the securities and exchange commission (SEC). It
  is critical that these reports be timely and
  accurate. Cardinal Health expects employees who
  have a role in the preparation and/or review of
  information included in Cardinal Health SEC
  filings to report such information accurately and
  honestly. Reports and documents that Cardinal
  Health files with or submits to the SEC, as well
  as other public communications made by Cardinal
  Health, should contain full, fair, accurate,
  timely and understandable disclosures. It is
  against Cardinal Health policy for anyone to
  unduly or fraudulently influence, coerce,
  manipulate or mislead an independent and/or
  internal auditor regarding financial statements,
  financial information, processes or internal
  controls.

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Does Cardinal Follow this Ethical Policy?

• The Securities and Exchange Commission began an
  informal investigation of Cardinal Healths
  accounting practices which then turned into a
  formal investigation.
• The financial statements of Cardinal Health from
  2001-2004 should no longer be relied upon.
• The SEC requested information on their revenue
  classification practices for its
  pharmaceutical-distribution business.
• Immoral ethical decision.

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How did Cardinal deal with it?

• According to insider information, Cardinal now
  does its own internal audits periodically.
• Cardinal was very cooperative during the
  investigation and went back to retroact their
  statements.
• Beginning in 2004, they made a revenue
  reclassification to one single category.
• Financial statements are being restated for the
  years 2001-2004.
• As a result, Cardinal lowered its earnings per
  share forecast.
• Cardinal established clearer boundaries between
  departments which created a set of checks and
  balances.

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Recommendations

• Cardinal has good intentions regarding their
  ethical policies but needs to abide by what they
  have stated.
• Cardinal needs to make their accounting practices
  more clear cut.
• For example, McKesson Corporation and Owens
  Minor have similar ethics policies. However,
  they follow their policies and have external
  audits on a periodic basis.
• Cardinal needs to get back to the basics of
  managing ethical behavior within their
  organization by
• understanding the weaknesses in the present
  organizational culture (their accounting
  practices),
• improving that culture, and
• implementing better ethical behavior so that it
  becomes a part of their organization.

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Conclusion

• We have learned that just because an organization
  presents a positive stance on ethics doesnt mean
  they follow it precisely.
• We hold ourselves accountable not only for what
  we achieve but how we achieve it.
• Managing ethical behavior within an organization
  requires proactive involvement by the managers.
• This includes defining practices and behaviors
  that are good or bad.
• Constantly asking if they are being consistent
  with what they believe in and what society views
  as ethical.

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Questions?
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References

• Burton, Thomas M. Cardinal Health to Restate
  Net, Citing Bulk-Revenue Accounting. The Wall
  Street Journal. New York, N.Y. September 14,
  2004. http//proquest.umi.com.libproxy.unm.edu
• Cardinal Health Webpage. November 23, 2004.
  http//www.cardinal.com/.
• Champoux, Joseph E. Organizational Behavior.
  Thomson South-Western. 2003.
• Hammergren, John H. Code of Business Conduct and
  Ethics. September 24, 2003. http//www.mckesson.c
  om/corp_gov_conduct.html
• Minor, Gilmer G. Code of Honor Owens Minor
  Standards of Conduct.
• http//www.owens-minor.com/teammates/
• Sanchez, Paul. Personal Interview. November 18,
  2004.
• The Wall Street Journal. Cardinal Health Inc.
  Form 10-k Filing to Be Delayed Pending
  Audit-Committee Probe. New York, N.Y. September
  28, 2004.
• http//proquest.umi.com.libproxy.unm.edu
• Walter, Bob. Ethics Guide. http//www.shareholder
  .com/visitors/dynamicdoc/enhanced/printwind ow.cfm
  ?Co