Which company's profit quality has deteriorated?

Control environment is the premise of controlling other elements in an enterprise and the guarantee of its healthy operation. "Sanlu incident" is a typical case in which the internal control environment of an enterprise is out of control. Based on the Sanlu incident, this paper analyzes the internal control environment of enterprises from three aspects: management factors, organizational factors and humanistic factors, and holds that enterprises should optimize the internal control environment from all aspects to ensure the healthy operation of enterprises. Sanlu incident; Internal control; Control Environment According to the description of the control environment in COSO Report, the internal control of enterprises is divided into five levels-control environment, risk assessment, control activities, information and communication and supervision. The internal control environment includes the personal integrity, moral values and the ability to fulfill organizational commitments of enterprise personnel, the business philosophy and style of the board of directors and the audit committee, the policies and procedures of management, organizational structure, division of responsibilities and human resources, and the risk awareness and risk management concept of the organization. Therefore, the control environment is a kind of atmosphere, which can affect the implementation of internal control and the realization of business objectives and overall strategic objectives. Without an effective control environment, other control elements, regardless of their quality, cannot form effective internal control. Enterprise control environment can be divided into three factors: first, management factors, including corporate governance, internal supervision and internal audit. Second, organizational factors, including organizational structure, corporate culture and risk early warning. Third, human factors, including human resources policy and the quality of managers. Taking Sanlu incident as an example, this paper analyzes the internal control environment of enterprises from these three angles, and puts forward targeted improvement suggestions. I. Sanlu Incident Sanlu Group, the full name of Shijiazhuang Sanlu Group Co., Ltd., is a large enterprise group integrating dairy farming, dairy processing and scientific research and development, and has been selected as one of the top 500 Chinese enterprises for six consecutive years. In the early 1990s, the company initiated the feeding management mode of "cow+farmer", which once laid a milk source advantage for Sanlu and was imitated by peers. In 2007, the Group achieved sales revenue of1001600 million yuan, a year-on-year increase of 15.3%. However, the hidden internal control and its environmental problems behind this high growth have been seriously ignored. Since March 2008, Sanlu has received complaints from parents of children with urolithiasis, and some media began to insinuate Sanlu with "a certain brand", but Sanlu did not pay enough attention to this, and strengthened internal control of enterprises, which led to the deterioration of the situation. It is estimated that the huge medical expenses and compensation of 902 million yuan have caused serious insolvency of Sanlu Group. On February 25th, 2008, at 65438, the Shijiazhuang Municipal Government announced the bankruptcy of Sanlu, and the bankruptcy ruling was delivered to Shijiazhuang Sanlu Group Co., Ltd., an enterprise that used to be the leading dairy industry disappeared overnight. Poor internal control environment is one of the main reasons. Two. Management factors (I) Corporate governance and the phenomenon of "insider control" Corporate governance structure aims to form a scientific and effective division of responsibilities and checks and balances mechanism. If corporate governance is not perfect, the company will inevitably lack an effective supervision mechanism, and the design of internal control system will become a mere formality, making it difficult to achieve the established results. Therefore, only in a good corporate governance environment can the internal control system really play its role. The major shareholder of Sanlu Group is Shijiazhuang Dairy Co., Ltd., and about 96% of the shares are held by more than 900 old employees. The second largest shareholder of Sanlu Group is New Zealand Fonterra Group, holding 43% of the shares of Sanlu Group. Tian Wenhua, Chairman and General Manager, served for 2 1 year from 1987 to 2008. It can be seen that the company's equity is quite scattered, and the checks and balances between the chairman and the general manager are impossible to talk about. The phenomenon of "insider control" is self-evident, and the checks and balances mechanism of governance institutions has failed, which has laid a hidden danger for the "tainted milk powder incident". This harsh internal control environment has become a hotbed of moral deficiency in management. (2) Internal supervision is a mere formality. Internal supervision can ensure the continuous and effective operation of the internal control system. The process of supervision is to evaluate the design and operation of control by the right person at the right time and take necessary actions. No matter whether it is the management or other controllers, as long as they find the defects of internal control, they should report to the corresponding management in time and deal with them decisively. The specific method of internal quality supervision of Sanlu Group is to set up a technical service station in the breeding area, and send personnel in the station to supervise and inspect the breeding environment, the sanitation of milking facilities and the implementation of milking process regulations. As a means of internal supervision, accredited institutions are an important part of internal control. However, in the actual implementation process, the supervision and inspection of the station staff were not strictly implemented, and the milk station operators lacked effective supervision before the raw milk entered the Sanlu Group production enterprise. (C) The lack of risk early warning and risk control is the basic requirement of enterprise internal control. Establishing risk early warning mechanism is not only an important part of modern enterprise internal control, but also the basis of enterprise risk management. The longer the industrial chain of an enterprise, the more risk points there are. For the food industry, quality control is undoubtedly the key to risk control. Through the early warning system, once risks appear, enterprises can nip them in the bud, so as to avoid or weaken the damage to enterprises. On June 28th, 2008, Article 37 of "Basic Standards for Internal Control of Enterprises" jointly issued by the Ministry of Finance and other five ministries and commissions stipulated: "An enterprise shall establish an early warning mechanism for major risks and an emergency handling mechanism for emergencies, clarify the risk early warning standards, formulate emergency plans for possible major risks or emergencies, clarify responsible personnel, standardize handling procedures, and ensure that emergencies are handled in a timely and proper manner". Sadly, the lack of risk control is the last straw to crush Sanlu Group. Since March 2008, Sanlu's response to the crisis has been "pushing, dragging and hiding", which has led to the deterioration of the situation. Three. Organizational factors (1) organizational structure and blind expansion of internal control come from within the organization, and adapting to the changing external environment and organizational change is the main line of internal control development. Organizational evolution is the driving force for the development of internal control, which promotes the continuous development and perfection of internal control. Because Sanlu Group has a brand but lacks milk source, and some local small dairy factories have milk source but lack brand, the group has created a development model of combining brand and milk source internally. Along this model, Sanlu Group has successively merged more than 30 small and medium-sized enterprises in Shandong, Hebei, Shaanxi, Henan, Gansu and other provinces with property rights as the link and brand as the banner, which has greatly changed the organizational structure of Sanlu. For example, Xingtang Sanlu Dairy Co., Ltd. is controlled by Sanlu Group with 565,438+0%, and the other 49% is controlled by Xingtang County Government. In essence, this merger has expanded the enterprise scale and market share to a certain extent, which is beneficial to the development of Sanlu Group. However, after being merged by Sanlu Group, milk powder was produced without any new equipment and funds, and the factory area was in ruins. Branches or subsidiaries similar to Sanlu Group abound. This expansion has led to the reality that capital investment can't keep up, machinery and equipment and internal management can't keep up, which has buried many security risks. (2) Corporate culture and "responsibility show" corporate culture is an existing intangible force, and it is a cultural atmosphere, corporate values, entrepreneurial spirit, business realm, moral norms and behavior patterns recognized by employees in long-term business practice. The development of corporate culture can promote the continuous development and maturity of internal control, and excellent corporate culture can fundamentally improve the control environment of enterprises. For example, an enterprise establishes a standard for judging whether all employees are right or wrong by establishing a code of ethics and code of conduct that conforms to the unit's own situation, and forms a formal written document to convey the unit's expectations for its responsibility, integrity and morality to employees. At the same time, top managers should pay more attention to their words and deeds, set an example, and guide employees to do things within the scope of morality. Sanlu Group once claimed that the soul of its corporate culture is to make unremitting efforts to improve the nutrition and health level of the public. According to its publicity materials, Sanlu Group has been committed to fulfilling its social responsibilities for many years: raising 800,000 cows, leading more than 80,000 farmers out of poverty, absorbing 50,000 laid-off workers and more than 800,000 rural surplus laborers; Supporting farmers to raise cattle, fighting floods and disasters, fighting SARS, helping the poor in old areas, helping disabled teaching assistants, donating money to families with multiple births, etc., has won wide acclaim from all walks of life; The enterprise has successively won more than 200 honorary titles at or above the provincial level, such as the National May 1 Labor Award, the National Top Ten Enterprises in Light Industry and the National Advanced Enterprise in Quality Management. Sanlu Group's social responsibility and various honors are beyond reproach. However, corporate social responsibility is mainly achieved by providing high-quality products to the society. Sanlu Group's products contain a large amount of melamine, which has caused physical and mental harm to infants and consumers, and caused huge losses to china dairy, especially the way of handling the problems after they were discovered, which caused a very bad social impact. This way of undertaking and fulfilling social responsibilities in pursuit of fame and fortune should be punished by morality and law. Four. People-oriented factors (1) Improper human resources policy and employment mechanism, establishing a good human resources policy is of great help to train employees, improve their quality, better implement and enforce internal control, and ensure the competence and integrity of those who implement enterprise policies and procedures. Many dairy farmers and professionals don't believe that Sanlu Group didn't know that the raw milk was mixed with melamine in the acquisition process for more than three years. Thousands of employees in the milk source department of Sanlu Group are mostly from rural areas. It can be seen that the improper employment mechanism of Sanlu is one of the outstanding manifestations of imperfect human resources policy formulation. (B) the concept and management methods of managers Management authorities play a key role in establishing a good control environment. The quality of managers directly affects the behavior of enterprises, and then affects the efficiency and effect of internal control of enterprises. No system formulated by an enterprise can surpass those who set these systems, and the effectiveness of internal control of an enterprise cannot surpass the morality of those who create, manage and supervise systems. Management thought is the soul of leading enterprise operation, and it is the concentrated expression of enterprise values, business philosophy and sense of responsibility to society and employees. Managers' attitude towards control determines the attitude and behavior of the whole company. Management philosophy and management style, including the types of business risks undertaken by enterprises, the attitude of management authorities towards business risks and the methods of controlling business risks, all greatly affect the control environment. In the Sanlu incident, driven by profits, the enterprise management authorities added melamine, an industrial raw material, to milk powder, ignoring the health of consumers and completely breaking through the moral norms. This short-term behavior in pursuit of economic interests and at the expense of violating business objectives makes the implementation of the system excessively flexible due to people's subjective will, greatly weakens the function of internal control, causes the phenomenon of "group deviance" in the whole enterprise, and leads to the deterioration of the control environment and serious consequences. Therefore, as a manager of an enterprise, we should first improve our own quality, including theoretical cultivation and moral cultivation, constantly improve the management level, and form advanced management ideas and clear management objectives. In addition, in addition to setting an example, senior managers of enterprises should also guide employees to control their behavior with moral standards, thus affecting the efficiency and effect of internal control of enterprises. Managers should take internal control as an important management means, and at the same time try their best to maintain its effective operation with power, make up and improve the omissions and functional defects of control, and make internal control serve the realization of business objectives. V. Research Conclusion "Sanlu" incident exposed various problems in the dairy industry. In view of Sanlu Group, which has the most prominent problem, referring to the basic requirements of "Basic Standards for Internal Control of Enterprises", it implies various drawbacks of the internal control environment of enterprises. Sanlu Group has sounded the alarm for China enterprises: building a harmonious internal control environment is related to the rise and fall of enterprises, honor and disgrace and life and death. Enterprise internal control environment is the key to internal control, which determines the tone of the enterprise and affects the control consciousness of all personnel in the whole enterprise. Take Sanlu Group as an example, if the enterprise has a good internal control environment, it may reduce the possibility of "accidents". Therefore, enterprises should optimize the internal control environment from all aspects, so that enterprises can improve efficiency and effectiveness, nip in the bud, and provide guarantee for the healthy operation of enterprises. The strengthening of internal control can not be completed in a short period of time, nor can it be achieved by the efforts of enterprises alone. The state should also create a macro environment for enterprises to attach importance to, develop and study internal control. ● [1] Cao Qiong Yang Yufeng. Construction of management ethics based on internal control environment [J]. Research on Coal Economy, 2007, (10). [2] Huang Yangmei, Liu Guangrui. Case study on internal control environment of private enterprises [J]. Accounting Newsletter, 2008, (02).