ETHICAL LEADERSHIP REQUIRES A SEAT AT THE TABLE symposium faculty Matthew Pachman VP, Compliance-Ethics and Business Practices Freddie Mac matthew_pachman@freddiemac.com Erica Salmon Byrne Assistant General Counsel Corpedia esalmonbyrne@corpedia.com
Today’s Schedule Symposium Topics – Writing/Rewriting the Code � Process of Rewriting and Reviewing – Pitfalls to Avoid � 50 Codes of Conduct Rated Each Code was rated by a panel � of experts from the Ethisphere Council An aggregate score was derived � through application of the following weighted subscores Public Availability (5%); Tone from the Top � (15%); Readability and Tone (20%); Non- Retaliation (10%); Values & Commitments (10%); Risk Topics (20%); Learning Aids (5%); Presentation and Style (15%).
Some Good Samples… Graphic from Kellogg Code Context from GAP Code Writing/Rewriting the Code Overview: � Overall Structure and Design � Overall Style and Language � Integration with Other Aspects of the Compliance and Ethics Program � Reporting, Discipline/Enforcement and Non-retaliation � Risk Exposure � Industry and Peer Best Practices
The Importance of Planning Did you think about your costs and secure budget money? Did you set realistic goals and milestones? � Drafting � Reviews � Legal, Human Resources, Communications, etc. � CEO and senior executives � The Board Did you plan for printing and distribution? Hard copies � � Review of proofs � Mail room � Electronic version � Web (.pdf, HTML), e-mail Values Based vs. Rules Based Rules Values Policies Principles
Overall Structure and Design How well structured and organized is the Code? � Can be structured in a variety of ways: � Alphabetical � Thematic Coverage, “Our Workplace”, “Our Relationship” � Should be organized in a way that fits the organization’s culture Does the Code contain a mission statement or guiding ethical principles? Common practice is to start the code with a values statement � Statement must echo employees’ “real” values � What kind of code do you want? � Overall Structure and Design Does the Code articulate the tone from the top? Is the CEO statement adapted to the company culture and vocabulary or is it formulaic recitation? � The CEO statement needs to be written in the CEO’s voice � Personalized with some well-known experience � Ideally, the CEO would help to draft the statement � CEO’s association with the code is only part of setting the overall tone from the top
More Helpful – Let’s Learn from Some Less Ideal Codes… � Tone from the Top Common Pitfalls � Tone from the Top
Common Pitfalls � Tone from the Top Overall Structure and Design Does the Code contain disclaimers/reminders? � The Code does not alter an employee’s status � Code should note that other organizational policies exist, and can be added, deleted, or changed � Managers and supervisors should be held to higher standards � Compliance with the code is a condition of employment � Make sure that this is part of the employment contract overseas?
Overall Structure and Design Does the Code identify who is covered by the Code? Typically codes are developed for � directors, officers & employees But, a company may have separate codes � of ethics for different types of officers Multiple codes run the risk of inconsistent � statement of expectations � Can have a basic code of conduct that covers all officers along with more specific codes to different subsets of officers Need to consider application of the code � to contractors, temporary employees, and vendors Overall Structure and Design Does the Code contain a listing of available resources for obtaining guidance and for good faith reporting of suspected misconduct? � Should identify ways in which employees can obtain guidance in interpreting the requirements of the code or an organizational policy � Identifying how an employee can make a good faith report of suspected misconduct is essential � Hotlines � Notes to the board?
Overall Structure and Design Does the Code contain a non-retaliation commitment? � Convincing employees that they will not suffer retaliation is one is one of the more significant challenges � A strong statement in the code is an important part of meeting that challenge � As a matter of regulation, retaliation is prohibited Does the Code contain acknowledgment of receipt and compliance form? � Common element is a final page that includes an acknowledgment of receipt Common Pitfalls � Non-Retaliation Language Section 22 of 22 Last page
Overall Structure and Design Does the Code provide Q&A, examples or case studies? Are topics communicated with expected behaviors/rules: do’s and don'ts? � Be judicious using dry recitations of “thou shalt nots.” � The code has to be looked at as a teaching device � Many employees are poor visual learners � Q&A, hypothetical situations are excellent teaching devices Common Pitfalls � Learning Aids
Overall Style and Language Overall Style of the Code: � Written in the active voice � Write at a level that is easily digested by the target audience � Style consistent with the target audience and company culture � Standard grammar, spelling, punctuation Overall Style and Language Overall Style of the Code: � Concise and clear communication � Content is constant throughout � Easy and/or engaging to read � How was translation done? � Test-marketed?
Common Pitfalls � Document Presentation Common Pitfalls � Document Presentation
Integration of the Code Integration into the Compliance and Ethics Program: � New hire training � Periodic re-training of employees � Performance evaluations � Ethics activities � Publicly available Reporting, Enforcement and Non-retaliation Reporting: � “Snitch Rule” -- employees must report suspected violations � Insufficient to have just an “open door” policy � Must have misconduct reporting alternatives � Clearly communicate the enforcement policy and local laws � Enforcement mechanisms need to be clearly defined
Reporting, Enforcement and Non-retaliation � Reporting � 24/7/365 reporting tool � Email reporting tool � Non-English language reporting tool Risk Exposure Code must respond to analyzed risks. � Covers areas of risk � Topics must match risk profile � Consistent with… � The Industry � The Law
The Prosecutor’s Perspective on Codes � Revised United State Sentencing Guidelines Effective compliance and ethics program requires more than � policies/procedures Entails a focus on organizational culture promoting abidance � with the law and ethical behavior The Prosecutor’s Perspective cont… � Justice Department (Thompson Memo) � In determining whether to charge a corporation for the criminal misconduct of its employees, prosecutors should consider “the existence and adequacy of the corporation’s compliance program.”
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