code of conduct - wild apricot...code of conduct “ethical culture is the single biggest factor...

CODE OF CONDUCTWhat You Need to Know about Current Best Practices

July 18, 2013

JUST A LITTLE ABOUT CORPEDIA

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1998 established

850+ clients

Millionstrained

2012 acquired by NYSE

2006advisory services started

8 point scoring matrix developed

4,500+ codes in database

180+codes of conduct rewritten

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AGENDA

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The Foundation of Your Program

The Business Case for Best‐in‐Class Code

Getting Started

Benchmarking Data on Codes

Assessing Your Code and Best Practices

THE FOUNDATION

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“A company’s code of conduct is often the foundation upon which an effective compliance program is built.”

WHAT DO WE WANT IN A FOUNDATION?

•It must be solid – well planned

•It must be purpose built – unique to your program

•It must be capable of supporting everything else –must be related to the rest of your program

•It must be maintained

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RIGHT AND LEFT – COMPLIANCE & ETHICS

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Creative

Intuitive

Holistic

Synthesizing

Subjective

Focus on macro

Ethical Culture

Logical

Sequential

Rational

Analytical

Objective

Focus on the micro

Compliance Program

DON’T FORGET THE CODE’S PURPOSE

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A Practical Roadmap

A Mission Statement

The Hub of the Wheel

Establishes Tone

Code

MORE FCPA GUIDANCE ON CODES OF CONDUCT

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Clear, concise and accessibleFor employees and third parties conducting business on the company’s behalf – including in local languagesCurrent and effectivePeriodically reviewed and updated

THE BUSINESS CASE

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THE BUSINESS CASE FOR A BEST‐IN‐CLASS CODE OF CONDUCT

“Ethical culture is the single biggest factor determining the amount of misconduct that will take place in a business.”

“Executives who don’t elevate culture to a priority risk long term business problems.”

‐ 2009 NBES Study by the Ethics Resource Center

‐ www.ethics.org

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THE COST OF FAILURE IS HIGHFines keep skyrocketing

BP $4.5B ($34B claim from the states)

GlaxoSmithKline $3B

Pfizer $2.3B

Johnson & Johnson $2.2B

HSBC $1.9B

Abbott Labs $1.5B

Eli Lilly $1.4B

Intel $1.4B

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STRENGTH OF CULTURE MATTERS

29%46%

67%

90%

0%10%20%30%40%50%60%70%80%90%100%

Strong Strong Leaning Weak Leaning Weak Leaning

% of Employees that Observed Misconduct in Previous 12 Months

Source: 2011 NBES Survey, Ethics Resource Center

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STRONG PROGRAMS DRIVE STRONG CULTURE

86%

57%

23%

Well‐Implemented

Poorly Implemented

Little/No Program

% of Organizations w/ Strong or Strong‐Leaning Culture

Source: 2011 NBES Survey, Ethics Resource Center

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A FOCUS ON ETHICS CAN HELP DRIVE RETURNS

Source: Ethisphere Institute

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AVERAGE SHAREHOLDER RETURN OVER TEN YEARS

8.8%

‐7.4%

16%

Source: Corporate Executive Board, 2012

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GETTING STARTED

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MEASURE TWICE AND CUT ONCEPLANNING YOUR NEW OR REVISED CODE•Stakeholder Selection• Cross functional team

• Include IT

• Include international representation

• Include BU folks

•Have a plan• Make sure the team has authority and goals

•Establish a timeline

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CODE DEVELOPMENT PLANNING

•What currently exists?• Are there multiple “codes” out there?

• Regional / national codes

• M&A or subsidiary codes / legacy codes

• “Employee handbooks” and other similar documents

• How old is the code?• Most organizations update code on a 2‐3 year basis

• It is best practice to have a regular, annual review

• Can it be saved?• “Refresh” versus “rewrite”

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CODE DEVELOPMENT PLANNING

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International concernsLanguage

Difference in laws and custom

Distribution

INDUSTRY SPECIFIC RISK TOPICS

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Give Thought to Relevant Risk Topics

Define the Terms Used Within Each Risk Area

Clearly Communication Behavioral Expectations

Reference Corresponding Company Policies

Communicate How Code Relates to U.S. and International Law

CODE DEVELOPMENT PLANNING –IMPORTANT QUESTIONS TO ASK•What kind of code suits our company?• Values based versus risk based versus stakeholder based

• Tone (lighthearted, serious, professional, casual …)

•Who is in the audience?

•Who are we as a company?

•What are our core messages?

[SOME EXAMPLES]

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CODE BENCHMARKING DATA

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CODE BENCHMARKING DATA ‐WME

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88% Include CEO Letter

83% Review <3 years

99% Have Code

Source: Ethisphere’s 2012 World’s Most Ethical Database

WHEN WAS YOUR CODE LAST UPDATED? ‐WME

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44%

17%

8%3%3%

24%

1%

20122011201020092008Currently> 4 years


IS THE CODE FORMALLY DISTRIBUTED TO ALL EMPLOYEES? ‐WME

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92.5%

6%

1.5%

All EmployeesSome EmployeesNo


CODE BENCHMARKING DATA ‐WME

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79% Require Acknowledge

ment

93% Distribute to All

Employees


CODE OF CONDUCT TRAINING ‐ ACC

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96% Mandatory Training

73% Require Formal Training

Source: ACC/Corpedia 2011 Compliance Program and Risk Assessment Benchmarking Survey

CODE OF CONDUCT TRAINING ‐WME

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80% Mandatory Training

87% All Employees

97% Train NewEmployees



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6% 6%6%

10%

73%

Percentage of Employees Receiving Code of Conduct Training

Less than 30 percent

30 to 50 percent

50 to 70 percent

70 to 90 percent

90 to 100 percent


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CODE OF CONDUCT TRAINING

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2% 3% 4%

5%

9%

77%

Percentage of Employees Receiving Code of Conduct Training

Less than 10 percent10 to 25 percent

26 to 50 percent51 to 75 percent

76 to 90 percent

91 to 100 percent

Source: ACC/Corpedia 2011 Compliance Program and Risk Assessment Benchmarking

Survey

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CODE OF CONDUCT TRAINING

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23%

2%

6%

8%10%

51%

Percentage of Employees Receiving Code of Conduct Training Online

Less than 10 percent10 to 25 percent26 to 50 percent51 to 75 percent76 to 90 percent91 to 100 percent


Survey

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CODE OF CONDUCT TRAINING ‐ ACC

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76% Report Training Board

on Code


Survey

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51%

4%

41%

4%

Board Training on Code of Conduct

YesNoProvided Code OnlyNot Sure


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CODE EVALUATION – WME & ACC

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95% Evaluate Code as Part of

Regular Benchmarking

51% Use ERM Data to Modify Code

Source: Ethisphere’s 2012 World’s Most Ethical Database and ACC/Corpedia2011 Compliance Program and Risk Assessment Benchmarking Survey

RETALIATION AND DISCIPLINE IN CODE ‐WME

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68% Include Discipline Policy

96% Anti‐Retaliation Included


THIRD PARTIES AND CODE ‐WME

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74% Require Supplier

Acknowledgement and Compliance


ASSESSING YOUR CODE

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CODE OF CONDUCT BEST PRACTICES:THEN & NOW

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Best Practices ThenMeets minimum requirementsDrafted by in‐house counsel or retained counselContent written in legalistic, often incomprehensible rhetoricImpersonal messaging and tone No inclusion of Tone from the Top (i.e. Executive Letter)General, often non‐specific risk topics addressedSingle distribution option

Best Practices NowTone from the Top: Communicating the executive team’s supportReadability & Tone: Engaging employees through an inclusive message, tailored in complexity to target audience, including translationsReporting & Non‐Retaliation: Clearly setting forth reporting resourcesValues Statements & Stakeholder Commitment: Enthusiastically communicating company values and commitmentsAll Relevant Risk Topic Coverage: Addressing risk topicsLearning Aids: Presenting practical scenarios for increased comprehensionPresentation, Style and Organization: Appealing to readers visually with easy navigation, logical structure, and alignment with company branding and culture

Best Practices ThenMeets minimum requirementsDrafted by in‐house counsel or retained counselContent written in legalistic, often incomprehensible rhetoricImpersonal messaging and tone No inclusion of Tone from the Top (i.e. Executive Letter)General, often non‐specific risk topics addressedSingle distribution option

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CODE OF CONDUCT BEST PRACTICES:THEN & NOW

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DESIGN SHOULD REFLECT THE COMPANY

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EIGHT CRITERIA

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Effective Code of Conduct

Tone from The Top

Readability & Tone

Non‐Retaliation & Reporting

Values and Commitments

Risk Topics

Comprehension Aids

Presentation & Style

Public Availability

BENCHMARKING YOUR CODE

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BENCHMARKING YOUR CODE

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Tone from the Top

Readability & Tone

Risk Topics

Overall Grade

Standards of Business Conduct and Ethics Benchmarks

Corpedia's Code Database Pharmaceuticals Industry Your Company

PUBLIC AVAILABILITYStakeholder access (including third parties)Regulatory or listing requirement

Tool for communicationHow is it used/located on website/clicks to get there

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TONE FROM THE TOPClear Communication of Executive Support for the Code

Personalize the ExecutiveMessage

Communicate the Code’s Applicability

Explain the Code’s Role

Include Reporting Information and an Affirmation of Non‐Retaliation

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READABILITY AND TONE

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Ensure the Code is the Appropriate Length

(8,000 to 10,000 words)

Adopt a Warm and Inclusive Tone

Focus on Expected Behaviors

Tailor the Complexity to Your Target Audience

Infuse Company Culture

Consider International Audiences

NON‐RETALIATION AND REPORTING

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Clearly Communication Resources for Asking Questions and Reporting

Make a Firm Statement of Non‐Retaliation and communicate it multiple times throughout the code

Provide Information on Complaint Resolution Process with multiple avenues

Emphasize by Reporting Concerns, Employees are doing the Right Thing

Ensure Compliance with International Reporting Laws

VALUES STATEMENT

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Clearly and EnthusiasticallyCommunicate Company Values

Discuss the CommitmentsEmployees Hold to Key Stakeholders

RISK TOPIC COVERAGE

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Give Thought to Relevant Risk Topics(+/‐ 30 topics) Define the Terms Used Within Each Risk AreaClearly Communication Behavioral ExpectationsReference CorrespondingCompany PoliciesCommunicate How CodeRelates to U.S. and International Law

LEARNING AIDS

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Ensure the Learning Aids are Relevant and Compliment Company Culture

Provide Clarity and Keep the Code Interesting

LEARNING AIDS

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Supplement the Code – not a replacement

PRESENTATION AND STYLE

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Visual Appeal

Format Code Properly

Organize Your Code

Table of Contents

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Translations

Distribution

Determine How to Distribute

Make Code Available to External Constituents

Provide an Electronic Version

Certification and Disclosure

COMMUNICATING THE CODE

CODE ROLLOUT

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5

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Develop email templates for regional business unit leaders to highlight the forthcoming code. Two templates – the first distributed one week after the first executive mention

Consider podcasts – would podcast interviews with regional leaders/senior leaders work? If yes, begin video process for distribution in the 4-6 months following code rollout

Develop branded posters matching code design

Develop and distribute message from compliance/ethics function regarding upcoming code

Distribute give-aways to regional leads for distribution day of launch – water bottles, stress balls, tent cards, etc.

2 weeks in advance - Second mention from regional business unit leaders highlighting code launch

2 weeks in advance - Distribute branded posters highlighting hotline to regions

Launch Day - Message from CEO, message from Regional Leaders highlighting both new code and code training, distribution of code itself (paper and online), posting of posters

Launch Training - Message from CEO, message from Regional Leaders highlighting importance of training

(Training managed by Corpedia post launch)

Post Launch - Manager communication toolkits on key training topics

mon

ths

out

mon

ths

out

CONTINUOUS COMMUNICATION

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Translations

DistributionDetermine How to DistributeMake Code Available to External ConstituentsProvide an Electronic Version

Certification and Disclosure

CODE 3.0 “BRINGING YOUR CODE TO LIFE”

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CODE OF CONDUCT DIAGNOSTIC*ADDRESSES

How effective your organization’s code is in terms of setting and reinforcing behavioral

Public availability

�� Tone from the top

�� Readability and tone

�� Non‐retaliation and reporting

�� Values and commitments

�� Risk topics

�� Comprehension aids

�� Presentation and style

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* Includes A Written Report, Unlike All Other Verbal Diagnostics.

Thank You

2012 FORTUNE 500 CODE OF CONDUCT DATASET

Ryan McConnell

Morgan Lewis

Houston

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REPORTING AND DISCIPLINE

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66 companies do not discuss discipline

436 companies do not discuss whistleblower

policy

30 companies do not mention retaliation

RISK TOPICS

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176 companies do not mention

HSE

348 companies do not mention social media

3 companies do not

mention COI

STYLE AND CONTENT

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197 companies do not use color or graphics

157 companies do not

include CEO letter

259 companies do not include

learning aids

SEEKING INFORMATION

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396 companies do not offer helpline/

hotline in other languages

292 companies do not mention CCO/CECO

11 companies do not have public codes

NO CATS ALLOWEDWhich company has a “no cat” policy but allows employees to bring dogs to work because cats visiting offices would be stressed out?

1. Baker Hughes2. Google3. Pet Co.4. NYSE

EMPLOYEES BY ANOTHER NAME…What does Walt Disney call its employees in its publically available Code of Conduct?

1. Dwarfs2. Cast Members3. The Happiest People on Earth4. Helpers

SAFETY FIRST

Which Fortune 500 company discusses the importance of maintaining its system to monitor product defects?

1. Boeing

2. Abbott Laboratories

3. Phillip Morris

4. Coca-Cola

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DO THE RIGHT THING

Which Fortune 500 company includes a special disclaimer to the employee urging them to “do the right thing” when they are unsure how to proceed?

1. US Bancorp

2. Allstate

3. FedEx

4. Johnson & Johnson

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JUST SO WE ARE CLEAR

Which Fortune 500 company includes a special disclaimer to make sure no one reading the code has an express or implied contract of employment with the company?

1. Marriott International

2. H.J. Heinz

3. Dollar General

4. GameStop

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POOF, PRESTO!

Which Fortune 500 company includes a special disclaimer that it can discontinue the Code without prior notice “at any time”?

1. Fluor

2. Norfolk Southern

3. US Airways

4. Applied Materials

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EXCHANGED CODE EXERCISES

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CODE EXERCISES

TAKE A FEW MINUTES TO REVIEW THE CODE YOU HAVE BEEN GIVEN

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CODE EXERCISES

Setting the Code aside, can you:

1. Tell what business the company is engaged in?

2. Can you name three company values?

3. Can you name the avenues for reporting concerns?

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CODE EXERCISES

Using the Code, can you:

1. Find if there is a dollar limit for gifts?

2. Does the code describe manager’s responsibilities regarding E&C?

3. What are those manager responsibilities?

4. Does the code state the company’s non‐retaliation policy?

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CODE EXERCISESUsing the Code, can you:

1. Does the code explain the necessity for the code?

2. What are the possible repercussions for violating the code?

3. Who should an employee report to regarding a unsafe workplace, a bribery suspicion or a conflict of interest?

4. Does the code discuss how to handle confidential information?

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CODE SCENARIOS AND ISSUES

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ANY QUESTIONS?

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SOME COMMON QUESTIONS

•What are some common roll‐out activities?

•How long can it take to write a code?

•Should we have different codes for different regions?•What are some key things to keep in mind for a global code?

•Our code is 12,000 words long, should we edit it down?•Our code is 8,000 words long, should we add to it?•What does a periodic code review include?

•How should we determine what needs to be added or removed from the code?

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