engaging your board - scce official site · example presentation to the board ... of the ethics and...

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ENGAGING YOUR BOARDErica Salmon ByrneEVP, Compliance and Governance SolutionsNYSE Governance Services

February 14, 2014

AGENDA

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Presenting to the Board

Training for the Board

Example Presentation to The Board

Current Program Assessment and Update

Business Case for Compliance

Common Questions

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PRESENTING TO THE BOARD

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Guideline standards and best practices regarding

Who delivers the report

How often the report is given

What is included in the report

How is the relationship between the “day to day” operational compliance personnel and the board memorialized?

Is the Audit Committee the right forum?

Do you have a “unique” governing structure?

JV or portfolio company

Private company

University or non‐profit

THE BOARD’S ROLE

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BOARD OF DIRECTORS OVERSIGHT (USSG §8B2.1 (B)(2)(A))

The Guidelines recommend that an organization’s “governing authority” be knowledgeable about the content and operation of the ethics and compliance program, and that it exercise reasonable oversight of that program.

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BOARD INVOLVEMENT WITH COMPLIANCE“HAS THE BOARD DELEGATED RESPONSIBILITY FOR ETHICS AND

COMPLIANCE TO A COMMITTEE OF THE BOARD ?”

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Source: World’s Most Ethical Company Dataset, Ethisphere Institute 2012

BOARD INVOLVEMENT WITH COMPLIANCE“DOES YOUR BOARD HAVE A ‘RED FLAG’ OR ALERT PROCESS TO

BRING ISSUES TO THE BOARD?”

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BOARD INVOLVEMENT WITH COMPLIANCE“HOW OFTEN DOES THE PERSON WITH OVERALL RESPONSIBILITY

FOR COMPLIANCE UPDATE THE BOARD?” [ALL ORGANIZATIONS]

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11%

50%5%

19%

5%10%

Annually

Quarterly

Monthly

Ad Hoc

Never

Other

Source: ACC/Corpedia Bi‐Annual Survey 2011

BOARD INVOLVEMENT WITH COMPLIANCEFREQUENCY OF COMMUNICATION

Confidential 8

2011 2009 2007 2005

Quarterly 50% 48% 42% 39%

Ad Hoc 19% 21% 30% 28%

Annually 11% 48% 42% 39%

Other* 10% 10% ‐ ‐

Monthly 5% 6% 8% 11%

Never 5% 5% 8% 6%

*Other was not an available choice for the 2007 and 2005 surveys

2011 ACC Benchmarking Survey on Compliance Programs and Risk Assessments

CONFIDENTIAL

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BOARD INVOLVEMENT WITH COMPLIANCE“HOW OFTEN DOES THE PERSON WITH OVERALL RESPONSIBILITY

FOR COMPLIANCE UPDATE THE BOARD?” [WME HONORED

ORGANIZATIONS]

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41%

42%

4%6% 6%

1%

> Than Quarterly

Quarterly

3 Times Annually

Bi‐Annually

Annually

Ad Hoc Only


BOARD INVOLVEMENT WITH COMPLIANCEROLE OF OPERATIONAL ETHICS/COMPLIANCE OFFICER WITH THE

BOARD

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“Does the operational ethics/compliance officer participate in board presentations?”


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BOARD INVOLVEMENT WITH COMPLIANCE“WHAT ASPECTS OF THE ETHICS AND COMPLIANCE PROGRAM

ARE REPORTED TO THE BOARD?” [ALL ORGANIZATIONS]

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0%20%

40%60%

80%

Hotline Statistics

Investigation Reports

Training Information

Communication

Risk Assessment

Program Measurement

Culture Assessment Results


BOARD INVOLVEMENT WITH COMPLIANCE“WHAT ASPECTS OF THE ETHICS AND COMPLIANCE PROGRAM

ARE REPORTED TO THE BOARD?” [WME HONORED

ORGANIZATIONS]

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20%40%

60%80%

Hotline Statistics

Investigation Reports

Training Information

Communication

Risk Assessment

Program Measurement

Culture Assessment Results


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ENGAGING THE BOARD ON RISK

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TIMELY AND RELEVANT INFORMATION ON RISK

Risk Assessment Process

How the company audits the implementation of the

compliance program

Employee perception of compliance

ALIGNING YOUR PROGRAMEXPECTATIONS FOR THE BOARD AND THE ORGANIZATION

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What information should the board be receiving?

Ethics and compliance metrics

Benchmarking

Training and regulatory updates

Program initiatives

What is the board’s role in communicating “tone from the top”

and ensuring engagement?

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TRENDS IN BOARD TRAINING

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Boards are increasingly asking for

guidance on what a good compliance

program looks like

Companies are increasingly

asking the Board to review – or to

complete – the same code training

provided to employees

Online training for directors is becoming more common

However, board training is still hovering around an hour at

a majority of organizations

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ENGAGING YOUR BOARD

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TOTAL HOURS SPENT TRAINING THE BOARD

Less Than One Hour

1 ‐2 Hours

3 ‐ 5 Hours

More Than Five Hours

2011 ACC Benchmarking Survey on Compliance Programs and Risk Assessments

47%

35%

12%

6%

a1 Format this slide like the other text slides please.apaul, 1/16/2014

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TRAINING FOR THE BOARD

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THREE MAJOR TRAINING “BUCKETS”

Code of conduct

Summary

Access to training assets including the online program

Role and responsibilities of board

Relevant risk topics

Insider trading

Conflicts of interest

Anti‐corruption

Antitrust

COMMON RISK TOPICS COVERED IN BOARD TRAINING

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25%

33%

53%

64%

36%

Other Anti‐Corruption Conflicts ofInterest

Code of Conduct Board OversightResponisbilities

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

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ETHICS & COMPLIANCE PROGRAM UPDATE

Erica Salmon Byrne

Chief Ethics and Compliance Officer

OurCo, Inc.

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ETHICS & COMPLIANCE PROGRAM UPDATE

Program assessment data

Reports

Case status and disposition

Culture survey results

Updated initiatives

Training and communication plan

2014 Plan

Outside expert presentation

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HELPLINE & REPORTING FOR Q1‐Q3 2013

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39%

14%

6%3%

2%

15%

21%

Type of Report

HR Matters

Misuse ofAssets

HSE

Fraud

Accounting

Other law

Contact StatisticsQ1‐Q32013

Total Helpline Contacts 233

Anonymous Contacts 17%

Open Door Reports 158

Total Reports 391

REPORT CONTACT TRENDS

Contact Statistics 2010 2011 2012Q1‐Q32013

Total Helpline Contacts 174 208 217 233

Anonymous Contacts 29% 33% 31% 17%

Open Door Reports n/a n/a 73 158

Total Reports 174 208 290 391

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REPORT CONTACT TRENDS

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0

50

100

150

200

250

300

350

400

450

2010 2011 2012 Q1‐Q3 2013

Open Door

Helpline

REPORT CONTACT TRENDS BY TYPE

Contact Statistics 2010 2011 2012Q1-Q3 2013

Human Resources Matters 61% 67% 56% 39%

Misuse of Assets (Theft, Disclosure of Confidential Information 12% 14% 8% 14%

Environmental Health and Safety 2% 2% 4% 6%

Corruption, Fraud & Bribery 2% 3% 2% 3%

Accounting, Auditing or Internal Controls 2% 5% 2% 2%

Other Law, Code or Policy Violation 19% 7% 16% 15%

Request for Guidance or Approval 2% 2% 6% 21%

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REPORTING METHOD TRENDS

34%

25%

12%

26%

3%

2010

Email

Webform

In Person

Phone

Fax

22%

17%

51%

9%1%

Q1‐Q3 2013

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CASE HANDLING

12%

22%

26%

16%

24%

19%

15%

34%

10%

22%

0%

5%

10%

15%

20%

25%

30%

35%

40%

ImmediateResponse w/Guidance

No Investigation orAction Warranted

Investigated,Corrective Action

Taken

Investigated, NoAction Warrented

Referred Contactto Resource

2011

2012

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CASE DISPOSITION

26%

14%

3%1%

56%

17%

24%

8%

2%

49%

‐10%

0%

10%

20%

30%

40%

50%

60%

No Action/Closed Counseling orDisciplinary Action

Termination Prosecution Other (Guidance,Approval,

Communication)

2011

2012

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EMPLOYEE ENGAGEMENT SURVEY ‐ 2013SURVEY INCLUDED QUESTIONS AIMED AT MEASURING COMMITMENT AND ADHERENCE TO THE PRINCIPLES AND VALUES IN OUR CODE OF BUSINESS CONDUCT AND ETHICS, INCLUDING:

I know where to seek advice if I have questions about the ethics of a specific action?

I believe that all employees (including senior management) are held to the same ethical standards?

I believe that senior management behaves in an ethical manner?

I have not felt pressure to compromise values, company policy, or the law to achieve financial goals?

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EMPLOYEE ENGAGEMENT SURVEY ‐ 2013

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27

23

31

15

43

50

47

34

20

18

16

28

7

7

5

15

3

2

2

8

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

Know Where to Seek Advice

All Employees Treated Same

Senior Management is Ethical

Not Felt Pressure to Compromise

Srongly Agree Agree Neutral Disagree Strongly Disagree

EMPLOYEE ENGAGEMENT SURVEY TRENDS

18%

45%

20%

12%5%

2010

StronglyAgree

Agree

Neutral

Disagree

StronglyDisagree

15%

34%

28%

15%

8%

Q1‐Q3 2013

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EDUCATION

2010

2011

2012

2013

Code of Business Conduct and Ethics TrainingOnline course delivered to all employees worldwide: 20686Completion rate: 62% (but recordkeeping not clear). Limited follow‐up to ensure completion.

Code of Business Conduct and Ethics Training All employees worldwide: 20436In person for senior management. Enrolled: 312. Completion Rate: 99%Online course for remaining employees. Enrolled 20124. Completion Rate: 93%Reasons for completion rates: Tone at top and significant follow‐up

Virtually no Compliance or Ethics Education courses delivered. Reasons: Reduction in Force/general economic conditions.

Insider Trading for Managers. Employees enrolled: 1896. Completion percentage: 66%. Minimal follow‐up to ensure completion.

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PROGRAM COMMUNICATION 2013

1Q2013

2Q2013

3Q2013

4Q2013

22 Feb – Intranet Feature, Test your Ethics IQ, Protecting Confidential Information of competitors, potential vendors26 Feb – CECO emails to managers and all employees regarding policies and Code training31 Mar – Intranet Banner re new Code training due 30 June

14 Apr – Intranet Feature, Ethics in Action, Credit card misuseJune – Intranet Corp News – Using File share correctly23 May – Intranet Feature, Test your Ethics IQ, Foreign Corrupt Practices Act30 May – Intranet Banner re new Code and completion of training7 June ‐ Annual Meeting – CEO and General Counsel remarks including ethics discussion

18 Jul – Intranet Feature, Test your Ethics IQ, Insider Information22 Aug – Intranet Feature, Ethics in Action, Employee and Vendor conflicts of interest3 Sep ‐ Quarterly Sales Meeting – CEO Speech including ethics discussion

24 Oct – Intranet Feature, Ethics in Action, CWT System cost error identified in Russia14 Nov – Intranet Feature, Test your Ethics IQ, gifts and conflicts of interest2 Dec ‐ Rollout of revised Code training including executive message and local manager discussion

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KEY INITIATIVES FOR FY13 Code of Business Conduct and Ethics Revision

Benchmark Codes of Other Companies

Engage Internal Partners – HR, Legal, Communications

Identify and Engage External Partners

Education and Communications Curriculum and Implementation Plan

Develop New Code Course to Coincide with Revised Code Rollout

Determine Subject Matter Curriculum for Specific Employee Groups

Deliver Education Course to Board

Engage Third Party Training Provider

Develop and Implement Communication Plan for Year

Compliance Policies

Review Current Policies and Identify Weakness and Gaps

Develop Plan for Updating Policies

Audit and Legal Committee and Full Board

Reserved Time at Every Meeting of the Committee

Full Board – Presentation at One Meeting Minimum

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THREE YEAR PLAN

2014

Code of Conduct RevisionAnd RolloutCommunications*Education Curriculum*Policies*Board and Audit Committee*

2015

Risk AssessmentIncentivesEmployee Engagement SurveyRegional CE Committees

2016

Employee Engagement SurveyThird Party Program AssessmentRegional/Business CE Officers

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QUESTIONS TO ANTICIPATE FROM YOUR BOARD(IN ADDITION TO “HOW MUCH IS ALL OF THIS GOING TO COST?”)

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“We’re no GE, we’re a bit player, why do we care about investing in this? Will the government even care about us since we’re smaller/private?”

Small fries get the bigger hammer

US Sentencing Commission data consistently shows small organizations taking convictions. In FY11, for example, 94% of the organizations convicted of a felony had less than 500 employees, 70% had less than 50 employees

Small orgs can’t weather the costs, reputational and otherwise, as well as large orgs

Issues like debarment from federal work can kill orgs

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QUESTIONS TO ANTICIPATE FROM YOUR BOARD

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“Why are you talking about Sentencing Guidelines?”

It’s not just us talking about it, it’s what your local US Atty looks at when making the call on charging, what the SEC and other agencies consider as a framework, and it’s echoed in standards from the Federal Acquisition Regulation (FAR) to international standards like the UKBA and OECD

The guidelines provide a flexible framework for organizations of all sizes and scopes – it’s a valuable roadmap

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“We’ve had a hotline for years now and we never get any calls, doesn’t that mean we’re doing fine?”

It might also mean that no one knows about the hotline or that they are either scared to report ‐‐or feel it won’t matter

Surveys consistently show that 90% or more of employees prefer to report to their managers, supervisors or HR – the hotline is consistently an option that gets less than 10%.

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“Everyone knows we are an ethical company and do the right thing. I talk about it all the time.”

While we are consistent in what we say from the top, getting the message to the grass roots is deceptively difficult and employee perception of the company culture and our commitment to it is actually as important as what we say and do at the top

The perception of company culture is local

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“Shouldn’t we focus all of the resources on [pick a topic], that seems to be the hot issue?”

What regulators are focused on today is important, but risks change and we need a robust program that focuses on reporting, asking questions and taking responsibility to create a culture that adapts to all possible compliance risks

Assessing individual risk topics, and the resources that should be brought to bear, is an integral part of any successful program – but you have to have the framework in place to do that

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“How do we know that the company’s money is going to be well spent?”

Ethics and compliance is not a black box, there are metrics that can be used to gauge performance and benchmarking with peers to ensure best practices (including internal surveys and external benchmarking)

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Thank You

engaging your board - scce official site · example presentation to the board ... of the ethics and...

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