ethics for front line managers

1www.PaulFalconeHR.com

www.PaulFalconeHR.com [email protected]

OverviewSarbanes-Oxley Act = reforms in corporate

governance. The goal = transparency to investors.

Congress passed SOX on July 30, 2002 in response to well-publicized financial fraud, including:

Arthur Anderson (Houston): shredding documents and destroying evidence

Martha Stewart: insider trading WorldCom, Enron, Global Crossing, and Adelphia declared bankruptcy

as massive accounting regularities were revealed


OverviewEthics . . . a definition

Creating an ethical environment

SOX and conflicts of interest

Ethical issues in your day-to-day work


Sarbanes-Oxley Act (SOX)Corporations failed to report shortcomings in public reports

filed with Wall Street just as the stock market bubble was bursting.

Wall Street failed to accurately disclose corporate shortcomings for fear of losing clients (because brokerage houses had their own in-house research teams that touted particular stocks that were being sold by the firms themselves).

Investors kept investing in good faith, reasoning that any short-term downturns in stock performance were temporary.

The stock market bust of April 2000 resulted, and from 2000 – 2003, $7 - $9 trillion was lost in the equities market.


SOX (cont.)Result: The major stock markets, including the

NYSE and NASDAQ, changed their standards governing listed companies. The latticework of reforms resulted in a new corporate governance regime, no longer market-driven but now highly rule-driven.

The Act changed corporate governance, including the responsibilities of directors and officers, the regulation of accounting firms that audit public companies, and financial reporting and enforcement.


SOX (cont.)Publicly traded companies now have to

certify that their companies’ annual and quarterly financial reports are accurate and not misleading and that they have met their responsibility for evaluating internal controls.

Penalties for “defective certification” include fines up to $1MM and/or imprisonment up to ten years. Penalties for willful noncompliance (fraud) include fines up to $5MM and/or imprisonment up to 20 years.


SOX (cont.)Sarbanes-Oxley compliance now includes:

Corporate governance standardsPublished codes of conduct (ethics

statements)Employee whistle-blower protection Audit committee rules and regulations in

terms of policies, procedures, systems, and controls

Management certification requirements 7www.PaulFalconeHR.com

HR’s Role in SOX Compliance

Our company strives to maintain a work environment that upholds the highest standards of business ethics and workplace behavior throughout all of our operations

Our Business Conduct Statement addresses a wide variety of business situations and should serve as a guide to both the letter and the spirit of our policies

Consult your supervisor, human resources representative, or a compliance officer for detailed interpretations, questions, or concerns


Our Policy is based on:

Laws affecting our workplace, and

Our view of management practices necessary to comply with the law and to maintain an ethical and productive workplace

Laws > policies > practices


This Statement is Not Exhaustive

The company has other policies and rules which are also important

These rules are the current standard and supersede earlier inconsistent rules

If more detailed rules exist, they apply

If you become aware of any violation or would like further clarification, consult your supervisor, HR representative, or a compliance officer


Your Responsibility to the Company: Avoid Conflicts of Interest

You have a primary business responsibility to our Company -- both your division, if applicable, and to our corporate parent

A conflict of interest exists when your outside business or personal interests adversely affect or have the appearance of or the potential to adversely affect your judgment or performance at work


Disclose Potential Conflicts of Interest

Disclosure is essential

Disclose to your Company's General Counsel via your reporting chain any personal or business interest that may interfere with your undivided loyalty to your Company or may have the appearance of doing so

Our policy is one of disclosure and review: together we will reach a solution


Conflicts of Interest: Prohibited Activities

Absent specific, prior approval, you may not:

Accept a personal benefit which obligates you in any way

Accept a benefit from or provide a benefit to a customer, supplier or competitor, other than nominal, reasonable and appropriate entertainment (Our company’s threshold = $200)

Accept or offer cash (in any amount) under any circumstances


Conflicts of Interest (cont.)

Have a financial interest in a customer, supplier or competitor, other than less than 1% of a publicly held company

Take a business opportunity from the Company

Do personal business with a customer, supplier, or competitor or the Company itself, except as a regular consumer

Have an undisclosed family relationship with an employee, customer, supplier or competitor of the Company

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Equal Employment Opportunity (EEO)

We place a high value on providing equal employment opportunity and maintaining a diverse workplace, free of discrimination

We strive to make our work force reflect the rich diversity of our society and our customers

Our firm recruits and hires without regard to race, color, sex, religion, national origin, ethnicity, age, marital status, sexual orientation, disability, veteran status or any other basis prohibited by law


EEO (cont.)

We strive to administer all personnel actions such as hiring, compensation, promotions, benefits, transfers, layoffs, company-sponsored training, education tuition assistance, terminations, social and recreational programs in a consistent manner


Harassment-Free Workplace

Supervisors are expected to make a personal commitment to our Equal Employment Opportunity Policy

Be sensitive to the warning signsEveryone must work together to maintain a workplace

committed to diversity and free of discrimination

Be mindful of how your conduct affects othersWatch out for harassment based on any protected

characteristic: race, color, sex, religion, national origin, ethnicity, age, marital status, sexual orientation, disability, veteran status, etc.

Harassment can take place on duty or off, in the office or on the road.

Treat co-workers with respect and dignity Supervisor/supervisee personal relationships must be disclosed


Harassment-Free Workplace (cont.)

Conduct which may constitute sexual harassment (quid pro quo):

Offering employment benefits in exchange for sexual favors

Unwanted sexual advances or propositions, including leering, gesturing, displaying suggestive objects or pictures, cartoons, and requiring the other person to participate

Threatening reprisals if rebuffed



Conduct which may constitute sexual harassment (hostile environment):

Physical contact: unwanted touching, impeding or blocking movements

Verbal abuse of a sexual or graphic nature or comments about an individual’s body

Nonverbal conduct: leering, gesturing, etc.Sexual letters, notes, posters, voicemail, or emailDirty jokes, screen savers, off color comments which

can be overheard



Any incidents of discrimination or harassment must be reported to any one of:

Your SupervisorYour Department HeadYour Human Resources RepresentativeOur company’s Compliance Officers

Reporting is required.


Reporting Harassment

What will happen if I make a report?

Prompt investigation by knowledgeable staff

Appropriate action to enforce the policy

No adverse consequences for good faith reports

A false report is a violation in itself



NO RETALIATION

Our company prohibits retaliation for lodging complaints under the harassment-free workplace policy

Retaliation would be a separate violation of the policy and could subject an employee to immediate termination, even for a first offense


Health, Safety and the Environment

Our policy is to comply with all applicable health, safety and environmental laws and regulations

Failure to do so can have serious consequences for you, our company, and the safety of others

Our firm and its employees may be liable not only for the costs of clean-up, but also for civil or criminal penalties for violations of environmental laws

Everyone is responsible for preventing incidents and for responding and reporting promptly should they occur


Use of the Company Time, Property and Supplies

The Company’s systems are for company business(Any personal use should be limited and reasonable)

Your email and voicemail are company property Do not use the Company’s Internet connection for

inappropriate activitiesRespect the copyright laws: do not download

unauthorized software, music, or other intellectual property

When in doubt, ask your supervisor


Implementation of this Statement

Compliance Officers’ responsibilities:

1. Ensure the Statement gets to you2. Review operations for compliance3. Review the Statement to keep it current4. Direct investigations of reported or

suspected violations5. Determine action for violations

Compliance officers report to the Audit Committee of the Board of Directors


Reporting Violations

Reporting violations is requiredEarly reporting is most effective.All reports will be treated as confidential

to the extent appropriateAbuse of the system is a violationFailure to detect violations could be a

violation (Standard: “know or should have known”)

You are obligated to be aware


How Do You Report?

In person or in writing

Report to any one of the following:

Your SupervisorDepartment HeadHuman Resources Representativea Company Lawyer, or a Company Compliance Officer


How do You Report? (cont.)

You are not restricted to your reporting chain

Anonymous reports are better than none, but they make the appropriate resolution more difficult


Investigations

All reports will be investigated:

At the direction of the Compliance Officers with the help of HR, Legal, and Labor Relations

Cooperation with an investigation is a requirement of employment

Relevant documents or data may not be destroyed

You may not conduct your own investigation


Disciplinary Actions

Actions up to and including termination may be taken for:

Actual violationsWithholding or destroying informationFailure to supervise violatorsRetaliation against a whistle blowerFailing to report a violation


Behavior We Expect From All Employees….

Maintain a work environment that upholds the highest standards of business ethics and workplace behavior throughout all of our operations

Respect the law and look to the Company Business Conduct Statement for guidance on a wide variety of business situations. Honor both the letter and the spirit of our policies.

Consult your supervisor, human resources representative, or a compliance officer for detailed interpretations, questions or concerns


Additional NotesAdditional Business Conduct Training may

include:

Financial Accounting / Prohibited Conduct Insider Information and Confidentiality Anti-Trust and Competition Political & Charitable Contributions International Business

Foreign Corrupt Practices ActAnti-Boycott Laws and Embargoes


Q&A: Questions and Actions

Paul [email protected]


ethics for front line managers

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