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Elements of Corporate Ethics Compliance. Element 1: Risk Assessment Element 2: Corporate Culture Element 3: Oversight by the Board and Senior Management Element 4: The Ethics and Compliance Office Element 5: Code of Conduct Element 6: Receiving complaints

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elements of corporate ethics compliance
Elements of Corporate Ethics Compliance
  • Element 1: Risk Assessment
  • Element 2: Corporate Culture
  • Element 3: Oversight by the Board and Senior Management
  • Element 4: The Ethics and Compliance Office
  • Element 5: Code of Conduct
  • Element 6: Receiving complaints
  • Element 7: Training and Communication
  • Element 8: Assessment of compliance activities
  • Element 9: Incentives and discipline
  • Element 10: Response to misconduct
  • Element 11: Employee screening
toolset for ethics compliance program
Toolset for Ethics Compliance Program*
  • Element 5: Code of Conduct
  • Element 6: Receiving allegations and giving advice
  • Element 7: Training & Communication
  • Element 8: Program Assessment & Evaluation
  • *This presentation is from KatherinaWulf’s “Ethics and Compliance Programs in Multinational Organizations”
element 5 code of conduct
Element 5: Code of Conduct
  • Main purpose is to educate employees as to the proper values of the organization and the key legal and ethical requirements under which it operates.
element 5
Element 5
  • Step 1: Collecting Existing Policies and Rules
    • Identify existing standards and rules, typical ethical issues faced by the organization, topics on which employees seek guidance, issues that are of concern to stakeholders.
    • Incorporate prior ethical lapses or scandals as well as changes in laws and regulations (e.g., the adoption of the Sarbanes-Oxley Act).
element 51
Element 5
  • Step 2: Appointment of a Cross-Functional Core Team
    • led by the chief ethics and compliance officer
    • Professionals from all relevant departments
      • such as human resources, audit, finance, legal, security, risk management, health and safety, IT, and major business operating units.
    • Focus groups, advisory team, or consultants to review content
element 52
Element 5
  • Step 3: Determine the Code’s Reach
    • All employees
    • Different areas with different concerns, problems and temptations
    • Third party vendors
    • Board of Directors
element 53
Element 5
  • Step 4: Accessibility for and Acceptance of Employees
    • Strong commitment from top
    • Substantive rules and guidelines
    • Readable and comprehensive text
    • Reporting channels
    • Protection from retaliation
element 54
Element 5
  • Step 5: Practical Guidance for Employees
    • Explain gray areas
    • Provide examples
    • Make it clear when standards and laws differ from country to country
element 6 receiving allegations and providing ethical advice
Element 6: Receiving Allegations and Providing Ethical Advice
  • Step 1: Provide Reporting and Advisory Channels
  • Step 2: Implement a 24-Hour Helpline
  • Step 3: Oversight of the Reporting Function
  • Step 4: Appropriate Personnel for Providing Advice
  • Step 5: Publication of the Reporting and Advisory System
  • Step 6: Confidentiality and Anonymity within the Reporting Process
element 7 training and communication
Element 7: Training and Communication
  • Step 1: Design and Implementation
  • Step 2: Key Messages of the Training and Communication Program
  • Step 3: Target Audiences
  • Step 4: Delivery Methods
  • Step 5: Training and Communication Calendar
  • Step 6: Pilot-Testing and Evaluating the Training and Communication Program
element 7 content of training
Element 7: Content of Training
  • An introduction to the code of conduct and general code of conduct and training focusing on laws and policies that affect all employees regardless of their function,
    • e.g., sexual and workplace harassment, discrimination, e-mail usage, information security, anticorruption, antitrust, insider trading, and conflicts of interest.
  • Training modules that focus on key industry-specific regulations and provide an understanding of the industry and the consequences if they fail to comply with its regulations and laws.
element 7 content of training1
Element 7: Content of Training
  • Specific training for employees working in certain business operation, e.g., sales force training on price fixing and antitrust.
  • Training on the use of anonymous reporting mechanisms, i.e., e-mail, hotline, phone numbers, etc.
  • Provision of dedicated training on retaliation and the organization’s nonretaliation policy.
  • Training on ethical decision-making.
element 8 program assessment and evaluation
Element 8: Program Assessment and Evaluation
  • Step 1: Program Assessment Used to Improve the Ethics and Compliance Function
  • Step 2: Audit the Ethics and Compliance Program
  • Step 3: Techniques and Tools to Evaluate the Ethics and Compliance Program
    • Benchmarking, employee surveys, focus groups, peer reviews, third-party reviews and evaluations, internal audits, exit interviews, stakeholder interviews, reporting system calls, or newspaper articles about the organization
element 8
Element 8
  • Step 4: Comprehensive Review of the Ethics and Compliance Program
  • Step 5: Post-Evaluation Actions to Improve the Ethics and Compliance Program
element 9 performance incentives and disciplinary actions
Element 9: Performance Incentives and Disciplinary Actions
  • Step 1: Standards and Expectations for Ethics and Compliance in the Workplace
  • Step 2: Fair Treatment of Employees Involved in a Disciplinary Process
  • Step 3: Reward Ethical Conduct, within limits
    • It might send message that ethics is unusual.
    • People are motivated to do the ethical thing by a sense of right and wrong, not reward.
element 9
Element 9
  • Step 4: Methods for Rewarding Ethical Conduct
    • Overall performance review
    • Monetary
      • E.g. wages, salaries, cash bonuses, stock options,
    • Nonmonetary
      • E.g. promotions, public recognition, tickets to events, awards
    • Psychological: praise or blame
element 91
Element 9
  • Step 5: Design a Disciplinary System with Consistent and Predictable Penalties
    • Punishment
      • withdrawal of positive outcomes (e.g., the taking away of a vacation or bonus) or
      • the presentation of perceived negative outcomes such as verbal reprimands, suspension, and termination
    • Disciplinary action
      • must always be put into context, be appropriate to the wrongdoing, and be consistent with what other employees have received for similar violations.
element 92
Element 9
  • Step 6: Responsible Function for Imposing Punishments
    • Usually coordinated by HR and CECO and home department
    • Investigation of allegations and the imposition of discipline handled separately.
    • Disciplinary actions need to be monitored and gathered in an organization-wide database to guarantee consistent discipline for unethical and illegal conduct based on internal precedents.
element 10 response to criminal conduct and remedial action
Element 10: Response to Criminal Conduct and Remedial Action
  • Step 1: Decision to Investigate and Process Establishment
    • Four factors:
      • the source
      • the form of the complaint, i.e., how the company was put on notice
      • the substance of the complaint
      • the scope, subject matter, and seriousness of the complaint
      • credibility of the report and whether a similar allegation has been made previously
element 10
Element 10
  • Step 2: Designation of Investigators
    • Cataloging wrongdoing
      • type of wrongdoing
      • severity of potential reputational, financial, business and other risks
      • level or rank of the individual who is the subject of the allegation
      • imminence of harm
      • department in which misconduct is alleged to have occurred
      • company’s historical record of engaging in such alleged activity
element 101
Element 10
  • Step 3: Interviewing Process
  • Step 4: Limits of Confidentiality
    • attorney-client privilege protects the disclosure of confidential communications between an attorney and a client related to the seeking or providing of legal advice
    • the work-product doctrine protects materials prepared for or by counsel so that counsel is able to give thorough legal advice.
element 102
Element 10
  • Step 5: Documentation and Closure of the Investigation
    • Refer
    • Write final report
element 11 employee screening
Element 11: Employee Screening
  • Step 1: The Screening Process
    • Part of overall recruitment process
      • to mitigate risks, to enhance workplace safety, to comply with the organization’s policies, to improve the quality of new employees, to meet regulatory compliance requirements, and to protect the organization’s reputation and reduce theft and fraud.
  • Step 2: Information Gathering and Methods for Screening
    • Check for criminal, work and educational history of candidates; checking identity documents , motor vehicle , and credit records
element 11
Element 11
  • Step 3: Compliance with Relevant Laws
    • Civil liability: The doctrine of negligent hiring says that an organization may be liable for the conduct of its employees if it has failed to select a competent and safe candidate and has thereby created an unreasonable risk of harm to others.
    • Privacy laws: organizations must be careful not to violate federal or state laws that mandate background checks in a nondiscriminatory manner and that protect the privacy of the candidates.
element 111
Element 11
  • Step 4: Determine when to Conduct Screens
    • Organizations are expected to make a reasonable effort to assure that hired individuals meet minimal professional standards, are competent to do their jobs, and do not present a danger to co-workers or customers.
    • Senior level management or those entering should be screened.
      • Rewards for and pressure to do wrong thing.
element 112
Element 11
  • Step 5: Criteria for Exclusion due to a Candidate’s Past Activities
    • Some criminal convictions
    • Some past history of misconduct (e.g. sexual harassment)