Elements of Corporate Ethics
Compliance
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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*
• 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 Katherina Wulf’s
“Ethics and Compliance Programs in
Multinational Organizations”
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
• 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 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 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 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 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
– 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
• 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
• 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 industryspecific 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 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
• 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
• 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
– 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
• 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 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 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
• 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
• 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 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 10
• Step 5: Documentation and Closure of the
Investigation
– Refer
– Write final report
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
• 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 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 coworkers or customers.
– Senior level management or those entering should
be screened.
• Rewards for and pressure to do wrong thing.
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)