Study in Ethics
for the Directors, Officers and
Employees
December 2013
41 South High Street
Columbus, OH 43215
1
Overview of Presentation
Overview of Ethical Considerations for JobsOhio, its
Officers and Employees
I.
Conflicts of Interest
II.
Gifts Meals and Entertainment
III.
Criminal Laws & Bribery
IV.
Other Policies and Considerations
V.
Reporting and Disclosure Requirements
VI.
Corporate Governance Requirements
VII.
The Appearance of Impropriety
VIII. Questions and Answers
2
Unique status of JobsOhio
• Mission: Attracting and retaining jobs in strategic industry
sectors.
• Created as a private, non-profit entity using a private-sector
approach to be more nimble, flexible and competitive in its
economic development efforts.
• Exempt from most of the ethics laws that apply to public
employees, BUT:
•
•
•
•
•
JobsOhio Policies apply
Ethics laws apply when dealing with public employees and
officials
Contractual Obligations to Development Services Agency
Principles of Corporate Governance apply to the Board
Scrutiny is high and avoiding an appearance of impropriety is
critical to JobsOhio mission!
3
Meaning of certain terms
• Board: the JobsOhio Board of Directors
• Director: a member of the JobsOhio Board of Directors
• Employees: all individuals employed by JobsOhio, on a
full or part-time basis.
• GC: General Counsel for JobsOhio
• Lobbying: actively advocating, on behalf of JobsOhio,
for a legislative or administrative action at the local,
state or federal level
4
I. Conflicts of Interest
JobsOhio Code of Regulations
JobsOhio Conflict of Interest Policy
DSA Contract
5
JobsOhio Code of Regulations
Article VI
Conflicts of Interest
• Policy on conflicts
• Annual Statement and Pledge by Directors and Officers
Article VII
Standards of Conduct
• Highest ethical conduct and fundamental honesty
• Maintain confidentiality of JobsOhio information
• Annual certifications and acknowledgement of Standards of
Conduct
6
JobsOhio Conflicts of Interest Policy
JobsOhio Conflict of Interest Policy
• Required by R.C. 187.06 and Board Regulations
• Applies to all JobsOhio Board Members and Officers
• Sets forth a Process for Reviewing Conflicts
• Sets forth a Process for Resolving Conflicts
7
JobsOhio Conflict of Interest Policy
Definitions
• Financial Interest: a financial ownership or investment interest
between you or your Family and any person or entity, such as:
• An equity interest in a non-publicly traded entity;
• An equity interest of 1% or more of any publicly-traded company;
• Remuneration of over $10,000 in the preceding year from an entity
other than JobsOhio;
• Other significant contract or business arrangement; or
• Income from intellectual property rights.
•
Fiduciary role: An obligation to act in the best interests (the financial
success) of another, such as membership on a board of directors or a
management role in a company or partnership
• Family: spouse or domestic partner, and dependent children or
other individual claimed as dependents for tax purposes.
8
JobsOhio Conflict of Interest Policy
Annual Declaration
• Required of most Directors, officers and, as
designated by Policy or the Board, employees
• Requires disclosure of Financial Interest,
potential conflicts of interest and other
business interests
• Requires prompt notice of any new potential
conflicts or changes to the form
9
JobsOhio Conflict of Interest Policy
Process for Review
• The Compliance Officer or General Counsel will
review Annual Disclosure Forms and Updates and
proposed or actual JobsOhio transactions
• The Compliance Officer or General Counsel will
alert you if an entity listed on your form becomes an
applicant for JobsOhio assistance
• If you recognize or suspect a conflict, consult with
the Compliance Officer or General Counsel
immediately
10
JobsOhio Conflict of Interest Policy
Handling Identified Conflicts
• Immediately withdraw – no formal or informal
involvement with the issue at all
• Compliance Officer or General Counsel will present
the potential conflict to the Board, Investment
Committee, or President and Chief Investment Officer,
as applicable, who will decide:
– No conflict exists; or
– Conflict exists, but is de minimus; or
– A conflict exists; (continue to abstain refer to Board of
Directors or Investment Committee )
11
JobsOhio Conflict of Interest Policy
Board or Investment Committee Determination
If you have a conflict (a Financial Interest, compensation
arrangement or Fiduciary Role):
• Board/Investment Committee will review
• You will have an opportunity to discuss the conflict
• Board or Investment Committee will determine if:
– A more advantageous transaction is available that would not
result in a conflict or whether another disinterested entity
could successfully proceed with the transaction and, if none;
– Whether the transaction is fair and reasonable to JobsOhio
12
JobsOhio Conflict of Interest Policy
• Failure to disclose a conflict can lead to disciplinary
action
• Directors are prohibited from seeking employment
from any person or entity that receives a JobsOhio
incentive or assistance
• Be mindful of any appearance of impropriety
13
Development Services Contract
• Agreement mirrors the JobsOhio Conflicts of Interest
Policy
• “Interested Person” is anyone who has or acquires an
interest in a particular transaction
• Requires Interested Person to step away from
transaction if the financial interest is “significant”
14
State Laws: Conflicts of Interest
• R.C. 187.03: JobsOhio Employees, Officers and
Directors are specifically exempted from the
definition of “public employee” for purposes of the
Ohio ethics laws
• State conflict of interest laws do not apply to JobsOhio
and the JobsOhio policy governs
BUT. . . .
That is not the case with gifts and bribery. . .
15
II.
Gifts, Meals and Entertainment
•
State and Local Laws applicable to JobsOhio
•
Criminal Laws, Bribery and Role Play
•
Foreign Corrupt Practices Act
16
State and Local Laws
• JobsOhio is not exempt from all ethics laws and must
abide by the law to the same extent any other private
entity that is doing or seeking to do business with a
public official or body must comply
• Always be aware of the ethics laws at the federal,
state and local levels when dealing with public
employees
17
State Gift Laws
• R.C. 102.03: “No person shall promise or give to a public
official or employee anything of value that is of such character
as to manifest a substantial and improper influence upon the
public official or employee with respect to that person’s duties”
• Ohio Ethics Commission violation test
− Is the source of the gift improper?
− Is the gift of substantial value?
• Yes to both might violate R.C. 102.03
• Criminal sanctions could be imposed for violations
− $1,000 fine and six months in jail
18
State Gift Laws
Improper Sources
• Any entity –including JobsOhio– that is regulated by, doing
business with, seeking to do business with, or interested in
matters before the public entity that employs the gift recipient
is an improper source
• Any corporation –including JobsOhio– holding a public
contract, grant or license with a public agency is an improper
source for that public agency’s employees or officials
• NO EXCEPTIONS FOR PERSONAL RELATIONSHIPS
19
State Gift Laws
Substantial Value
• General Guidelines- Acceptable Gifts
− Modest lunch
− Coffee mug or small gift
Note: Gifts are aggregated for calendar year
• “Substantial” Gifts if given by an Improper Source
− Dinner at an upscale restaurant
− Tickets to a professional sporting event
− Lodging
− Golf outings
20
Local Laws and Policies
Remember –
• State law applies to all public employees at the local
level
• Many local entities have ethics policies that will also
govern public employees with whom you interact
• Avoid the appearance of impropriety
21
Foreign Corrupt Practices Act
• FCPA prohibits paying, or promising to pay, “anything
of value” to a foreign official in order to influence an
act or decision. Applies to actions that:
– Meet “business purpose test:” intended to influence
foreign official to assist in obtaining, retaining or directing
business. Ex: influencing procurement process;
circumventing importation rules; or obtaining exceptions
to regulations;
– Are made “corruptly:” with an intent or desire to
wrongfully influence the recipient; and
– Are made “willingly:” committed voluntarily and
purposefully, and with a bad purpose.
22
Foreign Corrupt Practices Act
• “Anything of value” is not defined and could have
different monetary values in different countries
• Ordinary and legitimate promotion of business is not
covered if there is no corrupt intent
• Reasonable gifts to foreign officials as tokens of
esteem or gratitude are acceptable:
–
–
–
–
–
gifts must be given openly and transparently;
properly recorded in JobsOhio books and records;
appropriate under local law;
customary where given; and
reasonable for the occasion.
23
Foreign Corrupt Practices Act
Two defenses to FCPA violations:
• payment was lawful under the written laws of the
foreign country; or
• money was spent as part of demonstrating a product
or performing a contractual obligation:
– travel and expenses to visit company facilities or
operations
– travel and expenses for training
– product demonstration or promotional activities,
including travel and expenses for meetings
24
Criminal Laws & Bribery
• R.C. 187.10
• JobsOhio Directors, officers, and employees may not
knowingly solicit or accept any valuable thing or
benefit to corrupt or improperly influence the person
or another director in violation of the bribery laws.
25
JobsOhio Gift Policy
• Applies to all gifts received by or for JobsOhio
employees
• From any “business associate” (any person or entity,
other than JobsOhio colleagues, with whom the
employee interacts on a professional basis)
• Non-solicitation policy:
– Employee may not solicit anything of value that could
reasonably be expected to influence the employee in the
performance of duties
26
JobsOhio Gift Policy
• Acceptance of gifts is generally prohibited unless:
– They are given without an express or implied
understanding of obligation
– They do not violate law
– They do not place the employee in a compromising
position
– They are not of such a character as to create an
appearance of impropriety
– They comply with JobsOhio Policy
27
JobsOhio Gift Policy
• Additional Guidelines
– Business travel and lodging are not allowable as business
courtesies absent prior approval: Employees should seek
reimbursement from JobsOhio
– Business courtesies related to job activities(meals at a
business meeting, recreational activity, etc.) are permitted at
reasonable costs and in compliance with the Gift Policy
– Invitations to Events may be accepted if:
∙ Face value is less that $35; or
∙ JobsOhio pays for the event; or
∙ JobsOhio reimburses the contributor for the event; or
∙ Prior approval is obtained
28
JobsOhio Gift Policy
Additional Guidelines, cont.
– Acceptances of repeated invitations for entertainment (more
than twice per 12 month period per source, or more than 12
invitations overall in any 12 month period) are strongly
discouraged.
– Food or perishable gifts should be shared with the
employee's team or donated to a local charity, if possible.
– Gifts of cash or of cash equivalents, such as gift cards (other
than a single gift card with a value of $35 or less), are never
allowable, no matter the amount .
29
JobsOhio Gift Policy
Additional Guidelines, cont. Use Common Sense!
– Attempts to circumvent the gift policy may result in
disciplinary action– You may not accept a stack of $20 gift
cards or a series of small gifts from different
representatives of the same business associate
– Cannot accept otherwise prohibited business courtesies
under the guise of a "purchase" (must be available to the
general public and purchased at fair market value.)
– Consider cultural differences when accepting accept
business courtesies: consult JobsOhio's CIO, CFO, or GC
for guidance.
30
JobsOhio Gift Policy
Entertainment Disclosure Form:
– is required for any business courtesy in excess of $35
unless prior approval obtained
– Failure to accurately report can result in disciplinary
action
– Specific questions should be directed to the
Compliance Officer or General Counsel
– Form is attached to the Gift Policy
31
IV. Other JobsOhio Policies
• Whistleblower Policy
• Lobbying Considerations
32
Whistleblower Policy
• Highest ethical standards are expected
• Report potential violation confidentially to General
Counsel, the Compliance Officer, or to the JobsOhio
Outside Consultant, Tom Charles at the numbers
provided
• No one who reports a potential violation of JobsOhio
policies in good faith will be retaliated against
33
Lobbying Law Provisions
• State and federal law governs lobbying activities
• If you engage in lobbying, you and JobsOhio may be
required to register and file regular reports about
your activity
• Please see the Legislative and Community Outreach
Director if in doubt and before engaging in any
lobbying activity
• All entertainment of Public Employees or Officials,
whether or not you are lobbying, must comply with
JobsOhio policies
34
V. Reporting and Disclosure
Requirements
– Financial Disclosure Statements
– Post-Employment Disclosure Statements
– Form 990
35
Financial Disclosure Statements
R.C. 187.03(B)(2)
• Does apply to Jobs Ohio
• Directors and employees with significant
administrative, supervisory, contracting or
investment authority must file
• Annual disclosure due to the Ohio Ethics Commission
on or before April 15th of each year
• For all former public officials or employees who had
to file, additional filings may be required for 1 year
after leaving public service
36
Post-Employment Disclosure
PED Reports
• Applies to certain Jobs Ohio employees If you were
required to file financial disclosure statements with
Ohio Ethics Commission while employed with the State:
– Must file PED with Joint Legislative Ethics Commission (JLEC)
– PED must be filed three times per year and for two years
following state service
– Requires disclosure of:
∙ lobbying income;
∙ income from the employer of a lobbyist;
∙ Income from certain entities awarded state contracts during the
two calendar years immediately preceding your departure;
∙ any expense made on behalf of any employee of your former state
employer(s)
R.C. 102.021
37
Form 990 Requirements
• Federal tax laws require JobsOhio to file Form 990
• Requires numerous disclosures, including:
– Family or business relationships between Board
Members
– Conflicts of Interest by Directors, Officers and Key
Officers
– Acknowledgment of ethics, conflict of interest, and
whistleblower policies and corporate governance
practices
38
VI. Corporate Governance and
Federal Requirement
• Role, Functions, and Duties of the Board
• Role, Functions, and Duties of Management
and Other Employees
39
Role, Function and Duties
of the Board
• Role of the Board
• Directors function only as a board
• Standard functions of directors
• Basic duties of directors
• Duty of loyalty: Whose interest?
• Importance of a vote of disinterested directors
• Directors’ right of reliance
40
Role of the Board
• All authority for
– Decision making as to matters of policy, direction,
strategy and governance; and
– Oversight as to matters critical to the health of the
organization for its various stakeholders
is to be exercised under the direction of the
organization’s board
41
Directors function only as a board
• Directors function only as a board as determined by a
majority of its members at meetings in which a
quorum is present.
• An individual director has no authority to take any
action except as authorized by a majority vote of
directors at a meeting at which a quorum is present
42
Standard functions of directors
• Decision making as to matters of policy, direction,
strategy and governance;
• Oversight as to matters critical to the health of the
organization for its various stakeholders; and
• Mentorship of the CEO and senior management
43
Basic duties of directors
• Duty of care – to exercise the care that an ordinarily
prudent person in a like position would use under
similar circumstances
• Duty of loyalty – to act in good faith, in a manner he
or she reasonably believes to be in or not opposed to
the best interests of the corporation [may be broader
duty than for officers] i.e. Conflicts of Interest
44
Conflicts of Interest: Whose interest?
• The mission and the constituencies served by the
mission of JobsOhio
• Others:
– Employees, suppliers, creditors, and customers
– Economy of the state and nation
– Community and societal considerations
• Unless within the zone of insolvency and then it may
be creditors
45
Importance of a vote of
disinterested directors
• Matters in which directors or officers have a personal
or economic interest should, to the extent possible, be
approved by directors disinterested in the matters
• “Disinterest” is a subjective test based upon facts and
circumstances of each matter requiring an affirmative
vote on any such matter by those directors who do not
have a personal or economic interest in the matter that
could conflict with the person’s duty of loyalty to the
organization with respect to the matter
• Failure to have matters approved by disinterested
directors requires proof that the transaction is “fair”
from both an economic view and procedural view
46
Directors’ right of reliance
• State corporation law expects, and gives protection
for, directors’ reliance on –
– Officers or employees of the organization as to matters
for which they are reasonably believed to be reliable
and competent
– Legal counsel, public accountants, consultants or other
professionals as to matters reasonably believed to be
within their professional competence, and
– Committees of directors as to matters within their
designated authority, and that the director reasonably
believes to merit confidence
47
Role, Function and Duties of
Management and other Employees
• Expectation of reliance by directors
• Role of management
• Basic duties of management
48
Expectation of reliance by directors
• State corporation law expects, and gives protection
for, directors’ reliance on officers or employees of the
organization as to matters for which they are
reasonably believed to be reliable and competent
49
Role of management
• While the role of the board is to give direction by
granting authority and setting limits
• Management
– Provides input to help the board give direction
– Executes that direction by exercising that authority,
observing the set limits
50
Basic duties of management
• Duty of care – to exercise the care that an ordinarily
prudent person in a like position would use under
similar circumstances
• Duty of loyalty – to act in good faith, in a manner he
or she reasonably believes to be in the best interests of
the corporation [higher duty than that of directors]
51
VII. The Appearance of Impropriety
The appearance of impropriety can kill a deal
If you don’t want to read about it in the
newspaper, don’t do it!
52
Reminders
• As JobsOhio becomes more active and receives
additional funding sources, constant diligence will
become even more important.
• Policies are in place to protect you and JobsOhio from
reputational risk and even criminal liability
53
Summary:
What can I accept?
See JobsOhio Gift Policy
• Can never solicit a gift
• Under $35 generally ok if:
– No strings attached
– No appearance of impropriety
– No cash
– No attempt to circumvent law or policy
• Over $35 or travel:
– Only with prior approval
54
Summary:
What can I give?
To anyone doing business with JobsOhio?
– Follow the JobsOhio Expense Policy
To public officials and public employees?
– Follow the JobsOhio Expense Policy AND follow the ethics
laws
– Never spend money on a public employee or public official
unless coordinated beforehand with General Counsel AND
the Governor's Office
To anyone not included above?
– If using personal funds– no restrictions.
– If using JobsOhio funds- follow the JobsOhio Expense Policy
55
What to do if in doubt
• Consult your employee manual; and/or
• Talk to the General Counsel or
Compliance Officer
56
VIII. Questions and Answers
57
Questions?
Maria J. Armstrong
(614) 227-8821
marmstrong@bricker.com
Bricker & Eckler LLP
(614) 227-2300
100 South Third Street
Columbus, OH 43215
www.bricker.com
58