ETHICAL LEADERSHIP REQUIRES A SEAT AT THE TABLE

Matthew PachmanVP, Compliance-Ethics and Business Practices

Freddie Mac

matthew_pachman@freddiemac.com

Erica Salmon ByrneAssistant General Counsel

Corpedia

esalmonbyrne@corpedia.com

symposium faculty

Today’s Schedule

Symposium Topics –� Writing/Rewriting the Code

� Process of Rewriting and Reviewing – Pitfalls to Avoid

50 Codes of Conduct Rated

� Each Code was rated by a panel

of experts from the Ethisphere

Council

� An aggregate score was derived

through application of the

following weighted subscores

� Public Availability (5%); Tone from the Top

(15%); Readability and Tone (20%); Non-

Retaliation (10%); Values & Commitments (10%);

Risk Topics (20%); Learning Aids (5%); Presentation and Style (15%).

Some Good Samples…

Graphic from Kellogg Code Context from GAP Code

Writing/Rewriting the Code

Overview:� Overall Structure and Design

� Overall Style and Language

� Integration with Other Aspects of the Compliance and Ethics Program

� Reporting, Discipline/Enforcement and Non-retaliation

� Risk Exposure

� Industry and Peer Best Practices

The Importance of Planning

Did you think about your costs and secure budget money?

Did you set realistic goals and milestones?

� Drafting

� Reviews� Legal, Human Resources, Communications, etc.

� CEO and senior executives

� The Board

Did you plan for printing and distribution?

� Hard copies

� Review of proofs

� Mail room

� Electronic version

� Web (.pdf, HTML), e-mail

Values Based vs. Rules Based

Rules

Policies

Values

Principles

Overall Structure and Design

How well structured and organized is the Code?

� Can be structured in a variety of ways:

� Alphabetical

� Thematic Coverage, “Our Workplace”, “Our Relationship”

� Should be organized in a way that fits the organization’s culture

Does the Code contain a mission statement or guiding

ethical principles?

� Common practice is to start the code with a values statement

� Statement must echo employees’ “real” values

� What kind of code do you want?

Overall Structure and Design

Does the Code articulate the tone from the top?

Is the CEO statement adapted to the company culture and

vocabulary or is it formulaic recitation?

� The CEO statement needs to be written in the CEO’s voice

� Personalized with some well-known experience

� Ideally, the CEO would help to draft the statement

� CEO’s association with the code is only part of setting the overall

tone from the top

More Helpful – Let’s Learn from Some Less Ideal Codes…

� Tone from the Top

Common Pitfalls

� Tone from the Top

Common Pitfalls

� Tone from the Top

Overall Structure and Design

Does the Code contain disclaimers/reminders?

� The Code does not alter an employee’s status

� Code should note that other organizational policies exist, and

can be added, deleted, or changed

� Managers and supervisors should be held to higher standards

� Compliance with the code is a condition of employment

� Make sure that this is part of the employment contract overseas?

Overall Structure and Design

Does the Code identify who is covered by the Code?

� Typically codes are developed for directors, officers & employees

� But, a company may have separate codes of ethics for different types of officers

� Multiple codes run the risk of inconsistent statement of expectations

� Can have a basic code of conduct that covers all officers along with more specific codes to different subsets of officers

� Need to consider application of the code to contractors, temporary employees, and vendors

Overall Structure and Design

Does the Code contain a listing of available resources for

obtaining guidance and for good faith reporting of suspected misconduct?

� Should identify ways in which employees can obtain guidance in

interpreting the requirements of the code or an organizational policy

� Identifying how an employee can make a good faith report of

suspected misconduct is essential

� Hotlines

� Notes to the board?

Overall Structure and Design

Does the Code contain a non-retaliation commitment?� Convincing employees that they will not suffer retaliation is one is one of

the more significant challenges

� A strong statement in the code is an important part of meeting that

challenge

� As a matter of regulation, retaliation is prohibited

Does the Code contain acknowledgment of receipt and

compliance form?� Common element is a final page that includes an acknowledgment of

receipt

Common Pitfalls

� Non-Retaliation Language

Section 22 of 22 Last page

Overall Structure and Design

Does the Code provide Q&A, examples or case studies?

Are topics communicated with expected behaviors/rules:

do’s and don'ts?

� Be judicious using dry recitations of “thou shalt nots.”

� The code has to be looked at as a teaching device

� Many employees are poor visual learners

� Q&A, hypothetical situations are excellent teaching devices

Common Pitfalls

� Learning Aids

Overall Style and Language

Overall Style of the Code:� Written in the active voice

� Write at a level that is easily

digested by the target

audience

� Style consistent with the

target audience and company

culture

� Standard grammar, spelling,

punctuation

Overall Style and Language

Overall Style of the Code:

� Concise and clear communication

� Content is constant throughout

� Easy and/or engaging to read

� How was translation done?

� Test-marketed?

Common Pitfalls

� Document Presentation

Common Pitfalls

� Document Presentation

Integration of the Code

Integration into the Compliance and Ethics Program:

� New hire training

� Periodic re-training of employees

� Performance evaluations

� Ethics activities

� Publicly available

Reporting, Enforcement and Non-retaliation

Reporting:

� “Snitch Rule” -- employees must report suspected violations

� Insufficient to have just an “open door” policy

� Must have misconduct reporting alternatives

� Clearly communicate the enforcement policy and local laws

� Enforcement mechanisms need to be clearly defined

Reporting, Enforcement and Non-retaliation

� Reporting

� 24/7/365 reporting tool

� Email reporting tool

� Non-English language

reporting tool

Risk Exposure

Code must respond to analyzed risks.

� Covers areas of risk

� Topics must match risk profile

� Consistent with…

� The Industry

� The Law

The Prosecutor’s Perspective on Codes

� Revised United State Sentencing Guidelines

� Effective compliance and ethics program requires more than

policies/procedures

� Entails a focus on organizational culture promoting abidance

with the law and ethical behavior

The Prosecutor’s Perspective cont…

� Justice Department (Thompson Memo)

� In determining whether to charge a corporation for the criminal

misconduct of its employees, prosecutors should consider “the

existence and adequacy of the corporation’s compliance

program.”