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Effective Reporting to the Board on Compliance and Ethics Issues
Effective Reporting to the Board on Compliance and Ethics Issues
Effective Reporting to the Board on Compliance and Ethics Issues
Effective Reporting to the Board on Compliance and Ethics Issues
Effective Reporting to the Board on Compliance and Ethics Issues
Effective Reporting to the Board on Compliance and Ethics Issues
Effective Reporting to the Board on Compliance and Ethics Issues
Effective Reporting to the Board on Compliance and Ethics Issues
Effective Reporting to the Board on Compliance and Ethics Issues
Effective Reporting to the Board on Compliance and Ethics Issues
Effective Reporting to the Board on Compliance and Ethics Issues
Effective Reporting to the Board on Compliance and Ethics Issues
Effective Reporting to the Board on Compliance and Ethics Issues
Effective Reporting to the Board on Compliance and Ethics Issues
Effective Reporting to the Board on Compliance and Ethics Issues
Effective Reporting to the Board on Compliance and Ethics Issues
Effective Reporting to the Board on Compliance and Ethics Issues
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Effective Reporting to the Board on Compliance and Ethics Issues

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This presentation discusses the role of the chief compliance officer within the corporation, and in particular the CCO's relationship with the board of directors. This issue has important implications …

This presentation discusses the role of the chief compliance officer within the corporation, and in particular the CCO's relationship with the board of directors. This issue has important implications for effective corporate governance, risk management, and ethical behavior.

Published in: Business, Technology
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  • Audit Committee should take lead in oversight of C&E.
  • Transcript

    • 1. Effective Reporting tothe Board on Complianceand Ethics IssuesDouglas Y. ParkDYP AdvisorsJuly 19, 2011
    • 2. DYP Advisors (http://www.dypadvisors.com) 1The Agendao Who should manage the Compliance and Ethics (C&E) program?o Who should report to the Board?o When should C&E issues be reported to the Board?o What is the Board’s role in C&E?o What are the NASDAQ and NYSE requirements?o How to handle ethics training for the Board?
    • 3. DYP Advisors (http://www.dypadvisors.com) 2Who’s in Charge?o Structure of C&Eo Legal? o Pros o Conso Internal audit? o Pros o Cons
    • 4. DYP Advisors (http://www.dypadvisors.com) 3Who’s in Charge?o If legal is in charge o Internal audit supports legal o Internal audit must conduct reviews and provide relevant data o The data must follow legal’s guidance concerning the critical C&E risks
    • 5. DYP Advisors (http://www.dypadvisors.com) 4Who’s in Charge?o If internal audit is in charge o Legal supports internal audit o Legal must provide advice regarding acceptable risk boundaries o That will help internal audit focus its data collection and analysis
    • 6. DYP Advisors (http://www.dypadvisors.com) 5Who’s in Charge?o Mixed group might be best – even if the head is from one disciplineo Legal and internal audit must collaborate o To make data collection and analysis efforts efficient and effective o To reduce C&E risks
    • 7. DYP Advisors (http://www.dypadvisors.com) 6Who Reports to the Board?o Only one person should report to the Boardo Board should receive only one reporto The report should include information from relevant parties
    • 8. DYP Advisors (http://www.dypadvisors.com) 7Who Reports to the Board?o Should GC report to the Board even if legal does not manage C&E? o Yes o No
    • 9. DYP Advisors (http://www.dypadvisors.com) 8How Often To Report To Board?o What is the board’s involvement in the C&E program?o Does the company have a process for reporting C&E issues to the board?o Is C&E consistently on the board’s agenda?
    • 10. DYP Advisors (http://www.dypadvisors.com) 9How Often To Report To Board?o Frequency of complaintso Company wide problemo What level of employee is involvedo Hot button issueo Potential government investigation and penaltyo Impact on company’s reputation
    • 11. DYP Advisors (http://www.dypadvisors.com) 10Board’s Role in C&Eo Board can set the tone for the rest of the companyo C&E is big piece of board’s risk oversight functiono Needs to be involved in overseeing C&Eo Must know main risks company faceso Director and corporate liability?
    • 12. DYP Advisors (http://www.dypadvisors.com) 11NYSE Requirementso NYSE Listed Company Manual § 303A.10 o Adopt and disclose a Code of Business Conduct and Ethics for directors, officers and employees, and promptly disclose any waivers for D&O o Each Code must also contain compliance standards and procedures that will facilitate the effective operation of the Code o CEOs must certify compliance with listing standards every year. (Final NYSE Corporate Governance Rules, Section 10.)
    • 13. DYP Advisors (http://www.dypadvisors.com) 12NASDAQ Requirementso Rule 5610 of NASDAQ Listing Rules o Code of Conduct that complies with the definition of a “code of ethics” under § 406(c) of the Sarbanes-Oxley Act and SEC regulations o Code must apply to all directors, officers, and employees. Can satisfy this obligation by adopting one or more codes of conduct o Any waiver for D&O may be made only by the board and must be disclosed to shareholders, along with the reasons
    • 14. DYP Advisors (http://www.dypadvisors.com) 13NASDAQ Requirementso Rule 5610 of NASDAQ Listing Rules o Each Code must also contain o An enforcement mechanism that ensures prompt and consistent enforcement of the code o Protection for persons reporting questionable behavior o Clear and objective standards for compliance, and o A fair process to determine violations
    • 15. DYP Advisors (http://www.dypadvisors.com) 14Ethics Training for the Boardo Why? o So board can better understand C&E program o Stock exchanges strongly implyo When? o Once a year minimumo What? o What does the board already know? o What does the board need to know?
    • 16. DYP Advisors (http://www.dypadvisors.com) 15Takeawayso Structure of C&E program involves legal and IAo One person should report to the boardo Board needs to receive regular updateso NYSE and NASDAQ imply board oversighto Board training in C&E strengthens reporting
    • 17. Thank You! Douglas Y. Park DYP Advisors http://www.dypadvisors.com (650) 814-3933 dpark@dypadvisors.com16

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