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Ethics for Front Line Managers


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If you’re a publicly traded company, corporate ethics training is a requirement of employment thanks to the Sarbanes-Oxley Act (SOX) of 2002, and this template will help you walk your front-line managers through the law’s key tenets. The presentation addresses the origin of SOX and the corporate ethics statement (AKA “code of conduct”), the importance disclosing potential conflicts of interest, Equal Employment Opportunity and workplace discrimination/harassment, and the policy of non-retaliation. Slides are also dedicated to Health, Safety and the Environment, the Use of Company Time, Property, and Supplies, how to report violations, and how investigations and disciplinary actions are generally managed. (33 slides)

Presentation developed by author Paul Falcone -

Published in: Recruiting & HR
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Ethics for Front Line Managers

  1. 1.
  2. 2. Overview Sarbanes-Oxley Act = reforms in corporate governance. The goal = transparency to investors. Congress passed SOX on July 30, 2002 in response to well-publicized financial fraud, including:  Arthur Anderson (Houston): shredding documents and destroying evidence  Martha Stewart: insider trading  WorldCom, Enron, Global Crossing, and Adelphia declared bankruptcy as massive accounting regularities were revealed
  3. 3. Overview Ethics . . . a definition Creating an ethical environment SOX and conflicts of interest Ethical issues in your day-to-day work
  4. 4. Sarbanes-Oxley Act (SOX) Corporations failed to report shortcomings in public reports filed with Wall Street just as the stock market bubble was bursting. Wall Street failed to accurately disclose corporate shortcomings for fear of losing clients (because brokerage houses had their own in- house research teams that touted particular stocks that were being sold by the firms themselves). Investors kept investing in good faith, reasoning that any short-term downturns in stock performance were temporary. The stock market bust of April 2000 resulted, and from 2000 – 2003, $7 - $9 trillion was lost in the equities market.
  5. 5. SOX (cont.) Result: The major stock markets, including the NYSE and NASDAQ, changed their standards governing listed companies. The latticework of reforms resulted in a new corporate governance regime, no longer market-driven but now highly rule-driven. The Act changed corporate governance, including the responsibilities of directors and officers, the regulation of accounting firms that audit public companies, and financial reporting and enforcement.
  6. 6. SOX (cont.) Publicly traded companies now have to certify that their companies’ annual and quarterly financial reports are accurate and not misleading and that they have met their responsibility for evaluating internal controls. Penalties for “defective certification” include fines up to $1MM and/or imprisonment up to ten years. Penalties for willful noncompliance (fraud) include fines up to $5MM and/or imprisonment up to 20 years.
  7. 7. SOX (cont.) Sarbanes-Oxley compliance now includes: Corporate governance standards Published codes of conduct (ethics statements) Employee whistle-blower protection Audit committee rules and regulations in terms of policies, procedures, systems, and controls Management certification requirements
  8. 8. HR’s Role in SOX Compliance Our company strives to maintain a work environment that upholds the highest standards of business ethics and workplace behavior throughout all of our operations Our Business Conduct Statement addresses a wide variety of business situations and should serve as a guide to both the letter and the spirit of our policies Consult your supervisor, human resources representative, or a compliance officer for detailed interpretations, questions, or concerns
  9. 9. Our Policy is based on: Laws affecting our workplace, and Our view of management practices necessary to comply with the law and to maintain an ethical and productive workplace Laws > policies > practices
  10. 10. This Statement is Not Exhaustive The company has other policies and rules which are also important These rules are the current standard and supersede earlier inconsistent rules If more detailed rules exist, they apply If you become aware of any violation or would like further clarification, consult your supervisor, HR representative, or a compliance officer
  11. 11. Your Responsibility to the Company: Avoid Conflicts of Interest You have a primary business responsibility to our Company -- both your division, if applicable, and to our corporate parent A conflict of interest exists when your outside business or personal interests adversely affect or have the appearance of or the potential to adversely affect your judgment or performance at work
  12. 12. Disclose Potential Conflicts of Interest Disclosure is essential Disclose to your Company's General Counsel via your reporting chain any personal or business interest that may interfere with your undivided loyalty to your Company or may have the appearance of doing so Our policy is one of disclosure and review: together we will reach a solution
  13. 13. Conflicts of Interest: Prohibited Activities Absent specific, prior approval, you may not: Accept a personal benefit which obligates you in any way Accept a benefit from or provide a benefit to a customer, supplier or competitor, other than nominal, reasonable and appropriate entertainment (Our company’s threshold = $200) Accept or offer cash (in any amount) under any circumstances
  14. 14. Conflicts of Interest (cont.) Have a financial interest in a customer, supplier or competitor, other than less than 1% of a publicly held company Take a business opportunity from the Company Do personal business with a customer, supplier, or competitor or the Company itself, except as a regular consumer Have an undisclosed family relationship with an employee, customer, supplier or competitor of the Company 14
  15. 15. Equal Employment Opportunity (EEO) We place a high value on providing equal employment opportunity and maintaining a diverse workplace, free of discrimination We strive to make our work force reflect the rich diversity of our society and our customers Our firm recruits and hires without regard to race, color, sex, religion, national origin, ethnicity, age, marital status, sexual orientation, disability, veteran status or any other basis prohibited by law
  16. 16. EEO (cont.) We strive to administer all personnel actions such as hiring, compensation, promotions, benefits, transfers, layoffs, company-sponsored training, education tuition assistance, terminations, social and recreational programs in a consistent manner 16
  17. 17. Harassment-Free Workplace Supervisors are expected to make a personal commitment to our Equal Employment Opportunity Policy Be sensitive to the warning signs Everyone must work together to maintain a workplace committed to diversity and free of discrimination Be mindful of how your conduct affects others Watch out for harassment based on any protected characteristic: race, color, sex, religion, national origin, ethnicity, age, marital status, sexual orientation, disability, veteran status, etc. Harassment can take place on duty or off, in the office or on the road. Treat co-workers with respect and dignity Supervisor/supervisee personal relationships must be disclosed
  18. 18. Harassment-Free Workplace (cont.) Conduct which may constitute sexual harassment (quid pro quo): Offering employment benefits in exchange for sexual favors Unwanted sexual advances or propositions, including leering, gesturing, displaying suggestive objects or pictures, cartoons, and requiring the other person to participate Threatening reprisals if rebuffed
  19. 19. Harassment-Free Workplace (cont.) Conduct which may constitute sexual harassment (hostile environment): Physical contact: unwanted touching, impeding or blocking movements Verbal abuse of a sexual or graphic nature or comments about an individual’s body Nonverbal conduct: leering, gesturing, etc. Sexual letters, notes, posters, voicemail, or email Dirty jokes, screen savers, off color comments which can be overheard
  20. 20. Harassment-Free Workplace (cont.) Any incidents of discrimination or harassment must be reported to any one of: Your Supervisor Your Department Head Your Human Resources Representative Our company’s Compliance Officers Reporting is required.
  21. 21. Reporting Harassment What will happen if I make a report? Prompt investigation by knowledgeable staff Appropriate action to enforce the policy No adverse consequences for good faith reports A false report is a violation in itself
  22. 22. Harassment-Free Workplace (cont.) NO RETALIATION Our company prohibits retaliation for lodging complaints under the harassment-free workplace policy Retaliation would be a separate violation of the policy and could subject an employee to immediate termination, even for a first offense
  23. 23. Health, Safety and the Environment Our policy is to comply with all applicable health, safety and environmental laws and regulations Failure to do so can have serious consequences for you, our company, and the safety of others Our firm and its employees may be liable not only for the costs of clean- up, but also for civil or criminal penalties for violations of environmental laws Everyone is responsible for preventing incidents and for responding and reporting promptly should they occur
  24. 24. Use of the Company Time, Property and Supplies The Company’s systems are for company business (Any personal use should be limited and reasonable) Your email and voicemail are company property Do not use the Company’s Internet connection for inappropriate activities Respect the copyright laws: do not download unauthorized software, music, or other intellectual property When in doubt, ask your supervisor
  25. 25. Implementation of this Statement Compliance Officers’ responsibilities: 1. Ensure the Statement gets to you 2. Review operations for compliance 3. Review the Statement to keep it current 4. Direct investigations of reported or suspected violations 5. Determine action for violations Compliance officers report to the Audit Committee of the Board of Directors
  26. 26. Reporting Violations Reporting violations is required Early reporting is most effective. All reports will be treated as confidential to the extent appropriate Abuse of the system is a violation Failure to detect violations could be a violation (Standard: “know or should have known”) You are obligated to be aware
  27. 27. How Do You Report? In person or in writing Report to any one of the following: Your Supervisor Department Head Human Resources Representative a Company Lawyer, or a Company Compliance Officer
  28. 28. How do You Report? (cont.) You are not restricted to your reporting chain Anonymous reports are better than none, but they make the appropriate resolution more difficult 28
  29. 29. Investigations All reports will be investigated: At the direction of the Compliance Officers with the help of HR, Legal, and Labor Relations Cooperation with an investigation is a requirement of employment Relevant documents or data may not be destroyed You may not conduct your own investigation
  30. 30. Disciplinary Actions Actions up to and including termination may be taken for: Actual violations Withholding or destroying information Failure to supervise violators Retaliation against a whistle blower Failing to report a violation
  31. 31. Behavior We Expect From All Employees…. Maintain a work environment that upholds the highest standards of business ethics and workplace behavior throughout all of our operations Respect the law and look to the Company Business Conduct Statement for guidance on a wide variety of business situations. Honor both the letter and the spirit of our policies. Consult your supervisor, human resources representative, or a compliance officer for detailed interpretations, questions or concerns
  32. 32. Additional Notes Additional Business Conduct Training may include: Financial Accounting / Prohibited Conduct Insider Information and Confidentiality Anti-Trust and Competition Political & Charitable Contributions International Business Foreign Corrupt Practices Act Anti-Boycott Laws and Embargoes
  33. 33. Q&A: Questions and Actions Paul Falcone 33