Roadmap For An Effective Compliance And Ethics Program

1
Roadmap For An Effective Compliance And Ethics
Program

• The Top Ten Things
• the Board Must Know

Name of Presenter Title Date
2
Not Just About Sentencing

• United States Sentencing Guidelines
  (Guidelines), which address criminal conduct,
  are the foundation for compliance and ethics
  programs that address all misconduct (Program).
• 2004 Amendments to the Guidelines set forth
  specific goals for Programs.
• The Department of Justice and the SEC measure
  Programs against Guidelines standards when
  considering actions against entities.
• Other government agencies such as HHS, EPA and
  State also use the Guidelines as the principle
  benchmark for Programs.

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Key Requirements for Program

• 1. Board needs to be knowledgeable about and
  oversee the Program.
• 2. Must establish a tone at the top that
  demonstrates corporate commitment to ethical
  conduct and compliance with the law.
• 3. Requires an organizational structure where
  senior personnel have overall responsibility for
  the Program and individual responsible for
  day-to-day operations has appropriate authority
  and access to the Board or subcommittee of the
  Board.
• 4. Program must have adequate resources.
• 5. The Company must have appropriate corporate
  standards and procedures designed to achieve
  compliance.

4
Key Requirements for Program (continued)

• 6. Effective compliance training should be
  provided and Board needs to participate.
• 7. A confidential and anonymous disclosure
  mechanism (hotline) is required.
• 8. Must provide incentives to perform consistent
  with Program and apply consistent disciplinary
  measures for misconduct (carrot and stick).
• 9. Risk Assessment drives the Program.
• 10. The Program needs to be kept effective and
  regularly evaluated and revised as appropriate.

5
Board Must Know About and Oversee Program

• Guidelines Require
• The Board shall be knowledgeable about the
  content and operation of the compliance and
  ethics program and shall exercise reasonable
  oversight with respect to the implementation and
  effectiveness of the compliance and ethics
  program. (8B2.1(b) (2) (A)).
• Implementation
• This training.
• Regular written reports
• to be supplied

6
Tone at the Top

• Guidelines Require
• Establishment and maintenance of an
  organizational culture that encourages ethical
  conduct and a commitment to compliance with the
  law. (8B2.1 (a) (2)).

• Implementation
• to be supplied

7
Organizational Structure

• Guidelines Require
• High level personnel who have substantial control
  over the organization or who have a substantial
  role in making policy are responsible for the
  compliance program. ( 8B2.1(b) (2) (B).
• Day-to-day operational responsibility for the
  program delegated to individuals who report to
  high level personnel. Individuals responsible for
  day-to-day operations must have . . . appropriate
  authority and direct access to the governing
  authority or an appropriate subgroup of the
  governing authority (8B2.1(b) (2) (C)).

8
Implementation of Organizational Structure
to be revised appropriately
9
Program Must HaveAdequate Resources

• Guidelines Require
• Individuals responsible for day-to-day operations
  must have adequate resources . . ..(8B2.1(b) (2)
  (C)).

• Implementation
• Budget for Program for last year _____
• Staffing for Program for last year ______
• Budget for Program this year ______
• Staffing for Program this year ______

10
Compliance Standards and Procedures

• Guidelines Require
• The organization shall establish standards and
  procedures standards of conduct and internal
  controls designed to prevent and detect
  misconduct. (8B2.1 (b) (1)).

• Implementation
• to be supplieddiscussing code of conduct,
  policies etc.

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Compliance Training

• Guidelines Requirements
• The organization shall take reasonable steps to
  communicate periodically and in a practical
  manner its standards and procedures, and other
  aspects of the compliance and ethics program, to
  the Board, high level personnel, substantial
  authority personnel, the companys employees, and
  as appropriate, the companys agents by
  conducting effective training programs and
  otherwise disseminating information appropriate
  to such individuals respective roles and
  responsibilities. (8B2.1(b) (4) (A)).

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Compliance Training (continued)

• Implementation
• to be suppliedidentifying training courses,
  when given, who took them (by category), what is
  to be provided in the future etc.

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Hotline

• Guidelines Require
• The organization shall take reasonable
  steps---(C) to have and publicize a system, which
  may include mechanisms that allow for anonymity
  or confidentiality, whereby the organizations
  employees and agents may report or seek guidance
  regarding potential or actual misconduct
  without fear of retaliation. (8B2.1(b)(5)(C)).
• Sarbanes-Oxley imposes similar requirements.

• Implementation
• to be supplied

14
Carrots Sticks

• Guidelines Require
• The organizations compliance and ethics program
  shall be promoted and enforced consistently
  throughout the organization through (A)
  appropriate incentives to perform in accordance
  with the compliance and ethics program and (B)
  appropriate disciplinary measures for engaging in
  misconduct and for failing to take reasonable
  steps to prevent or detect misconduct.
  (8B2.1(b)(6)).
• Particularly important with regard to senior
  management who must set the tone at the top and
  whose performance and compensation may be
  considered by the Board.

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Carrots Sticks (continued)

• Implementation
• to be supplied

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Risk Assessment

• Guidelines Require
• The organization shall periodically assess the
  risk of misconduct and shall take appropriate
  steps to design, implement, or modify the
  Program to reduce the risk of misconduct
  identified through this process. (8B2.1(c)).

Implementation to be supplied
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Program Needs to be Kept Effective and Regularly
Evaluated

• Guidelines Require
• The organization shall take reasonable steps(A)
  to ensure that the organizations compliance and
  ethics program is followed, including monitoring
  and auditing to detect misconduct and B) to
  evaluate periodically the effectiveness of the
  organizations compliance and ethics program.
  (8B2.1 (b) (5) (AB)).
• After misconduct has been detected, the
  organization shall take reasonable steps to
  respond appropriately to the misconduct and to
  prevent further similar misconduct including
  making any necessary modifications to the
  organizations compliance and ethics program.
  (8B2.1 (b) (7)).

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Program Needs to be Kept Effectiveand Regularly
Evaluated (continued)

• Implementation
• to be supplied