Joe Murphy, CCEPAuthor, 501 Ideas for Your Compliance and Ethics Program (SCCE; 2008)

JEMurphy@voicenet.com

February 10, 2009

THE IDEAL WORLD FOR TODAY’S ETHICS & COMPLIANCE OFFICER

ICEP

Pronounced “I Keep” As in “I Keep My Job”

• INDEPENDENCE

• CONNECTEDNESS

• EMPOWERMENT

• PROFESSIONALISM

CECO WHITE PAPER

“Leading Corporate Integrity: Defining the Role of the Chief Ethics and Compliance Officer.”

http://www.corporatecompliance.org/Content/NavigationMenu/Resources/Surveys/CECO_Definition_8-13-072.pdf

IT’S LEGAL STUFF – JUST GIVE IT TO THE LAWYER?

1. Your lawyer as a witness?

2. Loss of privilege.

3. Mandatory “Miranda” warnings.

4. Management skills, not legal skills.

5. Just legal business as usual.

6. It’s ethics, not just law.

7. Legalistic approaches.

8. It’s more than giving advice.

9. Not everyone may call a lawyer.

10.More than putting out fires.

BOARD RESOLUTION

• ENDORSE COMPLIANCE & ETHICS PROGRAM • DELEGATING BROAD POWERS TO CECO. • CECO REQUIRED TO REPORT TO BOARD

– ANY ALLEGATIONS ABOUT A SENIOR OFFICER,

– ANY INSTANCE WHERE CECO IS THREATENED, AND

– ANY RECOMMENDATION OF CECO THAT IS NOT FOLLOWED.

• AN INDEPENDENT BOARD COMMITTEE HAS OVERSIGHT RESPONSIBILITY.

THE BOARD IN CONTROL

• CECO IS RESPONSIBLE TO BOARD. THE BOARD:

– HIRES AND FIRES,

– DETERMINES PAY, BENEFITS & RESPONSIBILITY, AND

– HEARS DIRECTLY & REGULARLY FROM CECO.

– NO FILTERS BETWEEN CECO & BOARD.

– MANDATORY EXIT INTERVIEW BY BOARD COMMITTEE WHEN CECO DEPARTS

POWER-UP THE BOARD

• PLENTY OF COMPLIANCE & ETHICS EXPERTISE AVAILABLE TO BOARD

• OUTSIDE COUNSEL, C& E EXPERTISE

• BOARD FULLY TRAINED ON

– THE SENTENCING GUIDELINES, AND

– WHAT MAKES A COMPLIANCE & ETHICS PROGRAM WORK.

POWER-UP THE BOARD

ONE MEMBER OF THE BOARD IS A CECO FROM ANOTHER COMPANY

See Murphy & Roach, “Compliance Officer on Board: What Your Audit Committee Is Missing,” 20 ETHIKOS 12 (Nov/Dec 2006).

CECO AS A PLAYER

• PART OF COMPANY’S POWER STRUCTURE

• ATTENDS THE IMPORTANT BUSINESS MEETINGS WITHOUT ASKING

• PART OF THE EXECUTIVE TEAM

• ACCESS TO ALL PEOPLE, PLACES & RECORDS

• CECO LISTED IN COMPANY’S ANNUAL REPORT

PROTECTING CECO INDEPENDENCE

• CECO IS FULLY PROTECTED:

– EMPLOYMENT CONTRACT

– AMPLE SEVERANCE

– INDEMNIFICATION, AND

– FULL D&O INSURANCE COVERAGE.

INFORMAL PROTECTIONS

– TRAIN BOARD & MANAGERS ON WHAT C&E IS

– NEVER BE ISOLATED

SO CECO CAN AFFORD TO BE COURAGEOUS

See Murphy, “Protections for Compliance People,” 19 ETHIKOS 1 (Jan/Feb 2006).

POSITIONING THE CECO

• TITLE & TRAPPINGS OF A SENIOR OFFICER

• PHYSICALLY LOCATED WITH CEO & OTHER EXECUTIVES

PROFESSIONAL CECO

• CECO IS A COMPLIANCE & ETHICS PROFESSIONAL

• BOUND BY STRONG PROFESSIONAL ETHICAL STANDARDS

• PARTICIPATES IN COMPLIANCE & ETHICS ORGANIZATIONS

• NETWORKS WITH OTHER C&E PROFESSIONALS

• COMPANY HAS AGREED TO CECO’S PROFESSIONAL STANDARDS

SCCE CODE OF PROFESSIONAL ETHICS

Rule 2.4

CEPs shall keep senior management and the highest governing body informed of the status of the compliance and ethics program, both as to the implementation of the program and about areas of compliance risk.

http://www.corporatecompliance.org/Content/NavigationMenu/Res

ources/ProfessionalCode/SCCECodeOfEthics_English.pdf

PROFESSIONAL CECO - NETWORKING

• SCCE – WWW.COROPORATECOMPLIANCE.ORG

• CCEP CERTIFICATION –

http://www.corporatecompliance.org/AM/Template.cfm?Section=CCEP

• SCCE SOCIAL NETWORK - http://community.corporatecompliance.org/CORPORATECOMPLIANCE/CORPORATECOMPLIANCE/eGroups/Default.aspx

– COST OF THE SOCIAL NETWORK – FREE

FINANCIAL INCENTIVES

• PAID ON AN EXECUTIVE SCALE

• INCENTIVES NOT TIED TO SHORT TERM PERFORMANCE

(SEE MY PRESENTATION ON INCENTIVES IN COMPLIANCE PROGRAMS – YOU SHOULD BE PAID MORE!)

INFORMAL EMPOWERMENT

• CECO HAS EASY ACCESS TO THE BOARD

• INFORMAL CONTACT WITH CHAIR OF BOARD’S AUDIT COMMITTEE

• INFORMAL LUNCHES WITH BOARD MEMBERS

• IN REGULAR EMAIL CONTACT WITH BOARD MEMBERS.

INFORMAL EMPOWERMENT

CEO SUPPORTS BY ACTIONS, NOT WORDS

• CEO EXECUTIVE MEETINGS• TRAINING STARTS AT THE TOP • TAKE YOUR CECO TO LUNCH

Murphy, 501 Ideas for Your Compliance and Ethics Program ## 103, 106 & 110 (SCCE; 2008)

RESOURCES TO DO THE JOB

• CECO HAS RESOURCES TO GET THE JOB DONE

• CONTROL OVER WHO HOLDS SUBORDINATE C&E POSITIONS THROUGHOUT COMPANY

• CONTROL OVER HOW C&E PEOPLE ARE TREATED

• INTERDEPARTMENTAL, HIGH-LEVEL COMMITTEE SUPPORTS CECO

RESOURCES TO DO THE JOB

• CECO HAS DIRECT ACCESS TO LEGAL ADVICE

– IN-HOUSE & OUTSIDE LAWYERS

– COUNSEL HAS EXPERTISE IN THE FIELD OF COMPLIANCE & ETHICS

– COMPANY COMPLIANCE LAWYER

A WORD FROM THE USSC

“To carry out such operational responsibility, such individual(s) shall be given adequate resources, appropriate authority, and direct access to the governing authority or an appropriate subgroup of the governing authority.”

§8B2.1. (b)(2)(C) Effective Compliance and Ethics Program

THE IDEAL WORLD FOR TODAY’S ETHICS & COMPLIANCE OFFICER

QUESTIONS?

(Can I really try this at home?)