building an effective compliance and ethics program · building an effective compliance and ethics...

© 2011 The Corporate Executive Board Company. All Rights Reserved. CELC9549211SYN

CORPORATE INTEGRITY PRACTICECOMPLIANCE AND ETHICS LEADERSHIP COUNCIL™

Building an Effective Compliance and Ethics ProgramData Insights for Driving Performance

1 March 2011

2

From the COMPLIANCE AND ETHICS LEADERSHIP COUNCIL™of the LEGAL AND COMPLIANCE PRACTICE www.celc.executiveboard.com


OBJECTIVES FOR OUR MEETING

Key Goals

1. Benchmark current program structure, resources and performance against peers.

2. Better understand the components of program effectiveness and the activities that drive it.

3. Walk away with at least one idea to improve compliance and ethics program effectiveness.


From the COMPLIANCE AND ETHICS LEADERSHIP COUNCIL™ of the LEGAL AND COMPLIANCE PRACTICE www.celc.executiveboard.com


3

INCREASING REGULATORY COMPLEXITY

Legislation and Enforcement That Impacts the Energy and Utilities Industries

Regulatory complexity across a greater number of jurisdiction only increases difficulties of meeting changing energy production and distribution demands.

■■ The financial crisis altered the relationship among governments, companies, and consumers, increasing regulatory scrutiny on all companies.

UK Bribery Act—Britain’s new law increases pressure on multinational companies to revise their anti-bribery controls and procedures.

EPA—Regulating carbon emissions to address greenhouse gas.

EU Data Privacy Directive—Complying with existing data privacy protections in Europe continues to present a challenge, especially as individual European countries roll out distinct provisions.

Consumer Protection—Modernizing the toxic substances act.

Heightened Enforcement

■■ In 2009, there were 168 Foreign bribery enforcement cases in the United States.

■■ FEAC enforcement staff received 93 self-reports in FY2010, down from 122 in FY2009. However, more non-disclosed investigations were opened in 2010 than in 2009.

■■ OSHA launched New Violator Program, enhancing enforcement and increasing penalties.

Impeding Business“The unintended consequence of

Section 6 [of the UK Bribery Act] is to potentially criminalize perfectly legitimate and proportionate promotional expenditure and hospitality practices…For the pharmaceutical industry, [it] could therefore impede the vital interaction between the industry and government-employed health care professionals and have far-reaching ramifications. In countries such as China, virtually every doctor is government-employed.”Corporate Compliance Office, Fortune

500 Company

4



ROAD MAP FOR THE PRESENTATION

Program Effectiveness

and Assessment

Current State of Compliance

and Ethics

Impact of Corporate Culture on Program

PerformanceQ&A




5

CELC’S STATE OF THE FUNCTION SURVEY: DEMOGRAPHICS

Respondents by RevenueEnergy and Utilities Industry Respondents

A range of companies in the energy and utilities industry responded to our biennial State of the Compliance and Ethics Function Survey.

■■ A total of 192 members across multiple industries participated in our survey that tests core program elements including the following:

– Program structure

– Reporting lines

– Budget size and allocation

– Compliance activities and effectiveness

– Allegations and investigations.

4% Less Than $1 Billion

30% $1–$2.99 Billion

37% $3–$9.99 Billion

8% More Than $60 Billion

0% $30–$59.99 Billion

21% $10–$29.99 Billion

n = 23.

46% Fewer Than

5,000

12% 50,000 to 99,999

21% 5,000 to 9,999

4% 20,000 to 49,999

17% 10,000 to 19,999

n = 23.

Respondents by Employee SizeEnergy and Utilities Industry Respondents

State of the Function■■ Biennial survey administered by the Compliance and Ethics Leadership Council

■■ Provides comparative data on staffing, budgetary spending, and function activities

■■ Industry-specific information available for our energy and utilities members



6

PROGRAM BUDGETS REMAIN FLATCompliance budgets in the energy and utilities industries remain below those of other highly regulated industries.

■■ Less than 20% of respondents expect to increase the program’s budget in 2011.

■■ Salaries and benefits make up the largest piece of the compliance budget, with limited resources to devote elsewhere.

Forecast Change in Compliance Budget for 2011 (in Millions)Energy/Utility Industry Respondents

Average Distribution of 2010 Compliance and Ethics Budget Energy/Utility Industry Respondents

n = 17.

n = 17.

InsuranceEnergy and Utilities

Pharma/Biotech

RetailHealth Care/Health

Insurance

n = 15.n = 17. n = 15. n = 7.n = 9.

Training and Communication

Vendors

Internal Training/

Communication

Salaries, Bonuses,

and Benefits

Outside Consultants

Travel Compliance and Ethics

Training

Technology-Regulatory

Compliance/Business Controls

Technology-Performance Compliance-

Related

Other

17.6% Increase

35.3% Decrease

47.1% No Change

Median 2010 Compliance and Ethics Budgets (in USD Millions)

1.1

10.0

3.1 2.7

0.5

50%

15%10%

6%2% 2%

7% 4% 4%

$1.5 Million All Company

Median




7

CORPORATE LOCATION OF THE COMPLIANCE PROGRAM

Location of the Compliance and Ethics Program, by IndustryPercentage of Programs, 2010

As in 2008, a majority (54%) of compliance and ethics programs reside in the legal department.

■■ Energy companies locate the compliance and ethics program in the Legal department almost twice as frequently as do Utility companies.

Legal Department

Independent Function

Other Location1

1 Other Locations include the risk function, internal audit, finance, human resources, operations, and other functions.

Utilities

(n = 13.)

Energy

(n = 11.)

All Companies (n = 196.)

Industry

64%

27%

9%

38%

8%

54%

54%

25%

21%



8

SHIFT IN COMPLIANCE REPORTING LINES

Primary Reporting Relationship of the Chief Compliance and Ethics OfficerPercentage of Programs, 2006 Through 2010

Compliance and ethics programs most frequently maintain direct-line reporting to the General Counsel.

■■ In the energy and utilities industries, sixty-four and 23% of compliance and ethics officers directly report to the GC, respectively.

■■ CELC analysis finds that reporting to the CEO and Board leads to greater satisfaction with program structure and is more important for than either program independence or location.

48% 48%

44%

20%

23%

32%

12%13%

14%

10%9%

6%

2%4%5%

1%2%

4%

1%2%

4%

0%1%

3%

0%1%

2% 2%0%1% 1%

2%1%

Gener

al Coun

sel

Board A

udit

Comm

ittee

Board C

omplia

nce

Comm

ittee

Head o

f Hum

an R

esour

ces

Full B

oard o

f Dire

ctors

Inte

rnal

Audit

Direct

orCOO

CFO

Board N

omin

atin

g/

Gov. C

omm

itteeCEO

Chief

Risk

Offi

cer

2006 (n = 101.)

2008 (n = 136.)

2010 (n = 196.)

Access Matters

Average Satisfaction 1 with Structure, by Compliance Officer’s Direct Reporting Relationships

1. Board Audit Committee 3.862. CEO 3.793. GC 3.754. Chief Risk Officer 3.225. CFO 3.00

1 Satisfaction was evaluated on a five-point scale (Very Satisfied = 5, Very Dissatisfied = 1).




9

(42%)

58%

(38%)

62%

(41%)

59%

EMBEDDING COMPLIANCE AND ETHICS STAFF IN THE BUSINESS

Compliance and Ethics staff sizes remain relatively unchanged over the past year.

■■ On average, more than half of FTE compliance and ethics staff are located in the business.

■■ A higher proportion of FTE staff located in the business is significantly related with greater effectiveness at developing policies and procedures and driving investigations.

All Companies

(n = 130.)

1 Sample sizes were not sufficient to display ratios for all industry groups.

Utilities(n = 9.)

Energy(n = 8.)

Percentage of Compliance Staff Not Located Full-Time in Business

Percentage of FTE Compliance Staff Located in Business (i.e., Embedded)

2009

2010

Median 2009–2010 Compliance and Ethics FTEs

Ratio of Embedded and Non-Embedded Compliance and Ethics Staff, by Industry1

Mean Proportion of Total Compliance and Ethics Staff Located in the Business, 2009

Energy Utilities All Company Median

9.0

8.0

6.0 6.0

7.5

8.5



10

THE COMPLIANCE AND ETHICS RISK DASHBOARDHealth, safety, and environmental concerns continue to be top of mind for energy and utilities companies.

■■ Not surprisingly, data privacy and bribery have grown in importance over the last five years.

Health/Safety Policy,

Regulation, or Law

Violations

Environmental Regulation or Law Violations

Data Privacy

Bribery and

Corruption

n = 23.

n = 23.

n = 22.

High Stakes“We’ve opened more investigations…we’ve

had more convictions, higher penalties and fines in the last two years than we’ve had in any other two-year period.”Tony West Assistant Attorney General,

Civil DivisionU.S. Department of Justice

Most Significant Compliance Risks Percentage of Energy/Utilities Companies Selecting as a Top-Three Risk, 2010

Integration of Compliance Risk Assessment Activities with ERM EffortsPercentage of Energy/Utilities Respondents, 2010

Type of Risk Assessment Process Percentage of Energy/Utilities Respondents, 2010

52%

43%

26%22%

35% No

50% Hybrid

30% Yes

35% Already

Integrated with ERM

23% Top-Down

27% Bottom-Up




11

23.2

10.2

13.5

2.5

17.3

2.7

6.3

3.0

6.8

2.6

6.1

4.2

9.0

5.4

6.9 6.9

Bankin

g and

Finan

cial S

ervic

es

n =

14.; n

= 13

.In

sura

nce

n =

8.

Health

Car

e an

d

Health

Insu

ranc

e

n =

9.

Pharm

aceu

ticals

and B

iote

chno

logy

n =

11.Utiliti

es

n =

10.; n

= 9

.

High

Tech

nolo

gy an

d

Telec

omm

unica

tions

n =

9; n =

8.

Consum

er P

roduc

ts,

Food, and

Tobac

co

n =

10.; n

= 9

.

Man

ufac

turin

g/Aut

o/

Heavy

Man

ufac

turin

g

n =

11.; n

= 10

.

COMPLIANCE AND ETHICS ALLEGATIONS PER EMPLOYEE

Total Allegations and Hotline Allegations, by IndustryMedian Number of Allegations per 1,000 Employees, 2009

Allegations per employee are generally high across “regulated” industries, particularly in the utilities sector.

■■ Across all industries, 54% of allegations are reported through the hotline.

■■ Average investigation case cycle time is 42 days.

Total Allegations

Hotline Allegations

All Companies Median: Total = 9.3

All Companies Median: Hotline = 3.9

9.3

3.9

DERF 11-0138

Catalog # ■■ CELC7415911SYN

Title ■■ ST: State of the Function

12





and Assessment


and Ethics


PerformanceQ&A




13

WHAT CONSTITUTES AN EFFECTIVE PROGRAMWhile the goals and value of program assessments vary by purpose and audience, the outcome should reinforce a standing program objective.

■■ Whenever possible, assessment should be based on actual regulatory results or changes in observed employee behavior.

■■ Methods for assessment vary by element, but include:

– Self-Assessment

– Internal Efficiency Review

– Industry Benchmarks

– Peer Review

– Regulatory Review

– External Assessment

Program Elements for Possible EvaluationElements Testing in Typical Program Review

Measuring Program EffectivenessKey Challenges

1. Identifying Credible Indicators of Program Performance— It is hard to establish indicators when regulatory expectations constantly change and management behaviors are hard to objectively assess

2. Finding Relevant Data—It is hard to find meaningful benchmarking data with actionable analytics

3. Achieving Consistency in Program Monitoring—It is hard to develop a useful frame for evaluating program success and ensuring consistency and objectivity in its use

4. Prioritizing Activities Based on Measurements—It is hard to take meaning from existing metrics

Measuring and Reporting Effectively■■ Monitoring and Auditing■■ Reporting and Disclosures

Risk Management■■ Compliance and Ethics Risk Assessment■■ Regulatory Compliance

Policies, Procedures, and Controls ■■ Policies and Procedures ■■ Records Management and Compliance Documentation

Training, Communication, and Culture■■ Compliance and Ethics Training■■ Corporate Culture■■ Employee Incentives

Investigations and Discipline ■■ Hotline Usage and Metrics ■■ Investigation Procedures

Program Design and Structure■■ Governance and Structure■■ Delegation of Authority



14

THE BALANCED COMPLIANCE SCORECARD

Potential Program Metrics

Measures ability to meet expectations of key regulators, corporate monitors, or other governmental bodies. Metrics include the following:

■■ Number of regulatory violations compared to industry average

■■ Regulatory examination results

■■ Risk assessment results and resultant process changes

■■ Year-over-year volume and costs of fines, penalties, and legal settlements

■■ Timeliness of reporting trading activities

Measures ability to facilitate business goals while still ensuring compliance. Metrics include the following:

■■ Feedback from senior business leaders on compliance’s effectiveness and support

■■ Efficiency of regulatory approval process

■■ Demonstrated business knowledge and acumen of compliance staff

■■ Applicability of discretionary compliance training materials

Measures the cultural condition in which employees operate, likely adherence to policies, and general susceptibility for misconduct. Metrics include the following:

■■ Percentage of employees who fear retaliation in response to reported allegations

■■ Company responds quickly and consistently to verified or proven unethical behavior

■■ Percentage of employees who feel direct manager respects his/her employees

■■ Percentage of employees who feel direct managers quickly respond to minimize operational problems when they are identified

■■ Deviation from training plan goal

Measures the efficiency at which compliance and ethics programs meet objectives. Metrics include the following:

■■ Number of identified compliance gaps, material weaknesses, or policy violations

■■ Compliance cost per $Billion in gross revenue

■■ Number of operational process improvements made annually

■■ Allegation and investigation case-cycle time

■■ Inventory of relevant policies, procedures, and guidelines is maintained and easily accessible

Regulatory Metrics Operating Business Metrics

Employee/Cultural MetricsFunctional Metrics

DERF

Catalog # CELC5665510SYN

Title

To accurately assess performance, compliance and ethics officers must capture feedback from a range of stakeholders.

■■ Effective compliance and ethics programs satisfy competing stakeholder demands (governments/regulators, investors, public) while enabling the business to operate successfully.

■■ This presentation will focus on measurement of functional and employee/cultural metrics.




15

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1.00

2.00

3.00

4.00

5.00

1.00

2.00

3.00

4.00

5.00

1.71

3.44

3.78

3.43

4.003.83

3.52 3.63

4.04

3.45

4.30

3.914.14

4.37

4.00

WHAT DO WE DO WELL?

Assessment of Activity Effectiveness 1Energy/Utility Industry Respondents, 2010

Energy/Utility programs feel most effective at investigations and training activities.

■■ Industry respondents consider themselves less effective driving program outcomes (e.g., measuring effectiveness or improving risk management).

Measuring and Reporting Effectively

Group Average 3.64

Group Average 3.75

Policies, Procedures, and Controls

Group Average 4.17

Investigations and Discipline

Group Average 3.68

Risk Management

Group Average 4.10

Training and Communication

Very Effective

Very Ineffective

n = 23.

1 Effectiveness was evaluated on a five-point scale (Very Effective = 5, Very Ineffective = 1).



16

DETERMINING COMPLIANCE AND ETHICS PRIORITIES

Priority Scores 1 of Compliance ActivitiesTop Eight Priority Scores for Compliance Activities, Energy/Utility Respondents 2010

On average, programs place a higher priority on compliance training and enforcing policies and procedures.

■■ Energy and utility companies show the greatest opportunity for investment in regulatory tracking, risk assessment, and training.

Trac

kin

g R

egu

lato

ry

Dev

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ents

Co

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lian

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Ris

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sses

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t

Co

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nd

Eth

ics

Trai

nin

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rog

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En

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om

plia

nce

an

d

Eth

ics

Po

licie

s/P

roce

du

res

Dev

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om

plia

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an

d

Eth

ics

Po

licie

s/P

roce

du

res

Co

mp

lian

ce

Ris

k M

on

ito

rin

g

Man

agin

g R

elat

ion

ship

s w

ith

Reg

ula

tors

Co

mp

lian

ce R

isk

Mit

igat

ion

4.73

4.213.88

3.51

3.06 2.952.79 2.70

n = 23.

1 Priority scores are calculated by (Importance – Current Effectiveness) × Importance. The result is a weighted score highlighting the relative importance of a particular activity toward program success.


17





and Assessment


and Ethics


PerformanceQ&A



18

CELC’S CULTURAL DIAGNOSTIC SURVEY

The Council’s Cultural DiagnosticEmployee Survey and Scale

Multiple IndustriesParticipating companies represent the following industries: Energy, Drilling and Gas, Insurance, Pharmaceuticals and Medical Supplies, Financial Services, Non-Profit, Professional Services, Retail, Construction and Building Materials, Manufacturing, Food Services, Chemical, and Consumer Product Goods.

Global CoverageRespondents work in more than 80 countries across North America, Europe, Asia, the Pacific Rim, and Latin America.

All Employee LevelsEmployees at all levels, from the CEO and senior management to middle management and frontline employees.

All Business FunctionsRespondents represent all business functions, including Finance, Sales, Marketing, Information Technology, Call Centers, Human Resources, and Manufacturing.

Key Demographics of Survey Participants to Date

Survey StatementsStrongly

Agree AgreeSlightly Agree Neither

Slightly Disagree Disagree

Strongly Disagree

I can report unethical behavior or practices without fear of retaliation.

My company responds quickly and consistently to verified or proven unethical behavior.

I am often exposed to situations that could lead to inappropriate conduct.

All CELC member companies can launch our Cultural diagnostic survey at their company—more than 120 companies have in the past three years.

■■ The survey allows members to rigorously assess culture across their organization and benchmark it against peers.

■■ Approximately 500,000 employees from 120 companies have completed the Cultural Diagnostic Survey.

1 3

2 4

COMPLIANCE AND ETHICS LEADERSHIP COUNCIL™www.celc.executiveboard.com

DERF


Title

Note: All questions were coded or recorded in such a way to directionally be on the same scale.




19

IMPROVING CULTURE REDUCES MISCONDUCT

Distribution of Employees By Overall Perception of Culture 1Percentage of 2009 Respondents in Each Category and Their Corresponding Observation/Reporting Rates

Employees with “Least Favorable” perceptions of company culture are nearly 10 times more likely to observe misconduct than employees with “Most Favorable” perceptions of culture.

■■ Interestingly, employees with “Neutral” perceptions are the group most likely to answer “don’t know” when asked if they observed misconduct at their company in the past year. This suggests that “Neutral” employees lack the awareness needed to identify misconduct in the workplace.

■■ The solution for improving perceptions of corporate Integrity for “Neutral” employees should include training and communications that address what constitutes misconduct in the workplace, as well as the importance of reporting.

10.1% 23.7% 61.6%

Observation Rate 2—Yes

61.8% 33.9% 16.6% 7.2%

Observation Rate 3—Don’t Know

23.0% 31.7% 24.2% 9.5%

Reporting Rate 4 44.9% 45.6% 51.2% 70.5%

4.6%

Least Favorable

Neutral

Moderately Favorable

Most Favorable

n = 109,281 from 2009.

1 Culture is assessed using CEB’s cultural diagnostic survey. The survey assesses key components of culture across companies and has been taken by more than 130 companies and 500,000 employees. For more information, please see appendix page 28.

2 Percentage of employees within category who observed misconduct in past year.3 Percentage of employees within category who responded “Don’t Know” when asked if they had observed misconduct over

the past year.4 Percentage of employees within category who reported the misconduct they observed.

DERF


Title



20

Fostering a stronger culture can have a dramatic impact on misconduct levels and reporting rates

■■ The Consequences of Culture on Risk Profiles:

– Organizations with higher integrity index scores have significantly fewer observed instances of misconduct.

– Organizations with higher integrity index scores have significantly higher reporting rates when misconduct is observed

What the Numbers MeanFor every 10,000 employees at a typical company, a total of 1,840 individuals may observe misconduct. However, a single low-scoring business unit may hold twice as many misconduct observations as a business unit with a high Integrity Index score.

High

Low

Integrity Index

High Integrity Business Unit

Management

Integrity Index = 6.21

Observation Rate = 7%

Reporting Rate = 75%

Non-Management




Business Unit 2

Management

Integrity Index = 5.85Observation Rate = 12%Reporting Rate = 66%Non-Management

Integrity Index = 5.58Observation Rate = 20%Reporting Rate = 45%

Low Integrity Business Unit

Management




Non-Management




LARGE INTEGRITY VARIATIONS EXIST ACROSS BUSINESS UNITS

Impact of Culture on Misconduct and Reporting RatesFindings from CELC’s Cultural Diagnostic Survey for One Company

Profile of a Typical CompanyActual Cultural Diagnostic Data







21

SMALL DIFFERENCES, BIG CONSEQUENCES

Inte

gri

ty In

dex

Sco

re

Individual Company Score

Relative to Employees at Top Quartile Companies, Employees at Bottom Quartile Companies Are…

1.6 times as likely to observe misconduct.

Two times as likely to observe HR–related misconduct.

Three times as likely to observe misconduct in high-risk compliance areas such as conflicts of interest or accounting irregularities.

Bottom Quartile (25th Percentile)

Top Quartile (75th Percentile)

Even relatively small changes in Integrity Index scores are linked to significant differences in misconduct levels.

■■ A few ethical missteps can have a significant impact on overall employee perceptions of a company’s culture of integrity and can increase the company’s risk profile.

4.8

5.0

5.2

5.4

5.6

5.8

6.0

6.2

4.8

5.0

5.2

5.4

5.6

5.8

6.0

6.2



22

The data shows a connection between health of corporate culture and total shareholder return.

■■ While one-year, three-year and five-tear total shareholder returns have modest levels of statistical significance and are positively correlated with Integrity Index levels, 10-year total shareholder returns have a strong, highly significant correlation with Integrity Index levels.

n = 34.

INTEGRITY DRIVES BUSINESS PERFORMANCE

Integrity Index Score and 10-Year Total Shareholder Return

10-Year TSR (Percentage)

Overall Integrity Index Score

Correlation (r) = 0.58Significance Level of Correlation: P-value < 0.01Summary: Positive relationship; statistical significance

(40)

(30)

(20)

(10)

0

10

20

30

5.0 5.2 5.4 5.6 5.8 6.0 6.2




23

COMFORT SPEAKING UP HAS THE STRONGEST RELATIONSHIP WITH LONG-TERM TSR

Relationship Between Comfort Speaking up and Long-Term TSR

For every 0.2-point increase in the comfort speaking-up score, companies tend to see a five-percentage point increase in average 10-year total shareholder return.

■■ Comfort speaking up is employees’ degree of agreement that

– They can report unethical behavior or practices without fear of retaliation at their company and

– They feel comfortable reaching out to someone at their company to seek advice about ethical dilemmas or concerns. 10

-Yea

r TS

R

Comfort Speaking Up Score

(40)

(30)

(20)

(10)

0

10

20

30

5 5.2 5.4 5.6 5.8 6 6.2 6.4

Correlation (r) = 0.60Significance level of Correlation: P-value < 0.01

n = 34.

Potential Drivers

Comfort speaking up:■■ Enables focus on accountability and product quality over individual reputation■■ Creates greater sense of trust and purpose■■ Fosters a problem-solving culture; driving innovation, performance, and risk mitigation

+28 Percentage Points



24

Top quartile companies outperformed the bottom quartile companies by more than 16 percentage points in 10-year total shareholder return.

HIGHER INTEGRITY, STRONGER LONG-TERM TOTAL SHAREHOLDER RETURNS

Average 10-Year Total Shareholder Return for Bottom and Top Quartile of 34 Companies

(7.4%)

8.8%

Top Quartile of Integrity Index

Bottom Quartile of Integrity Index

DERF 10-3454


Title HO: 15 April MHF

Correlation (r) = 0.58Significance level of Correlation: P-value < 0.01

n = 34.

Culture as Competitive Advantage?

While promoting a culture of integrity may not always be a high corporate priority, failure to properly engage with employees represents a strategic (as well as compliance) risk that threatens long-term competitive advantage.


25



KEY LESSONS

Executive Summary

1. Defining Effectiveness—A proper measure of compliance and ethics effectiveness balances competing demands of multiple stakeholders including regulators, business partners, employees, and the public.

2. Assessing Program Performance—Accurate program assessments require credible, results-based measurements, meaningful benchmarks, and a consistent evaluation standard.

3. Compliance and Ethics Program Performance—Across the utilities and energy industries, compliance programs should focus investment on the activities with the highest potential priority and returns: tracking regulatory developments, risk assessments, compliance and ethics training, and corporate culture.

4. Corporate Culture is a Lead Indicator of Actual Employee Behavior—Compliance and ethics officers that create high-integrity cultures decrease the most significant forms of business misconduct by 67%. In particular, Compliance and ethics officers should directly target specific employee perceptions, such as employee comfort speaking-up, that have a dramatic impact on both the instances of business misconduct but the likelihood that it is reported.

5. Corporate Culture and Business Performance—Significant correlations exist between specific components of corporate culture and business misconduct. For example, companies with a higher culture of integrity have 10-year total shareholder returns that are 16 percentage points higher than companies with low integrity scores.

26

From the COMPLIANCE AND ETHICS LEADERSHIP COUNCIL™ of the LEGAL AND COMPLIANCE PRACTICEwww.celc.executiveboard.com


Questions?


27

From the COMPLIANCE AND ETHICS LEADERSHIP COUNCIL™ of the LEGAL AND COMPLIANCE PRACTICEwww.celc.executiveboard.com


Appendix



28

CULTURAL DIAGNOSTIC SURVEY AND ENGAGEMENTAssess your company’s ethical culture and preemptively identify cultural risks before they lead to compliance failures.

■■ The Cultural Diagnostic Survey and Engagement is available as a fee-based stand-alone service.

■■ Contact David Reile for more information. [email protected].

“The Cultural Diagnostic survey has allowed our company

to identify some underlying cultural issues that our risk assessment process had not uncovered. It also provided information to business owners regarding where they should target limited resources for increased training and controls.”Chief Compliance OfficerHealthcare Services Company

DERF 10-5593


Title ■■ MR: CDS Summit Merchandiser

Almost 58% of employees at your peer companies do not share bad news and negative feedback because they fear it will negatively impact their careers. What are your employees not telling you?

The Corporate Executive Board’s Cultural Diagnostic Survey is an employee survey and diagnostic tool for senior Finance, Strategy, Legal, and Compliance executives that enables your company to do the following:

■■ Identify cultural weak spots that present increased risk—and missed strategic opportunities—for your organization.

■■ Benchmark your results against hundreds of thousands of employees across the globe.

■■ Analyze your findings by business unit and management level.

■■ Determine clear, actionable solutions to assess and improve your corporate culture.

Why Our Diagnostic Is Different

Guaranteed Data Quality

Established and extensive peer data set based on three years of research

Developed in collaboration with member companies and academics

Comprehensive Data Collection Tool

Paper and online survey tool including simple, easy-to-follow instructions

Customized data cuts by seniority, function and business unit, and geography

Custom Reports and Support

Custom benchmarking report with detailed analysis

Continued implementation support from your advisory team




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CULTURAL DIAGNOSTIC SURVEY AND ENGAGEMENT (CONTINUED)

“We received excellent support throughout the survey process.

CEB made the project very easy for us. This is a very valuable tool, and we really appreciate the professional support we received from the CEB staff.”Chief Compliance OfficerManufacturing Company

Through the online and paper survey, employees in all functions and levels assess the company’s ethical culture and susceptibility to risk.

■■ Assessments are based on 25 questions about company and department climate and five demographic questions.

■■ Eighteen of these questions collectively contribute to the Integrity Index Score, a proxy for the company’s cultural health.

Core Question Categories Other Question Categories

Sample Report Screenshots

Integrity Index:■■ Comfort Speaking Up■■ Organizational Justice■■ Openness of Communication■■ Clarity of Expectations■■ Tone at the Top■■ Direct Manager Leadership■■ Trust in Colleagues

In addition to the core questions, participants can include customizable question sets related to the following:

■■ Misconduct■■ Strategic Agility■■ Risk Management■■ Safety■■ Security (Available early 2011)■■ Quality (Available early 2011)

As a participant, you receive a detailed and customized report including the following:■■ Quantitative data on the strength of your organization’s culture of integrity■■ Indicators or red flags on how susceptible your organization is to multiple risk areas■■ Levels and types of risk areas observed by your employees in the past year■■ Rates at which employees report misconduct and the channels they use■■ Prescriptive guidance and tools for addressing identified gaps and opportunities

Customized Reports and Ongoing Guidance

1

Observed Misconduct, by Type Percentage of Survey Respondents

When we asked employees what type of misconduct they observed in

the past 12 months, they responded “yes” to observing the following.

ACME Company

Benchmark =

n=1751 employees

© 2010 The Corporate Executive Board Company. All rights reserved. © 2010 The Corporate Executive Board Company. All rights reserved. 2

Management Level Comparison Comfort Speaking Up

ACME Company

Comfort Speaking Up

Employee’s degree of

agreement that:

• they can report

unethical behavior or practices without fear of

retaliation.

• they can reach out to

someone at company to seek advice about

ethical concerns

n=49 n=1106 n=542 n=43

ACME Company Overall Average: 5.76

CELC Overall Benchmark: 5.73

5.60

5.54

5.76

6.02

= Position Level Benchmark



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COMPLIANCE AND ETHICS PROGRAM ASSESSMENT WIZARD™

Key Components

Identify your strengths and improvement opportunities with the Program Assessment Wizard.

■■ Compare your program’s effectiveness to standards set by world-class compliance and ethics programs.

■■ Identify your most significant improvement opportunities and start using CELC tools and best practices to close gaps.

■■ Want a 360-degree look at the Program Assessment Wizard? Visit the CELC Web site to use the Program Assessment Wizard Demo or take the full survey to discover your program’s full potential.

Web-Based Diagnostic SurveyAssess your compliance and ethics program across the following eight performance elements:

■■ Program structure and oversight■■ Standards and procedures■■ Compliance risk management■■ Training■■ Communications■■ Discipline and incentives■■ Allegation reporting and investigations■■ Program measurement and monitoring

Service PlanA customized service plan identifies your program’s vulnerabilities and provides ready-to-use tools and templates for program improvement.

Custom Benchmarking ReportUse your individualized benchmark report to compare your program’s performance against your peers and identify areas of greatest leverage for resource allocation.

DERF 09-3005


Title ■■ MR: Program Assistant Wizard 2009


CORPORATE INTEGRITY PRACTICECOMPLIANCE AND ETHICS LEADERSHIP COUNCIL™


building an effective compliance and ethics program · building an effective compliance and ethics...

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