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Benchmarking Compliance, Risk andAnticorruption Efforts: How Does Your Company
Compare?January 16, 2008
Presented by Corpedia & the Ethisphere Institute
Association of Corporate Counselwww.acc.com
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Panel
Moderator:Erica Salmon-Byrne
Presenters:Alex BrighamPresident and CEOCorpedia Corporation
Robert LeffelAssociate DirectorThe Ethisphere Institute
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Today’s topics…ACC-Corpedia recent benchmarking survey
External factors impacting internalcompliance & ethics programs
Goldman Sachs research
New government contractor ethics regulations
Ethisphere Institute work
What does it mean for the future?
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About Corpedia… Established 1998
500+ global clients
eLearning in 300+ compliancetopics
Code of ethics writing &training
Compliance programconsulting
Global risk assessmentsoftware
FCPA Audits
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Does Your Organization Have aChief Ethics Officer?
All Survey Participants
Does Your Organization Have aChief Compliance Officer?
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The CEO is becoming less involved on a daily basis
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Key takeawaysCEO increasing have less day-to-day responsibility/oversight forcompliance activities
Separate Chief Ethics Officer not necessary – but can beconsolidated into Chief Compliance Officer function (necessary)
Mandatory code training deep into the workforce is new ‘norm’regardless of industry – other topics less
Board of Directors should be trained in compliance; 1-2 hoursannually suffices
Risk assessment must be done – with eye on lack of Attorney-Client privilege
Separate ‘Ethics Guidance’ or Ombudsman role is not necessary
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About Ethisphere Institute research institute with associated
300+ corporate membershipcouncil
research and best practices inethical leadership and compliance
70,000+ CEO/Director magazinecirculation
global certification of orgs’compliance/ ethics programs andleadership
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Ethical companies outperform
Goldman Sachs Sustainability Index (GSSUSTAIN) outperforms relevant market
metrics 72% of the time – and hasoutperformed the overall market by 25%
since August 2005
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Goldman Sachs analyzed…Company’s ability to engage with “Millennials” (next generationof employees) who demand “alignment of personal andcorporate values”
Social leadership and disclosure
Gender diversity in employees, leadership and board
Compensation per employee
“policies, management systems and leadership to ensure ethicalbusiness conduct”
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Well-regarded companies areworth more…
“a company's reputation for being able to deliver growth, attract top
talent, and avoid ethical mishaps can account for much of the 30%-to-70% gap between the book value of most companies and their market
capitalizations. Reputation is a big reason why Johnson & Johnsontrades at a much higher price-earnings ratio than Pfizer, Procter &
Gamble than Unilever…”
What Price Reputation?
- July 9, 2007 issue
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Government contractor ratingFirst/only independent review of U.S. government contractorsethics and compliance program, based on the F.A.R. rules andFederal Sentencing Guidelines
Supported by members of NIH, DOJ and dozens of top law firmsand corporations
Analyzing top 1,500 federal contractors
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Lockheed Martin
EDS
PepsiCo
Avaya
Rockwell Collins
Ethisphere’s 2008 GovernmentContractor Ethics Program
Rankings is “nonpartisan andnon-confrontational.”
Other supporters and initial participants include…
Fluor Corp.
Computer SciencesCorporation
Pitney Bowes
Tyson Foods
“Ethisphere’s effort makessense. Voluntary disclosure ofinternal ethics procedures will
give us better means to dobusiness with the bestcontractors out there.”
- Senator Tom Carper, State ofDelaware
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Aggregate WeightingsAggregate Weightings
Leadership and Tone
From the Top
20%
Training and
Communication Program
25%Internal Control Systems
35%
Code of Ethics and
Business Conduct
20%
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Reward vs. Punish ResearchJan 2008: Richard Ivey School of Business (Ontario)researchers announced correlations between business ethicsperception and pricing
Price premium for products perceived to be ethically produced
Consistent with positive-negative asymmetries, the notion thatindividuals react more strongly to negative information, theresearch found that there is a stronger punishment forunethically-produced goods and a smaller reward pattern forethically-produced goods. The expectation to pay less forunethically produced goods is far greater than consumers’willingness to pay more for ethically produced goods.
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Using ethics to win in the market
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2008 World’s Most EthicalCompanies
June 3rd 2008
New York City
Unveiled at the Forbes-EthisphereWorld’s Most Ethical CompaniesConference
Published in Forbes
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Key takeaways Discussion migrating from compliance to ethics
Increase in research correlating business ethics and competitiveoutperformance
Ability to attract employeesPricing and customer capture/retention“Get out of jail free” pass for good reputation corps
Increased government pressure on ethics controls
Objective rating and rankings initiatives coming onto center stage(Innovest, Ethisphere, Forbes, etc…)
Trend will continue for foreseeable future
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