Ethics & Compliance The Competitive Advantage PowerPoint

Ethics & Compliance The Competitive Advantage

Vuslat Eksi Director, Ethics & Compliance

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What is Ethics & Compliance?

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Presentation Notes

Doing the right thing, adhering to laws and regulations, fairness, acting with integrity, following rules, being honest, having morals, being trustworthy. …You see a colleague, take a ream of paper from the copy room, put it in their bag and walk out. That one is easy right? Stealing is wrong. How about when a client offers you a complimentary entry into a conference they are sponsoring. Is that an easy one?

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Gray Area

ethics

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No, it’s not. It falls in a gray area. Are they offering the complimentary entry to all clients? Are they expecting something in return? Are they currently bidding on an RFP your company put out? In most cases ethical questions fall into this gray area.

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Now What?

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Now that we established that ethics falls in a gray area, now what? What am I supposed to do as the head of an organization? How do I ensure my employees make the right decisions about those gray areas?

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Advantages of an Ethical and Compliant Culture

Employees in higher integrity cultures are 67% less likely to observe significant instances of

business misconduct than employees in lower integrity cultures.

Managers that exhibit corporate values can improve employees’ performance by 12%

Ethical companies receive widespread public attention and secure the trust of customers and

suppliers.

A strong culture of integrity correlates positively with long-term total shareholder return; there are

fewer lawsuits, fines, and penalties.

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The Requirement

FAR 3.10 Contractor Code of Business Ethics & Conduct

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In addition to all of these advantages we just spoke about, in our industry it is a requirement! Any company that provides goods or services to a Federal agency is considered a Federal contractor and is subject to the Federal Acquisition Regulations (FAR).

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FAR 3.1002—Guidance for All

The FAR states that all federal contractors should have a written code of business ethics and conduct…and a display of hotline posters.

“Government contractors must conduct themselves with the highest degree of integrity and honesty.”

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Contractors also should have an internal control system that: Is suitable to the size of the company and extent of its involvement in Government contracting; Facilitates timely discovery and disclosure of improper conduct in connection with Government contracts; and Ensures corrective measures are promptly instituted and carried out.

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FAR 3.1003 and 52.202-13(b) – Mandatory for Small Businesses

Mandatory if • Value of contract is greater than $5,000,000; and • Performance period is 120 days or more; and • Contractor is a small business concern*. The FAR states you must have: 1. Have a written code of business ethics; and 2. Make a copy of the code available to each employee engaged in performance of the contract; and 3. Exercise due diligence to prevent and detect criminal conduct; and 4. Otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law.

Timing: Within 30 days after contract award, unless the Contracting Officer establishes a longer period.

*AbilityOne® nonprofits don’t automatically quality as a small business for purposes of being awarded a small business contract. Under the SBA regulations, 501(c)(3)s are not considered in the definition of a small business.

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FAR 3.1003 and FAR 52.203-13(c) – Mandatory for Large Businesses

Mandatory if • Value of contract is greater than $5,000,000 and performance period is

120 days or more; and • Contractor is a large business concern. The FAR states you must have: 1. An ongoing business ethics awareness and compliance program; and 2. An internal control system. Timing: Within 90 days after contract award, unless the Contracting Officer establishes a longer period.

• Applies to the Prime, it’s principals, employees, agents, and flows to the subcontractor(s) as well. • Also applies to subcontractors who meet the dollar and performance

period requirement.

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Consequences of Compliance Failures

Financial Loss • Damages • Settlements • Fines

Reputational Harm Negative impact to the trust of sup-porters, customers, employees, and key stakeholders

Missed Opportunities Loss of business and opportunities to differentiate the company from its competitors Career Damage • Damage to credibility • Suspensions • Terminations • Jail Time • Penalties

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Ethics & Compliance Program Elements

Ethics & Compliance

Corrective Actions

Confidential & Anonymous

Hotline

Monitoring, Auditing and

Risk Assessments

Exclude Bad Actors

Assignment of Responsibility

Compliance Training

Disciplinary Guidelines

Standards & Procedures

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Presentation Notes

FAR Elements are similar to the United States Sentencing Guidelines. They determine what constitutes an effective ethics and compliance program.

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Code of Conduct

• Policies & Procedures • Guidance Documents • Code of Conduct

– A code is a written clarification of your mission, values, principles, and expectations for acceptable workplace behavior.

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Sets standards of behavior for internal and external interactions. Serves as an ethical decision making framework. Gives stakeholders a view of what is valued, what you believe, and what they should expect from interactions with you. It demonstrates a commitment to integrity. Design with consideration for your agency's values, your clients, and services you provide. Driven by the fact that your agency's reputation and work environment are based on the actions and behaviors of your employees. Provide guidelines for acceptable behavior. Applies to employees, contractors, and possibly all who do business with you if you require. Require compliance with all applicable legislation. Provide examples of prohibited actions or behavior that are regarded as misconduct (and it may specify the consequences of violations), but state that these are examples only and not all inclusive. Refer to other related policies (for example: handling of confidential information, harassment, and conflict of interest).

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Compliance Training

• Mechanism to Communicate • Mandatory for Code of Conduct • Annual (minimum) • Online or Instructor Led

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The method selected should be suitable to the size of your company and you should be able to track completion of the training and keep the documentation.

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Hotline & Hotline Poster

• Internal Reporting Mechanism • Anonymity & Confidentiality

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Ethics & Compliance

Ethics is every employee’s

responsibility!

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No one can know everything or be expected to have enough information and knowledge to independently evaluate every situation. But employees need to know enough to spot issues. So how can we ensure that employee’s know what to do? E&C PROGRAM!

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Common “Red Flags”

If we bring that up,

people will start asking

questions, just leave it alone.

We’ve always

done it this way. It’s no

big deal.

Don’t worry about it. These

instructions are from the

top.

This is about my

bonus and your

bonus.

It’s for the good of the

company. It’s not like it’s

for me.

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Key Takeaways

• Formal Ethics & Compliance Program • Integrate Managers into E&C • Encourage a Two-Way Dialogue • Reinforce Organizational Commitment

Source: CEB “Culture of Integrity & Ethics”

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Having an E&C program is not only a good business decision but it is also a REQUIREMENT for ALL government contractors. Employees generally lack ownership over compliance and ethics program outcomes and don't actively participate in program initiatives. 96% of employees don't use the speaking up hotline, and 39% of employees don’t report concerns because they don't think the company will take action.

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Integrate Managers into E&C Efforts

• Articulate the role of managers • Educate managers to receive and respond to issues • Use managers to cascade formal compliance

expectations • Use liaisons to complement the role of managers


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Employees are ten times more likely to report misconduct to direct managers than to the compliance and ethics department. Develop and deploy training, guidance and tools to ensure that managers across the firm understand how to handle employee reports in a consistent and timely manner.

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Encourage a Two-Way Dialogue

• Provide multiple reporting channels • Create a Stand-Along Speaking Up Policy • Use Managers to Train Employees on Reporting

Protocols • Socialize Speaking Up Through Multiple

Communications.


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Managers incorrectly assumes that employees do not report business misconduct because they are uncertain or do not understand the importance of reporting. Research shows, however, that 42% of employees do not report because of fear of retaliation and 39% do not understand the importance of reporting the violation.

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Reinforce Organizational Commitment

• Demonstrate senior leaders commitment to ethical accountability

• Determine opportunities to publicize compliance issues

• Reinforce accountability through compliance messaging


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Presentation Notes

When employees feel that their company does not address verified reports of misconduct appropriately, perceptions of the organization’s culture of integrity decline dramatically. Foster organizational justice by acting decisively on instances of misconduct and openly demonstrating a corporate commitment to upholding compliance and ethics expectations.

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Reputation

It takes many good deeds to build a good reputation, and only one bad

one to lose it.

--Benjamin Franklin

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Thank You