Key Decisions in Drafting a Code of Conduct

1. DELVACCA presents: The Ten Most Important Decisions to Make When Drafting a Code of Conduct

2. Why Should You Focus on Drafting a Code of Conduct? • It helps to define your organization - both internally and externally • The policies embodied therein can influence success and failure in the marketplace • It can positively influence conduct well outside the specific policies addressed • In a time of crisis, it is a key document to fall back upon • The Department of Justice (and other law enforcement officials) will consider the existence and substance of an operative Code of Conduct in determining whether to bring criminal charges against an organization; similarly, an effective compliance and ethics program is a mitigating factor under the federal sentencing guidelines.

3. Key Components of a Code of Conduct • Robust statement of your organization’s principles • Compliance with laws and regulations • Anti-corruption policy • Insider trading policy • Conduct in the workplace • Accuracy of business records • Protection of your organization’s assets • Conflict of interest • Gifts and Entertainment Policy • Political and charitable giving policy • Reduce whistleblower risk by including a no retaliation policy • A hotline or other similar intake mechanism for questions or complaints available to employees and third-parties

4. Audience Goals Organization Specific Content Practicality and Usability Gifts and Entertainment Policy Charitable Giving and Political Donations Application Across an Organization Business Function Participation Enforcement Employee Discipline The 10 Most Important Decisions

5. 1. Audience Consider your audiences Employees Customers Vendors Business Partners Government Officials, Regulators, Judiciary Donors Shareholders/Investors

6. 2. Goals • Establish clear goals at the outset such as: • Emphasizing the values of the organization • Creating a culture of compliance • Furthering marketplace objectives • Reducing legal and operational risk • Facilitating regulatory administration • Protecting the organization in the event of a serious legal violation

7. 3. Organization Specific Content • One size does not fit all: every code should be company-specific • Code should reflect the following: • Industry specific issues • Regulated or unregulated nature of the business • Regional, domestic or global scope of business • Enhanced requirements of publicly traded companies • Existence of government contracts • Organization culture

8. 4. Practicality and Usability • Blend broader goals with specific policies • Create definitive guidance on common scenarios that can easily be applied by employees • Flexibility and predictability are not mutually exclusive: do not attempt to anticipate/ address every specific situation, but have a logical approach

9. 4. Practicality and Usability (cont.) • One example of a simple structure that blends broader goals with specific policies: • Principles of Conduct (compliance with laws and code, duty to report code violations, no retaliation) • Workplace Environment (equal opportunity, no harassment) • Protecting the Company (accurate financials, conflict of interest, gifts & entertainment, confidentiality) • Market Facing Integrity (anti-corruption, insider trading, accuracy in communications with third-parties, social media policy)

10. Gifts & Entertainment(A Constant Struggle) • Customer relationship issues must be reconciled with vendor relationship issues • Managerial Approval - yes or no and if yes, by whom, for what, and when • What is reasonable • Are tickets to a Red Sox/Yankees game different than tickets to a Yankees/Royals game? What about the World Series? • Address specific exceptions such as government contracting restrictions • Harmonize the gifts and entertainment policy with the anti-corruption policy

11. 6. Charitable Giving and Political Contributions (A Delicate Balance) • Establish a strict distinction between individual action and corporate action • Define when it is appropriate to use the organization’s resources • Establish processes to insure compliance with regulations and protect the organization’s brand

12. 7. Application Across an Organization • C-Suite personnel • Classified/ Non-Classified Employees • Union considerations • Non-US employees • Directors • Other important relationships – e.g., consultants, leased help

13. 8. Business Function Participation • Create drafting and vetting committees with membership from across your organization • Make sure your business functions own the creation of the code • Diversity of thought will enhance your end product and increase the likelihood of compliance • Unilateral pronouncements from Legal/Compliance usually fail • Ensures consideration of practical implications

14. 9. Enforcement • Create an enforcement infrastructure • Consider establishing an anonymous hotline and emphasize non-retaliation policies to encourage reporting • Design a protocol for handling inquiries: • Harassment (HR) • Theft of corporate data (Internal Audit or SIU group) • Violations of law (General Counsel) • Ensure clear lines of communication and rules for notification up the chain • General Counsel, Internal Auditor, C-Suite, CEO, Audit Committee, Board of Directors • Consider Privilege Implications • Implement guidelines for the use of outside or independent counsel

15. 10. Employee Discipline • Create a disciplinary committee or similar framework to handle senior level issues • Legal should have an advisory role to the committee to maintain privilege • Explicit goal should be consistent application of the policy both as to scope and discipline • Issue: Director violations

16. Rolling Out the Code and Keeping it Fresh • Establish the tone at the top • Conceptualize the roll-out as a marketing campaign • Provide a tool kit for down the chain • Use multiple channels such as e-mail, website, town halls, screensavers • Integrate the code into employees’ annual performance objectives • Reinforce general employee awareness at least once per year via an annual CEO podcast or letter to employees • Disseminate regular training and communications from your Chief Ethics Officer • Have a plan for new employee training • Leverage the code for external audiences: customers, vendors, business partners, investors and regulators

17. Questions?