Corporate Governance

Boards and senior management are impelled to continuously police corporate integrity by using care not to place miscreants into positions of authority and by taking swift and decisive action in response to instances of wrongdoing. The amendments are intended to stimulate the flow of information about potential ethics and compliance violations by obliging corporations to implement a system for employees and agents to report misconduct without fear of retaliation and providing confidentiality guarantees as necessary.

While there is no “one size fits all” approach for complying with the guidelines, the board of directors should, among other things:

• Ensure that senior management consist of persons of high moral character and that a climate of accountability and transparency prevails at all levels of the company;
• Assume personal responsibility for overseeing compliance matters;
• Undergo ethics and compliance training themselves;
• Ensure that the corporation has a senior compliance officer, who should have direct access to the board;
• Ensure that compliance activities are adequately funded; and
• Have compliance programs audited by independent experts.

For its part, senior management should set the proper “tone at the top” by clearly and forcefully communicating the corporation's ethical values through a variety of means ' and then backing up those words with genuine action. This includes, among other things:

• Holding business unit heads accountable for meeting compliance objectives;
• Ensuring the effectiveness and independence of compliance staff;
• Responding promptly and forthrightly to allegations of wrongdoing;
• Praising and rewarding ethical conduct and meting out firm but fair punishment to wrongdoers, even if they are “big producers”; and
• Institute other mechanisms that allow management to detect problems before they arise and implement internal controls that deter misconduct.

Background