NEW YORK – November 29, 2011 – The Ethisphere Institute, in partnership with attorneys Ryan D. McConnell, Katharine Southard and Charlotte Simon, is pleased to announce the launch of its new Code of Conduct Dataset, a searchable, online review of the content of codes of conduct and policies from the 500 largest corporations by revenue. The information contained in the dataset, which was collected between January 2011 and September 2011, breaks down key aspects and content areas within each code of conduct by 42 criteria, ranging from whether the code includes an introductory letter from the company’s CEO to inclusion of policies on key compliance and ethics risk areas such as export controls, insider trading, and anti-corruption.

“The code of conduct is the foundation of a compliance program and sets forth the rules that all employees should follow,” said Ryan D. McConnell, a white collar criminal defense partner with Haynes and Boone who conceived of and directed the research. “This new tool is exciting as it provides compliance officers with a centralized tool for reviewing peer practices in code of conduct content. Every company should gather data to benchmark and improve their own codes of conduct on a regular basis.”

Beyond providing a free, searchable tool for compliance officers interested in researching today’s peer practices in codes of conduct, Ethisphere will use the information collected for this dataset, as well as publicly available information on more than 2,500 additional codes of conduct gathered by Ethisphere’s research team, to regularly publish statistics and best practices on codes of conduct by industry.

For example, some of these findings include:

• Five percent of retail stores do not have an antitrust policy of any kind
• Two-thirds of beverage companies’ codes listed in the dataset begin with an introduction from the CEO
• Only 17 percent of airline companies’ codes listed in the dataset contain 24/7 hotline availability information

“Ethisphere is the top organization when it comes to reviewing and benchmarking codes of conduct for multinational corporations,” said Erica Salmon Byrne, senior vice president of advisory services and assistant general counsel for Corpedia, a leading ethics, compliance, and risk assessment consulting company and licensed credentialing partner of the Ethisphere Institute. “Making this data publicly available will help significantly as companies benchmark themselves against others in their industry, providing an opportunity for companies to see areas they can improve and areas where they are doing well.”

Click here to register for access to the new dataset which will be granted on a password-protected complimentary basis and will be featured on Ethisphere’s website at www.ethisphere.com.

About The Code Content Dataset
The Ethisphere Code of Conduct Dataset is an aggregation of more than 500 companies’ code and policies benchmarked by industry. The dataset is designed to be a comprehensive tool for compliance departments as they develop and improve their own codes. Compliance professionals can use the dataset to learn best practices from peers by reviewing over 500 codes.

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Ethisphere Media Contacts
Jennifer Mitchell
Marketing & Media Director
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1-800-369-7583 ext 7

In January, the Guidelines Monitoring Group (GMG), the group established to verify compliance with the code, released its first report and the results were less than impressive.

The report states “almost all of the firms” complied with many of the guidelines/requirements, though the method in which the firms “complied” varied drastically. Overall, the report claimed that fewer than 50 percent of the firms which voluntarily signed onto the Code complied with 100 percent of the guidelines.

The trips typically lasted 14 days and cost between $25,000 and $55,000 each. The money came out of Lucent’s sales department and was falsely documented as “factory inspection” or “training” trips, but little to no time was actually spent in either regard. Although by 2001 Lucent had outsourced the vast majority of its work and had no factories for customers to tour, the company still paid for factory tours across the world to countries such as the United States, Europe, Japan, Australia, Canada, etc.

The Justice Department will not prosecute Lucent should the company agree to all the terms of the agreement. This includes the aforementioned fine, as well as adding stronger internal controls, maintain fair and accurate books and records, implement a new FCPA compliance program and, most importantly, stop bribing customers. In a separate but related settlement with the SEC, Lucent agreed to pay $1.5 million but neither admitted nor denied guilt. These decisions come from alleged violations committed before Alcatel bought out Lucent in 2006.

The state had previously fined Baines $2,000 after investigating allegations of racism and creating a hostile work environment, however it allowed him to keep his position. Pasternak claims the abuse led to “insomnia, anxiety and depression.”

Read the complete story here.

Non-white people were three times as likely to report leaving their work due to unfair workplace treatment than heterosexual white men. As David Blood, a former Goldman Sachs executive, puts it:

“If companies have high turn-over or are unable to attract top talent, they will not perform in the long run . . . Not dealing with these issues is flawed finance and flawed business strategy.”

Commentary: As the article states, this trend isolates competent workers that could otherwise help a US company against ‘low-cost’ rivals in other parts of the world. The discrimination doesn’t just affect the individual worker, but the entire company as well.

Improved areas included “the expansion of environmental elements into supplier factory audits to include waste identification, waste handling and disposal, wastewater treatment and discharge, and air emissions.” Factory management is now notified of environmental findings by auditors. The company also provides environmental training for all of its suppliers. Rajan Kamalanathan, vice president of Ethical Standards for Wal-Mart Stores, Inc. had this to say about the report:

“Factories that are disapproved may close, and the impact on the factory workers can be devastating. To prevent this, we identify at-risk factories and invite factory management, along with the suppliers they do business with, to meet with members of the Wal-Mart Ethical Standards Team.”

Read the article as reported by CNN Money.

When first implemented in 2005, the law was unclear on whether web-based training seminars were permitted. The new law permits online training so long as the coursework is created by “experts” – which, in this case, includes attorneys with two or more years experience with California or federal anti bias laws, HR professionals, and professors.

Newly hired supervisors must receive their training within six months of entering their post.

Read more about the development here.

Commentary: An important update for all California employers. The use of web-based training will greatly increase the efficiency of the legislation and the accessibility of the training, sparing supervisors from giving up their time to travel to and from training centers.

The company reported on July 3rd that the administrator illegally downloaded the information and sold it to a third party data broker, who in turn sold the data to various marketing companies.

Fidelity National confirmed that the unnamed employee had been fired.

Commentary: Over 3.5 million credit card accounts were taken along with over 1.4 million credit card numbers. This is a prime example of how one employee can cause significant damage to a large corporation, their reputation, and their clients.

A jury determined that Robert Yarbrough broke his contract with the company after he violated non-competition obligations and leaked company secrets. He was charged with $1.1 million in damages.

Westport Big & Tall, a competitor of Casual Male, was charged $400,000 for interference with contractual relations.

Reportedly, the three lower-level managers were taking large bribes from flooring vendors out of Asia in return for featuring these vendors’ products in Home Depot stores.

Home Depot is cooperating with law enforcement authorities who are looking into the situation – prosecution against these employees is a possibility.

The company released a statement adding to their stance on the situation:

“Maintaining our ethical standards is of utmost importance to the Home Depot and is something we enforce strongly.”

O RLY?

Unfortunately, crashing housing and home renovation markets aren’t the only things buffeting Home Depot. The company has also been fighting ethics, compliance and governance scandals on multiple fronts:

(1) Paying a CEO $225 million while employees were continually laid off and the stock declined (Nardelli, who was later terminated after he refused to answer questions at the annual shareholders’ meeting).

(2) The subject of wrongful termination lawsuits by former employees in Maryland and Alabama who claim that they were fired in retaliation for blowing the whistle on Home Depot, accusing the company of pumping up its financials with fraudulent product return procedures (which the SEC is now investigating).

(3) Admitting this past December that the company had engaged in improper stock option backdating for 26 years.

Commentary: We talked to a number of companies that have done business with Home Depot, and many of them repeated stories that indicated a broad culture of ‘browbeating’ and unreasonable demands being made by purchasing personnel at the company. Interestingly, such culture doesn’t appear to be limited to store merchandising – it extends elsewhere in the company as well. For example, we heard about the IT department demanding free products from vendors for the company simply so the vendor can promote Home Depot as a client.

We are also told that the company has virtually ZERO ethics and compliance training or programs.

To help protect its reputation, IBM announced this week that it was establishing a code of conduct to govern its more than 5,000 employees who have a presence (or “avatar”) on “Second Life” and other online universes.

IBM appears to be the first corporation to create rules governing virtual worlds- its guidelines address such things as protection of intellectual property, export controls (!), proper attire, and even sexual harassment and discrimination:

IBM strives to create a workplace that is free from discrimination or harassment and takes steps to remedy any such problems. External virtual worlds, however, are outside of IBM’s control. If you are in a virtual environment in conjunction with your work at IBM and you encounter behavior there that would not be acceptable inside IBM, the recommended approach is to ignore such behavior and to “walk away” or even sign out of the virtual world.

Commentary:Check out the full IBM net-world guidelines here.

Back in the Q2 edition of Ethisphere, we reviewed IBM’s “real world” code of conduct and were impressed – while this online code is not quite as good, they are the first corporation to have established one of its kind, which is impressive in its own right.

See the avatar in the picture up above? That’s the avatar of Sam Palmisano, the CEO of IBM. Other than dressing himself in the IBM blue, it looks like he grew about a foot and hit the gym… sure beats having to work out for real.

Citing findings from a recent survey by Goldman Sachs, Ling asserted that companies with strong ethical standards outperform the market. For example, companies on an ethical list compiled by Goldman Sachs outperformed the MSCI World Index by an average of 25 percent. 72 percent of these companies were also found to have outperformed their industry peers.

Anthony Ling of Goldman Sachs International insisted that a company’s “ESG” performance (its environmental, social, and corporate governance) can provide an advantage to the company over competitors because these factors are sure to pay off with customers and employees.

Ling stated that these factors, combined with careful consideration of the company’s place in its industry, competitive advantage, and financial performance should all be taken into account when evaluating investment options in mature or emerging markets.

Commentary: We were thrilled to see this report. Our research at Ethisphere has found similar results. The Ethisphere Ethics Index, which tracks the publicly traded components of the annual World’s Most Ethical Companies Ranking, OUTPERFORMED THE S&P BY MORE THAN 2:1 over the five-year period that ended March 31, 2007.

A complaint from the office of Massachusetts Secretary of State William F. Galvin accuses UBS of providing investment managers office space at below-market rent, low-interest personal loans, and a number of other gifts without either UBS or the investment managers disclosing this relationship to the hedge funds’ clients.

The complaint cites a clear conflict of interest in the gift-giving. Hedge fund brokers should be chosen on a cost and service basis, and bribery makes that less likely – thus the depriving unknowing investors of the best deal available to them.

The report, based on results gathered from a survey of 10,000 U.S. workers, showed the impact that working in a strong ethical culture can have on an employee’s pride in an organization, confidence in its future, and overall satisfaction.

The most surprising finding? Just over half of those polled rated their organization positively in providing an ethical culture- only 29 percent actually reported that their employers have an ethically strong culture.

Commentary: Naturally, we are not surprised with the report, as the ability to attract and retain workforce talent is one of the “profit points” behind Ethisphere’s “Good. Smart. Business. Profit.” motto. Of course, it’s always nice to see reaffirming data. This can prove extremely useful for internal compliance and ethics officers looking for additional support for their program efforts.

The jury sided with Target as they saw Patton’s demotion as a decision made regardless of his military service. However, the jury decided that the company retaliated against Patton for asking the National Gaurd to intervene following his demotion. In a statement, Target revealed its intent to appeal the decision on the ground that they believe the case is “without merit” and cited Target’s strong history of support for its employees (many of whom, as the statement pointed out, are veterans, reservists, or members of the National Guard).

Commentary: This is unfortunate as Target has a strong compliance and ethics track record. We believe that this is an isolated event and not reflective of any broader organizational culture problems at the company.

What this case does is highlight the increasingly important role that the Internet plays in helping to sway public perception of an organization’s reputation. When a story gets traction in an online community, as this one did with the online military community, a company may be well-advised to settle and get it out of the press rather than try to reverse it on principle – however tempting it may be. Viral marketing works in mysterious ways, including against a company. What we do know is that it is can be close to impossible to control (unless you are in China of course).

The Federal Bureau of Investigation opened an investigation of Beazer after the Charlotte Observer newspaper reported on March 25 the company sold homes to low-income buyers who couldn’t afford them, using mortgages that were based on expectations the buyer’s income would rise.

Commentary: It pays to follow SEC filings closely as the company did not issue a press release about this, but simply mentioned it in a filing to the Commission. How did the stock do? Well, it dropped over 10% immediately once word leaked out – on 6x normal volume.

One is led to ask: “what’s going on with Beazer?”. This is the second senior executive fired for violation of the Code of Conduct this year (GC Kenneth Gary was canned back in February for: “for a pattern of personal conduct, which includes violations of company policies”).

Patrick Imbardelli was on the verge of being appointed to InterContinental’s board when the company learned that the Singapore-based executive did not have degrees from Cornell University and Australia’s Victoria University as he had claimed.

In a statement last month, the company noted that Imbardelli had joined the company in 2000 and was appointed managing director of the Asia Pacific region in 2003.

Commentary: Not the first time that an executive has been called out for lying on their résumé. What is interesting, however, is how public Intercontinental is being by revealing the reason for Mr. Imbardelli’s dismissal. There are plenty of resignations each year from corporate leaders where the real reason (including résumé fraud) is politely ignored and the departing executive is allowed to maintain their dignity and reputation.

Intercontinental obviously felt a compulsion to clearly disclose Mr. Imbardelli’s fraud. The first reason may have been that they did not want investors thinking that his departure might have been related to something else in the business being awry (like the speculative stock sell-off resulting from Wellpoint CFO’s resignation for personal conduct last week). Another motive might be that Intercontinental’s leadership was simply pissed off about Imbardelli lying to them.

The former head of Volkswagen’s work council had previously won libel cases against papers claiming that “he liked to party”… then he changed his mind and admitted that “he likes to party” – unfortunately at the expense of Volkswagen (and its reputation). You can only imagine what a poor example this sets for other Volkswagen employees around the world who are supposed to be acting in a compliant and ethical manner.

As reported in Euronews…

Hans-Juergen Uhl owned up to the charges at a court in Wolfsburg. He was fined just over 39,000 euros.

He had previously denied any wrong-doing and won several libel suits against media sources that made the allegations against him. But he resigned from Parliament at the end of May, saying he had in fact lied.

Uhl’s case is the second in a two-year probe.

VW’s former Personnel boss Peter Hartz received a two year suspended sentence and a fine in January. He admitted approving the use of company funds to pay for bonuses, trips and prostitutes to keep smooth relations between management and workers unions.

Uhl, who was on the receiving end of these perks, told the court his conduct at the time contradicts all his personal values. Two other suspects are awaiting trial for similar offenses.

The company would not specifically cite which elements of their Code Mr. Colby violated. Instead, the company only stated that the violation did not involve illegal conduct and was “in no way related to the business of Wellpoint.” When the CEO of the company was asked on an analyst call whether the company had considered giving Colby a second chance, he responded, “We don’t have double standards in the company. We have one set of the Code of Conduct that applies to everyone.”

Commentary: While an unfortunate incident for all parties involved, we admire Wellpoint’s decision. Colby loses over $1.6 million in options in addition to his job. Wellpoint loses a CFO highly regarded by Wall Street analysts. It was no surprise that the company’s stock dropped sharply (3.5%) as result on the news. This is a tremendous example of the “non-tolerance” attitude that is increasingly pervasive in corporations, where all employees held to equal standards when it comes to abiding by the organization’s Code. Wellpoint’s decision to specifically mention that it was a code of conduct violation (but refusing to name exactly what it was beyond being “non-criminal”) is interesting. While we suspect the intention is to prevent Wall Street from panicking and believing it was something worse (as one might when a CFO suddenly departs), there is also a clear message of “ethical from the top” sent to all employees.

Care to speculate about what the violation might have been? You can see Wellpoint’s Code of Conduct here.

Unless you live in a cave, you know that Paul Wolfowitz was fired asked to step aside as head of the World Bank after weeks of international furor. While politics certainly played a major role, Wolfowitz was also found to have violated the conflict of interest provisions of the World Bank’s Code of Ethics (another executive lost to code violations!) through improperly influencing a job transfer and pay raise for her girlfriend. The great irony here was that Wolfowitz’s key emphasis in office was global anti-corruption.

So what does Wolfowitz do with his free time? Learn checkers? Spend more time with his girlfriend? Apparently not. The crack reporters of the NY Post found a new angle to this already over-exposed story… His girlfriend dumped him.

Commentary: Total bummer. Lost my job. [twang]… Lost my reputation [strum]… Lost my spoon [twang]. Dagnabit we hope his dog don’t leave too. At least he will have the basis for a great country song.

Our code of conduct assessment series brings us next to the New York-based IT software behemoth, CA, Inc.

CA’s Code of Conduct jump starts with a personal letter from President & CEO John Swainson who sets an inspiring tone from the top with statements such as, “We use the word ‘our’ rather than ‘CA’ because we are the people who will make this Code a true reflection of all that is good about the company.”

CA does an exceptional job of explicitly addressing the commitments it holds to each of its stakeholders, both internal and external. CA’s commitment to the stakeholders is clearly expressed in the extensive “CA’s Constituents” section of the Code.



The document addresses all of the pertinent risk areas we would expect to find for a storage and systems management software company, including information security, data protection, as well as a thorough explanation of the behavioral expectations pertaining to insider trading, fair dealing, and security law.

What prevents this Code from earning near-perfect marks is the handful of examples that are passed off as the document’s only supplemental learning aids. An injection of contextual question and answer subsections would highlight key topics and clarify some potentially gray areas.

Despite the lackluster learning tools, CA’s exemplary stakeholder commitments, solid content, and great tone from the top earn this Code of Conduct an overall grade of “A-”.

For more insight into CA’s code as well as how you can find out how your organization’s code stacks up, visit ethisphere.com.

A special World Bank panel found that Wolfowitz’s involvement in the details of his girlfriend’s compensation package “went beyond the informal advice” given by the bank’s ethics committee and that he “engaged in a de facto conflict of interest.” Both under Wolfowitz’s contract as well as under the Code of Conduct for board officials, he had been required to avoid any conflict of interest.

But Wolfowitz is not the only leader in the hot seat or losing their job because of questionable conduct in the past couple of weeks. Others include:

+ the sobering dismissal of the President of the University of Mary Washington (Fredricksburg, VA) for being arrested for DUI not once, but twice! in just two days;

+ the early resignation of Sir Lord John Browne from the helm of British Petroleum for lying in court (a case which also highlights the perils of being a gay high-profile business executive)

+ the President of Voorhees University (Columbia, South Carolina) found guilty, with $500k in damages assessed for his sexual harassment of a professor;

+ the Chairman and CEO of HBO being pressured into resigning three days after being arrested for assaulting his girlfriend in a Las Vegas parking lot (as an investigation uncovered that he had previously had a $400k settlement in 1991 at HBO for allegedly choking an office colleague); and

+ to top it all off, the Chairman of the multi-billion Korean industrial conglomerate, Hanwha, being arrested last week and thrown in jail for hiring some goons (and going along with them to get his own licks in) to go beat up some bar patrons who had roughed his son.

Commentary: Hanwha’s Chairman really brings to life the old schoolyard taunt “my dad can beat up your dad.” All of these cases are from the last several weeks alone – and demonstrates in clear fashion that behavior from a CEO/President that once could be “brushed under the rug,” in this era is instead dragged out into the open and quickly becomes grounds for termination based on legal or moral clauses.

Telemarketing fraud, once limited to small-time thieves, has become a global criminal enterprise preying upon millions of elderly and other Americans every year, authorities say. Vast databases of names and personal information, sold to thieves by large publicly traded companies, have put almost anyone within reach of fraudulent telemarketers. And major banks have made it possible for criminals to dip into victims’ accounts without their authorization, according to court records.

The banks and companies that sell such services often confront evidence that they are used for fraud, according to thousands of banking documents, court filings and e-mail messages reviewed by The New York Times.

Although some companies, including Wachovia, have made refunds to victims who have complained, neither that bank nor infoUSA stopped working with criminals even after executives were warned that they were aiding continuing crimes, according to government investigators. Instead, those companies collected millions of dollars in fees from scam artists…

In a lawsuit filed last year, the United States attorney in Philadelphia said Wachovia received thousands of warnings that it was processing fraudulent checks, but ignored them. That suit, against the company that printed those unsigned checks, Payment Processing Center, or P.P.C., did not name Wachovia as a defendant, though at least one victim has filed a pending lawsuit against the bank.

During 2005, according to the United States attorney’s lawsuit, 59 percent of the unsigned checks that Wachovia accepted from P.P.C. and forwarded to other banks were ultimately refused by other financial institutions. Wachovia was informed each time a check was returned.

“When between 50 and 60 percent of transactions are returned, that tells you at gut level that something’s not right,” said the United States attorney in Philadelphia, Patrick L. Meehan.

Other banks, when confronted with similar evidence, have closed questionable accounts. But Wachovia continued accepting unsigned checks printed by P.P.C. until the government filed suit in 2006.

Commentary: It isn’t news that people are defrauding the elderly. The elderly has long been obvious and easy targets. Is it easier in the age of the Internet and identity theft? Maybe, maybe not. What is interesting about this case is Wachovia’s apparent willful blind eye to the activities. As readers of Ethisphere know, the Q2 Edition of Ethisphere Magazine publicized the 2007 Rankings (by industry) of the World’s Most Ethical Companies. Neither of the two banks featured in this article (Wells Fargo and Wachovia) made their financial service industry’s ethical leadership list. However, Wells Fargo was relatively close – and Wachovia missed out by a long shot. This is an interesting fact considering if you read this article closely, the business practices being spelled out by the NY Times closely and accurately affirm what the rankings have found.

The latest is last week’s announcement by (try and say in one breath!): The Central Committee for Discipline Inspection (CCDI) of the Communist Party of China (CPC)…The Ministry of Supervision…The Ministry of Personnel… AND The Legislative Affairs Office of the State Council of a new 55-article Code of Conduct.

Regular readers of Ethisphere Magazine and the blog know that we love Codes of Conduct and this one, which shall apply to all Chinese civil servants, prohibits a whole lot more than a typical Western code. Prohibitions include:

+ No engaging in illegal or immoral activities such as having a mistress or gambling;

+ No leaving the country without permission, staying overseas longer than permitted or secretly obtaining foreign citizenship;

+ No failing to perform duties resulting in accidents, disasters, environmental pollution or “mass protests”;

+ No using influence to benefit a lover (and see above, no having a lover that’s not your spouse);

+ No organizing superstitious gatherings;

+ No taking drugs or engaging in sex trade;

+ No abusing or abandoning family members or refusing to support elderly relatives;

+ No engaging in corruption, embezzling or losing public funds; and

And finally… (and perhaps most interestingly):

+ No repressing criticism or retaliating against whistleblowers, destroying evidence or disclosing personal details of whistleblowers to the accused.

According to Qu Wanxiang, Vice-Minister of Supervision, said that this regulation (going into effect on June 1st) is the first of its kind and aims to “make sure government officials perform their duties according to the law. The regulation is important for persuading officials to adopt a clean, honest and down-to-earth work style to better serve the people”.

Commentary: “CCDICPC”. What a friendly sounding committee! We are thinking of creating at “Vice Minister of Supervision” position for the Ethisphere Council. More seriously, this is just the latest effort by the Chinese to crack down on corruption. Unlike in their country to the North, we truly believe that the Chinese are trying to reduce domestic corruption (international is a totally different story) as they know that it can undermine state power and competitiveness in the long-run.

Rather than get a bunch of emails asking about the salt reference, if you don’t get it then please sneeze and visit here.

The “Corporate Governance” section of FNB’s website provides an unimaginative 13-page “Code of Conduct” document devoid of temperament and permeating with legal mumbo jumbo.

What becomes immediately apparent is the disappointing lack of support for the Code from Mr. Mortensen or the rest of the executive team. Nothing quite exemplifies a reinforcing tone from the top as an opening statement of “F.N.B. Corporation and its subsidiaries and affiliates, are collectively referred to in this Code of Conduct as the ‘Company’.”

This Code takes no chances as it goes so far as to define the ever arduous “you”, “we”, “your” and even “us”.

Lurid language, no acknowledgment of a commitment to its stakeholders, and the complete lack of attention to the document’s design forces we (or is it “us”?) to unfortunately have to give FNB’s Code an assessment grade of “C” on the 8-point Ethisphere Council Effective Code grading scale. .

For more insight into FNB’s assessment and that of other companies be sure to check out the latest edition of Ethisphere magazine.