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1 Call To Action - Building Ethics Programs for Tomorrow The Institute of Internal Auditors November 16, 2004 Ed Dudley, CIA, CPA Retired Vice-President.

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Presentation on theme: "1 Call To Action - Building Ethics Programs for Tomorrow The Institute of Internal Auditors November 16, 2004 Ed Dudley, CIA, CPA Retired Vice-President."— Presentation transcript:

1 1 Call To Action - Building Ethics Programs for Tomorrow The Institute of Internal Auditors November 16, 2004 Ed Dudley, CIA, CPA Retired Vice-President & General Auditor-ABB Americas

2 2 Introduction & Key Issues For Today Ed Dudley Taking the Ethics Program to the Next Level Brian Sears Monitoring and Assessing Corporate Governance from the Internal Audit Function Donna Passal Annual Disclosure and Conflicts of Interest Questionnaire Chris Yost Break Q & A Summary of Main Points Ed Dudley Agenda

3 3 Key Issues Examine Several new Initiatives in Ethics Review Ethics Tools for Leaders Discuss Advantages in Producing an Ethics Film Festival Examine an Internal Audit Review and Certification of NYSE Rules

4 4 Key Issues Examine How to Plan for That Review and the Board Committees Affected Review Corporate Governance Guidelines for Board Directors Review Questionnaire Disclosures for Board, Corporate and Regional Leaders Examine an Internally Developed Web- Based Questionnaire Application

5 5 Taking the Ethics Program to the Next Level Brian Sears Director – Ethics Awareness Lockheed Martin Corporation

6 6 Ethics & Business Conduct Program Setting the Standard – Code of Ethics & Business Conduct Worldwide confidential Helpline Ethics officers at all major sites Communication and awareness campaign Compliance training and education program All-employee Ethics surveys Annual Ethics awareness training for all employees Program Elements

7 7 New Initiatives The Chairmans Award Ethics Tools for Leaders Organization Ethical Maturity Assessment Ethics Film Festival Ethics Minute

8 8 The Chairmans Award Recognizes a single LM employee for acts that exemplify our commitment to Ethics and Integrity One nominee from each Business Area and from Corporate Winner selected by Chairman/CEO and President/COO

9 9 Ethics Tools for Leaders Online, self-directed training course –Creating an ethical environment –Responding to employees –Using the tools All managers will complete course in 2003 Online support toolkit –Ethics resources –Links to policies –News & information –Search, Contact, Help

10 10 Mission Success Organization Ethical Maturity Model Ad Hoc Uninformed Uninformed Ethics Not Integrated Ethics Not Integrated Compliance Enlightened Enlightened Compliance Training Compliance Training Values-Based Ethics Embraced Embraced Core Value Core Value Integration Visible Visible Role Models Role Models Competitive Advantage Transformation Transformation

11 11 Self-Assessment Tool Self-assessment Tool Hosted on the Ethics Website Requestor contacts Ethics Office Reports Next Level Director or Vice President completes Self- Assessment Ethics Officer consults with Requestor Prepares Action Plan Employees complete Self- Assessment Manager completes Self- Assessment

12 12 Ethics Film Festival: Objectives Promote ethics in the workplace Opportunity for employees to present their views, in a positive forum Keep ethics message fresh and interesting Multiple potential uses of videos received –Training –Ideas for future initiatives –Internal publicity and promotions –Outside publicity 37 Videos Received to Date

13 13 The Ethics Minute A series of one-minute video episodes containing an ethics message on a central theme –Delivered by link –Three to six episodes constitute one series –Periodic delivery after initial kickoff

14 14 The Ethics Minute: Objectives To deliver an ethics message that: –Complements annual awareness training; –Is received throughout the year; –Focuses attention on key issues; –Reaches a large segment of the employee population; –Uses an engaging and interesting format

15 15 Monitoring and Assessing Corporate Governance from the Internal Audit Function Donna Passal, Director Global Corporate Audit Services Office Depot

16 16 Internal Audit Review In November 2003, the SEC approved the final corporate governance rules of the NYSE. These rules require that each listed companys CEO certify to the NYSE each year that he or she is not aware of any violation by the company of these standards. OD had to be in full compliance by the time the May 2004 shareholders meeting was held and had to submit the first certification to the NYSE no later than 30 days after the meeting. Global Corporate Audit Services performed a detailed review of ODs compliance with the rules, and provided the results to the CEO.

17 17 Planning the Review Final NYSE and SEC corporate governance rules Current year proxy statement/10K ODs conflict of interest policy Completed directors questionnaires Charter, meeting schedule and minutes for board committees: –Corporate Governance Committee –Compensation Committee –Audit Committee

18 18 Board Of Directors Independence of directors –Basis for determining independence disclosed –No material relationship with OD –Independent after three years of condition Director is officer of a charity Executive sessions for non-management directors

19 19 Corporate Governance Committee Member independence Written charter –Director selection –Corporate governance principles –Board evaluation –Committee evaluation –Member qualification, structure, operations Search Firms

20 20 Compensation Committee Member independence Written charter –CEO compensation and evaluation –Non-CEO compensation plans –Report for proxy statement –Committee evaluation –Member qualification, structure, operations Compensation consultants

21 21 Audit Committee Member number, qualifications and independence Written charter Oversight functions –Annual and quarterly financial statements, MD&A, press release, analyst guidance –Risk assessment and risk management –Meetings with management, external auditors and internal auditors –Internal accounting controls, accounting and audit matters Responsibility for external auditor –Quality control –Hiring, firing and compensation –Audit and non-audit services –Partner rotation and auditor independence

22 22 Corporate Governance Guidelines Director qualification standards Director responsibilities Director compensation Director orientation and continuing education Management succession Annual performance evaluation of board

23 23 Office Depots Corporate Governance Website Select company information, then investor relations, and finally corporate governance Company values Board independence Board training Committee charters Governance documents

24 24 Code of Business Conduct and Ethics Directors, officers and employees covered Waivers approved and disclosed Compliance standards and procedures Available on website Addressed in annual report and 10K Key areas

25 25 Annual Certification CEO certification Annual report Non-compliance

26 26 Annual Disclosure and Conflict of Interest Questionnaires Chris Yost, CIA, CPA Director of Internal Audit, Whole Foods Market

27 27 About Whole Foods Founded in 1980 in Austin, Texas Largest natural and organic foods retailer Sales of $3.1 billion in fiscal year stores in the United States, Canada and the United Kingdom 10 operating regions High level of autonomy in decision- making processes

28 28 Code of Conduct & Ethics Approved by the Board in November 2002 Requires completion of annual questionnaires by –Board members –Executives –Other leadership including store and regional personnel

29 29 Types of Questionnaires Disclosure –Board –Corporate leadership –Regional leadership Conflict of Interest –Corporate leadership –Regional leadership –Store leadership

30 30 Electronic, internally developed web-based application Easy to complete Easy to follow up on non-responses Easy for Ethics Committee to review responses Users can review prior year responses and update Facilitates data retention

31 31 Form A

32 32 Form C

33 33 Questionnaires Questionnaires complement other elements of the Whole Foods ethics program: - Whistleblower tip line - Awareness materials - Communications with vendors regarding the Companys gift acceptance policy.

34 34 Questions?

35 35 Q & A

36 36 Summary of Main Points An Online Self-Directed Training Course can help Create an Ethical Environment Online Support Tool Kits can aid Ethics Resources, Links to Policies and Provide Contact Help An Ethics Film Festival Promotes Ethics in the Workplace and is an Opportunity for Employees to Become Involved with the Message

37 37 Summary of Main Points An Ethics Minute Program can Focus Attention on Key Issues Throughout the Year Internal Audit Reviews of Compliance with Internal and External Rules can Provide Valuable Assurance to your CEO A Corporate Governance Board Committee Should Have a Written Charter Providing for Member Qualifications, Structure and Operations

38 38 Summary of Main Points Compliance Reviews can Cover your Corporate Governance, Compensation and Audit Committees Code of Conduct Questionnaires Should Cover Board Members, Company Executives, Store (Unit), Regional Leadership and Other Employees Web-Based Questionnaires are Easy to Review and Compare to Prior Years and Follow Up on Non-Responses

39 39 Summary of Main Points Code of Conduct/Ethics Questionnaires can Compliment Other Elements of your Compliance Program, Including Materials Awareness, Gift Policy and Others

40 40 Get Your CPE Certificate: If you are a primary Webcast participant: If you view the live Webcast, you should be receiving your CPE certificate via today. You can also view the certificate in your account. Just log in and hit the CPE button. If you are viewing the archived Webcast, you will have to take the corresponding quiz which you will find in your webcast account. If you are not the primary participant but will be viewing the Webcast: Additional viewers may obtain CPE for a $15 administrative fee per additional viewer per Webcast. Register online at

41 41 Webcasts Benchmarking Internal Audit: Benchmarking Internal Audit: Where do you measure up? Where do you measure up?

42 42 Webcast Evaluation Visit the Login Page

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