Ethics on the Top Management

8/2/2019 Ethics on the Top Management

1/12

management

ethics

In thIs Issue

Summe 2008

EthicsCentre CA announces its publication o

the third edition o Ethics & Governance:

Developing and Maintaining an Ethical Corporate

Cultureby Pro. Leonard J. Brooks and David Selley,

two o the Centres co-ounders. Tis publication,

launched on March 6, 2008, is one o the Centres

major educational initiatives and serves as a practical

resource or business. While the books primary ocus

is ethical conduct within companies and particularly

publicly-traded corporations, it also applies to any

organization - large or small in any sector that

seeks to instill ethics as a part o its decision-making

process.

Proessor Leonard J. Brooks is a Proessor o Business

Ethics & Accounting and Executive Director o Te

Clarkson Centre or Business Ethics and Board

Eectiveness at the Rotman School o Management,

University o oronto. Proessor Brooks has had a long

and distinguished career in the eld o business ethics

and is a recipient o the Ethics in Action Award or

Ongoing Social Responsibility. David Selley, FCA is a

Public Accountant and a Past Chair o the EthicsCentre

CA. Mr. Selley spent much o his career at Ernst &

Young Chartered Accountants, where he specialized

in auditing standards and methodologies. He hasalso served on the Board o Directors o ransparency

International Canada.

Oscar Wilde summed it up with customary air in

Lady Windemeres Fan; Experience is the name that

every one gives to their mistakes. David Selley adds

his own touch by asserting that doing the wrong

thing usually causes trouble. I an organization errs

ethically, the ramications can be broad-reaching.

Since the early 1990s there has been a growing

realization that a supportive ethical culture - a culture

o integrity - is critical to an organizations success

Len Brooks and David Selleys updated bookEthics

& Governance: Developing and Maintaining an

Ethical Corporate Culture provides an invaluable

blueprint or organizations through practica

guidance to the development o a culture o integrity

as the core o governance reorm.

Many successul companies had already established

a culture o integrity beore the Enron, Arthur

Anderson and WorldCom scandals in the United

States became ront page news. For those at the

leading edge in corporate ethical conduct, the ormula

was readily apparent; good ethics are good businessGood ethics can not only support a competitive

advantage, but can also oster enthusiastic suppor

among employees, customers and stakeholders

Tese successul companies were also aware that al

employees - irrespective o position level - as wel

as company agents, customers and suppliers, need

guidance about a companys values and integrity

expectations. Guidance can ensure that decisions

made are not only ethical but also serve to protect and

urther the companys strategic objectives, enhance a

companys reputation and uture prots and ensure

sound risk management based on ethical principles.

Te much-publicized corporate scandals presented

a silver lining in that they ushered in actions to

restore corporate credibility and public condence

in capital markets. Te resulting governance reorm

also introduced the need or compliance with new

legislation such as the Sarbanes-Oxley Act (SOX) o

July, 2002. CEOs, CFOs and Boards o Directors were

obliged to ensure that adequate and eective interna

corporate controls were in place, both to protec

Cotied o pae 2

Develpi ad Maiaiia Eical Cpae Culue

CveDeveloping andMaintaining anEthical CorporateCulture . . . . . . . . . . . . . . 1

EdiialTe EvolvingRole o the Ethicsand ComplianceOcer . . . . . . . . . . . . . . 6

EdiialRespect in theWorkplace. . . . . . . . . . . . . . . . . . . . . . . . . . 8

A Messaerom theExecutive Director

. . . . . . . . . . . . . . . . . . . . . . . . . . 9

LeislaiveWacProposed Changesto CompensationDisclosure . . . . . . . . 10

UpcmiEvesEthicsCentre CA

12


2/12

Smmer 2008 Maaeme Eics

the company and the accuracy o

nancial reporting. Brooks and

Selley note that good governance

now requires an assessment o a

companys culture o integrity to be

part o the risk management and

internal control review processes.

Tere were lessons learned rom

other ethical situations including

Union Carbide, Ford Pinto, Intel,

Shell, exaco, the ylenol recall,

Parmalat and more recently,

Hollinger International.

Canadian securities regulators

have also adopted some o the U.S.

regulatory elements. Many Canadian companies and

their auditors are now subject to SOX and Securities

and Exchange Commission (SEC) regulations. Te

oronto Stock Exchange adopted new rule changes

at year-end 2002. New trends, including review

o the independence o Directors, clarication

o responsibilities, greater transparency, claried

legal liabilities o the CEO, CFO and Directors

and independence o auditors have emerged. Te

new governance places a premium on reputationmanagement, ethics risk assessment, corporate

citizenship and mechanisms to improve ethics

management

What is a ethical cltre?

What constitutes an ethical culture and how does

it work? What values dene an ethical culture? In

essence, an organizations culture is akin to corporate

DNA - the way we do things around here. It includes

broader values and normative patterns that guide

employee behavior. A corporate culture is the set o

belies, norms and practices that are shared by anorganizations members. A culture o integrity depends

on the set o values that drives belies, norms and

actions. Te need to explore how to make corporate

culture better remains a constant challenge. Brooks

and Selley believe that developing and maintaining

an ethical culture is a key determinant o stakeholder

support and success. Ethical cultures are seen as

important building blocks to help ocus on and

improve corporate governance.

Employee actions ow rom belies and norms tha

are conditioned through an organizations mission

statements, codes, communications and employees

own personal values.

Why does a oraizatio eed a ethical cltre?

Te answer is really quite simple - Its Good BusinessBrooks and Selleys work emphasizes why building

and maintaining an ethical culture is important to

any organization, irrespective o its size and nature

o business or service. Te business case or creating

and sustaining a culture o integrity remains strong. I

an organization can successully inculcate an ethica

culture into the way it does business, it is highly

likely that the company will be more successu

than an unethical counterpart. In the post-Enron

environment, personal and corporate legal liability

or misdeeds have soared. I decision makers do no

take into account the strategic signicance o ethicaand legal considerations in pursuing prots, they

ail to appreciate the potential damage that may b

caused to the company in the long run. Brooks and

Selley assert that the pace and complexity o business

operations continue to increase and in turn will place

even greater reliance on building relationships and

managing risks ethically. Increasing attention on

Cotied from Cover

Develpi ad Maiaii a Eical Cpae Culue

2007 L.J. Brooks. Reproduced with permission from Business & Professional

Ethics for Directors, Executives & Accountants, CENGAGE LEARNING (formerly

Thomas South- Western)

2


3/12

Maaeme Eics Summe 2008

developing an additional point o reerence or

decision-making - an ethical corporate culture

to guide employees to behave ethically - is

essential.

Organizations are not only held accountable to

shareholders, but also to stakeholders including

employees, customers, suppliers, legislators and

regulators and host communities. Stakeholders

increasingly expect that their interests will

be taken into account in return or their

support. A culture o integrity is important

or enthusiastic support among employees,

customers and stakeholders to help maintain

a productive environment that is aligned with

business objectives and to sustain sales margin.A culture o integrity can serve as an eective

recruitment mechanism in which talented

individuals seek out ethical organizations

and shy away rom those with less than ideal

ethical values. An ethical corporate culture

does more than providing a rame o reerence

or employees, it can also improve the level o

trust that employees have in the organization.

A culture o integrity gives essential guidance

about an organizations values or integrity

expectations. Tese in turn help everyone

within the organization to make decisions thatprotect the companys reputation and also to

urther its strategic objectives.

Can a culture o integrity really help an

organization? Recently published studies

including KPMGs Ethics Survey, 2005-2006

provide compelling evidence that an ethics

program leading to the development and

maintenance o an ethical corporate culture

not only improves perceptions o behavior

but also is critical to the ongoing success o

a corporation. KPMGs survey comparescorporations with and without ethics programs

and nds that an ethics program improves

perceptions or behavior based on the ollowing

statistics:

Betweensixand12percentreduction in

observed misconduct or violation o values

and principles in the prior 12 months.

Arangeofnineto16percentimprovement

inprevention o misconduct.

Between39and48percentimprovement

in comort among employees in reporting

misconduct to a supervisor.

27to46percentimprovementinbeliefthat

appropriate action will ollow reporting o

misconduct.

Between43and54percentimprovement

in employee perception that the CEO and

other top executives set the right tone at

the top.

37to49percentimprovementinemployee

motivation to do the right thing.

Sound risk management provides another

compelling reason oran eective governance

system based on an ethical

corporate culture. Brooks

and Selley assert that

although between 10 and

20 per cent o employees

will never bend the rules,

steal or commit raud and

the same percentages will

do so irrespective o any

system to prevent such acts,

the majority o employees between60and80percent

will bend the rules, steal

or commit raud i they

think that they can get away with it. Without

sound ethical guidance and related internal

controls, organizations risk vulnerability to

illicit acts frombetween80 and 90percent

o employees. With a sound ethical culture

in place, that number can be dramatically

reduced to between 10 and 20 per cent.

How does a oraizatiocreate the riht cltre?

Just as doing the right thing is not always

easy, designing, implementing and sustaining

a corporate culture o integrity can be

challenging. Brooks and Selleys book helps

organizations to determine whether or not

their culture is suciently ethical. Pragmatic

checklists and guidelines provide essentia

steps or eective ollow through and

implementation. Figure 3.1 outlines the key

sequence in Creating and Implementing an

Ethical Corporate Culture:

Clariying roles: building a proactive ethica

culture requires strong and committed ethica

leadership - the tone at the top. Demonstrated

support rom senior management is essentia

in creating and sustaining an ethical corporate

culture. Te CEO must endorse the process

Tese elements can not be lef on the shel but

need to be put into practice on a daily basis

(See Figure 3.2Te Leadership Component)

Research also indicates that to be perceived

as an ethical leader, an individual must both

articulate and demonstrate a corporations

expectations o ethical values. Speaking ou

is key. Without these actions, employees may

believe that the bottom line is all that matters

Prots that are made also need to be made

ethically as well as legally.

Identiying values and issues: while valuesare key touchstones in establishing patterns

o motivation, norms and behavior among

employees, an eective ethical system o

governance requires more than signposts

pointing in the right direction. Elements need

to be appropriately integrated andeectively

Cotied o pae 4

3


4/12


Develpi ad Maiaii a Eical Cpae Culue (cond)

monitored without trial and error. Without support

and reinorcement mechanisms, Codes o Conduct

have restricted utility. Ethical values and rules can

be dicult or employees to both grasp and observe

because the positives o an ethics program are

ofen not intuitively sel-evident. Brooks and Selley

acknowledge that convincing employees requires

an all-out eortEmployees will not buy into an

ethics program unless there is a strong, dedicated,

well-resourced eort directed at developing and

maintaining an ethical corporate culture. Guidance

and senior management support must underpin the

organizations strategic objectives.

Guidance: developing the core values and issues

foundation (seegure 3.3) is the basis for cultural

guidance. Tis can dene important behavioral

principles and guide how employees will act with

the organizations stakeholders. Ethical values need

to be ront and centre in establishing a culture o

integrity. Many corporations choose core values

related to reputation-drivers (trustworthiness,

credibility, reliability, responsibility (seeFigure3.4);

hyper-norms (honesty, airness, compassion, integrity,

predictability, responsibility; and ethical decision

criteria (net positive utility or consequences o an

action, observance o duties, rights and/or airness

and expected virtuosity. Integration o ethical valuesinto the organizations strategic and operational goals

is the next essential step. Consistency is key to avoid

conusion and to keep perormance in line with

desired objectives. Brooks and Selley explore ethical

decision-making approaches and criteria (see gure

3.6)alongwithaValue Desirability Framework (see

gure 3.7) to determine what specic value-added

and desired/expected behaviors are required. Ethics

issues need to be identied and articulated by the

organizations leadership. Important ethical issues

requiring ethical guidance can be identied through

various approaches, including environmentalsensitivity scans, stakeholder consultation groups and

ethics audits.

Efective communication o organizational values

and objectives is also essential to minimize employee

conusion and to achieve employee understanding

commitment and support or desired behaviors

Brooks and Selley provide insights or creating

guidance communications and a ramework

relating to the companys mission statement, Code

o Conduct and other decision aids. Jointly these

can develop commitment to and understanding

o the organizations ethical objectives. Tey show

how to integrate core values into strategic objectives

and operational goals. Eective communication o

values and building on input rom all levels within

an organization are also critical to success Launching

a new ethical corporate culture along with eective

training are also keys in developing employee

understanding and commitment to the underpinning

o an ethical culture.

Are We Tere Yet?: when these steps are achieved

organizations need to work on reinorcing and

sustaining the organizations values and preerred

practices as well as ostering compliance with its

policies. Brooks and Selley discuss a variety o

techniques, including reinorcement o values

communication and eedback mechanisms

management development, Ombuds oces, hotlines

whistle-blower programs and inquiry services

standalone and/or integrated ethics training

appropriate eedback and recognition and reward odesired behaviors. Ethical values may be spelled out

in an organizations Code o Conduct but unless they

are also incorporated into perormance evaluations

and employee job descriptions, the Code will al

short o an eective process or dealing with ethica

issues. Reinorcement mechanisms (see chapter six

are needed to ensure that employee commitment

to the culture o integrity is sustained and renewed

and that appropriate decisions continue to be made

It is important to develop an on-going monitoring/

reporting process that helps to achieve employee and

management compliance and to address violations oa code o ethics.

Corporate Social Responsibility (CSR): CSR i

becoming increasingly important or many

corporations as external stakeholders apply rising

4


5/12

Maaeme Eics Summe 2008

pressure or transparency while exerting increasing

inuence over corporations to make a dierence

through CSR (see Appendix A: CSR and Sustainability

Reports, Indexes and Rankings). Brooks and Selley

discuss CSR and how it relates to ethical perormance,

along with rameworks or CSR measurement,

potential comparators and the audit o CSR reports

(see chapter seven).

Brooks and Selleys work also guides organizations

through the essential components in achieving

a deensible ethical decision - including eective

management o conicts o interest, international

operations, not-or-prot and small owner-managed

organizations. Te authors are clear to point out

that Te values chosen will determine whether or not

employees are directed to behave in an ethical manner

or not.By way o example, i employees believe that

the bottom-line is paramount, they are likely to step

over the line and act unethically. An organization

needs key stakeholder support to attain and sustain

its strategic objectives. Stakeholder interests need to

be careully accounted or. As well, Brooks and Selley

assert that the degree to which a corporate culture is

based on ethical principles that respect the rights o a

multiplicity o stakeholders will determine its degree o

ethicality.A self-assessment score sheet to assess this

factor,alongwithFigure2.3detailingkeystakeholdersupport is available at the accompanying website

http://www.ethicscentre.ca

Developing an ethical corporate culture involves going

beyond a minimum ethical perormance approach

that is achieved by setting the bar at a compliance or

legal standard level. It is insucient to put a sound

ethics program in place and cross corporate ngers

in the hope that it will work. While measurement,

monitoring and reporting o perormance will

go a long way to developing and maintaining an

ethical corporate culture, steps need to be eectivelyintegrated and implemented. A well-designed, well-

implemented corporate ethics program can reduce

an organizations risk o unethical and illegal actions

by employees and agents while responding to the

interests o the companys stakeholders. Once in

place, how can an organization improve, manage

and maintain its ethical culture? Brooks and Selley

include a number o useul checklists and practicaltips, to help organizations determine whether or not

their culture is suciently ethical. Achievement o

a corporations strategic objectives cannot be lef to

chance. Irrespective o an organizations size, nature

o its operations or services, achieving a culture o

integrity can result in business success. An ethical

corporate culture will not only provide a common

rame o reerence that inuences employee behaviors

and instills principles o management and control

leading to desirable ethical outcomes, but also

becomes the driving orce o an organization.

Te Canadian Centre or Ethics and Corporate Policy

provides a companion website at http:/www.ethicscentre.

ca to assist organizations urther in developing and

maintaining an ethical culture. Click on the Resources

sectiono the EthicsCentre CA website and go toArticles

and Submissions to reach the companion website. Tis

link also provides updates, news and commentary on

governance and ethics matters. Also available at this

site are downloads o checklists, tables and other helpul

documents that are reerenced in Brooks and Selleys

book. Complimentary copies o the book have been

provided to the Centres members. Non members may

order a copy o the book or $10.00 (plus shipping and

taxes) by contacting the Canadian Centre or Ethics &

Corporate Policy either through its website or by calling

416-368-7525.

Photo : David Simpson, Director InterPraxis

5

From left to right: Len Brooks, Hlne Yaremko-Jarvis and David Selley.


6/12


Te Conerence Board o

Canada published a report in

November 2006 on Te Evolving Role o the

Ethics and Compliance Ofcer, authored by

Zachariah Ezekiel. Tis report is part o a series

o reports produced by the Conerence Board on

organizational ethics. Te report draws rom the

insights o the Corporate Ethics Management

Council, one o the executive networks oered

by the Board. Te Councils Senior Research

Associate is Michael Bassett, and the Ethics

Centre thanks Mr. Bassett or allowing us to

assemble some o the Reports content or this

newsletter. Te ull copy o the report is available

through the Conerence Boards e-library www.

conerenceboard.ca (Vincent Power, Editorial

Board, Management Ethics).

Itrodctio

Many rms still struggle with the best way to

manage the corporate ethics unction, never

mind how to sta it. Indeed, all too commonly,

candidates are thrust into the

role with little preparation or

training.

Ideally, senior executives selected to

lead ethics and compliance programs

should have signicant and varied

experience in the organization

and in the industry. Knowl-

edge o the industry can

help in understand-ing the most important

risks and in sning out

problems more quickly. But

in certain situations or example, serious le-

gal or ethical problems in the organization, or

employees who have a low level o trust in the

existing management team a search or an

external candidate may be required. Whoever

is chosen, that person needs credibility with

senior management and the Board, and must

simultaneously be seen as approachable, ac-

cessible and trusted by more junior sta.

In many cases, ethics or compliance positions

are created in response to external pressures,

rather than to a perceived business need. In

other words, companies create ethics oces

not because they eel they need one, but

because they are orced to, either through

regulatory or other legal coercion, or in

response to the exigencies o dealing with

increasingly jaundiced stakeholders. Indeed,

establishment o an ethics or compliance

oce is ofen considered an end in itsel, with

relatively little thought given to what the oce

will actually do and what value it might add.

A second complicating actor is that many ac-

tivities related to ethics such as the manage-

ment o internal nancial controls or conict

o interest have traditionally been the pur-

view o other corporate departments or unc

tions. Even organizations with well-developed

ethics or compliance programs may nd tha

their legal, nance, risk management, inter-

nal audit and human resource departments

are still managing and accepting ultimate ac-

countability or these unctions.

Eaemet verss compliace

Another signicant obstacle to a precise denition o the ethics unction is that, even among

ethics believers, opinion has, until recently

sharply diverged with respect to the approach

that ethics programs should take. At the risk o

oversimpliying, the two dominant and ofen

competing perspectives are as ollows:

e compliance approach to corporate

integrity management (sometimes called

the rules-based approach) suggests tha

appropriate organizational and individua

behaviour can best be encouraged by a

concerted ocus on ensuring strict adher

ence to legal and regulatory requirements

and corporate policy. Proponents o thi

approach avour clear rules, unambiguous

communication o those rules, controls to

limit individual discretion and to moni

tor compliance, enorcement o rules and

credible sanctions against rule-breaking

Tey are suspicious o appeals to shared

values or ethical ideals, believing those

concepts to be too subjective to be mean

ingully measured or enorced.

e engagement approach to corporate

integrity management (sometimes

called the values or values and ethics

approach) tries to shape a culture o

6

The Evolvi Role of theEthics ad Compliace Ofcer


7/12

Maaeme Eics Summe 2008 7

integrity within a company by ostering

dened organizational values and ethical

standards and by encouraging and

empowering employees to apply those

values and standards in their decision-

making. Proponents o this approach

avour raising awareness o ethical

issues through dialogue, training and

other orms o support, and ostering a

corporate culture that encourages (or

at least tolerates) questioning about theethics o particular activities. Tey are

uncomortable with an excessive reliance

on rules, which, they argue, encourages

conormance to the letter rather than to the

spirit o the law. Proponents o engagement

contend that rules cannot cover every

eventuality and that organizations will

want employees to recognize and manage

ethical issues that may not contravene

specic laws, regulations or policies. Tey

urther argue that too many policies, rules

and controls can hamstring managers and

diminish organizational perormance.

Conerence Board o Canada research

ound that a consensus is emerging among

practitioners that ethics programs must

incorporate both the compliance and the

engagement approaches.

Corporations are increasingly taking an

integrated integrity management approach

to their ethics programs, incorporating

both compliance and engagement activities.

Evidence o this unied approach is ound onboth sides o the CanadaU.S. border.

The relators weih i

What is driving this emerging consensus about

the need to incorporate and integrate both

ethics approaches? One important motivator

is that regulators and the judiciary have, in

eect, mandated a truce. Legal exigencies

notably the U.S. SarbanesOxley Act o

2002 and comparable Canadian securities

regulations are making proponents o

the engagement camp come to terms with

compliance and controls whether they like

them or not. Conversely, although many o

the most publicized regulatory interventionshave involved mandated compliance based

activities, the positive eects o the engagement

approach have not been lost on regulators.

For example, the U.S. Federal Sentencing

Guidelines (to which Canadian companies

with U.S. operations are subject) strongly

encourage a hybrid approach. Tey dene

companies with eective ethics and compliance

programs as those that exercise due diligence

to prevent and detect criminal conduct . . . [and

that] . . . otherwise promote an organizational

culture that encourages ethical conduct and a

commitment to compliance with the law.

In Canada, regulators have also taken several

steps to enhance compliance activities in

publicly traded corporations. However, they

are also increasingly paying attention to the

importance o organizational culture or

ethical business conduct.

Research sests that a

iterated approach works best

Te ceasere between the compliance andengagement camps is also being driven by

a growing body o research and experience

suggesting that a hybrid o the compliance

and engagement approaches yields better

results than does compliance alone. Research

by Linda revio and Gary Weaver (in

Managing Ethics and Legal Compiance

ound that, although compliance-type

programs deliver some benets in terms o

reduced misconduct, values-based programs

represent more powerul inuences on

employees attitudes and behaviors.

Coclsios: The iterity maaemet fctio

More and more Canadian corporations areadopting an integrated integrity managemen

orientation to managing corporate ethics. Te

ascendance o this unied approach is being

driven by a growing recognitionamong

practitioners, regulators and researchers

alikethat neither a compliance nor an

engagement approach can, by itsel, yield

optimum results.

However, although integrity managemen

is increasingly being accepted as an integra

corporate role, it remains a proession withou

its own proessionals. Te Conerence Board o

Canada report, Te Evolving Role o the Ethics

and Compliance Ofcer, provides a sample job

description to help clariy the skills required

by compliance oriented or engagement-

oriented personnel. Te Conerence Board

research was conducted in response the lack

o clarity across organizations regarding the

kind o people who are best qualied and

suited to eectively lead and manage the

unied integrity unction.

In a uture issue o Management Ethics, wellook at an Integrity Managers Prole and Job

Description in an eort to help organization

more eectively recruit or this increasingly

important role.


8/12


Respect i the Workplace

Idont get paid enough. Really, its true. AndIm not appreciated. My boss always usese-mail and never once drops by to ask me how

Im doing. I dont think that (s)he trusts me

or recognizes the valuable contribution that I

make to the organization. I never get positive

eedback. He denitely has avorites and Im

not among them. Have you seen the way that

he looks at me in meetings when I try to

speak up? How he cuts me o mid-sentence?

Im sure that he distrusts me i I take a sick-

day. Im not given a shred o exibility. I eel

micro-managed every moment o the work

day. Seriously, should I consider moving on?

Does this sound or eel amiliar? Lets

change the scene to Paradise. Setting aside

its Hawaiian location or a moment or two,

imagine the island in the television series

Lost as your workplace. Beore thinking

nice work i you can get it, consider one o

the characters Sawyer and his seemingly

endless list o nicknames or those with

whom he interacts. Few are immune rom

his unrelenting insults. Deep Dish, Stay

Pu , Pillsbury, Hit the Buet, - to

name but a ew - are ung at an overweight

Hurley who also suers rom a mental health

disability. Each nickname is careully selected

to resonate with a particular individuals

personal characteristics, creed and physical

appearance: Kato, Mohammed, Daniel

Boone, Mr. Clean, Dr. Quinn, Pos de

Leon and Short Round. Each name, except

perhaps or Freckles - Sawyers love interest

- is designed to both humiliate and demean

the recipient. Even in Paradise, is Sawyer theequivalent o the abusive and harassing boss

or co-worker? Is he the grown-up schoolyard

bully?

Sawyer is smart. He already knows that I was

just joking doesnt cut it. A particular brand

o humor in the workplace can be misplaced.

While the protagonist claims that the recipient

is over-reacting and simply too sensitive,

such lack o respect may constitute either

personal harassment and/or harassment on

a prohibited ground under corporate policies

and provincial human rights codes. While

larger corporations may have well-dened

policies with respect to abuse, harassment

and violence in the workplace, are they

translated into appropriate practices? Smaller

companies and the not-or-prot sector

may nd it challenging to implement zero

tolerance policies in light o pressing work

demands and increasingly limited resources.

Employees ofen talk about respect and trust

as matters o undamental importance. When

asked to dene what respect in the workplace

looks like, things can begin to get a bit uzzy.It usually boils down to how employees eel

they are being treated. Demonstrating respect

is more than a management responsibility;

it crosses all position levels in the company.

Flexibility, tolerance, showing acceptance

to people around us, showing common

decency to our co-workers and being

considerate o others legitimate needs are

critical. Acknowledging that ones own

behavior towards others has an impact i

also an essential ingredient o a respectu

workplace. ogetrespect, one also has togiv

respect. Te immediate supervisor, the boss

senior management, work colleagues and

Me we are jointly responsible or starting

and sustaining the cycle o respect in the

workplace.

What i the workplace bully is your boss?

Some employees unortunately become

accustomed to the abuse and while not

liking it, accept it as the norm while looking

or another position. Short-term sel-

preservation becomes an act that condones

an intolerable situation. Sta resentmen

gradually builds until one day someone

erupts only to end up acing discipline. While

there is no singular cookie-cutter solution a

to what constitutes a good managerial style

an oce bully - particularly when it is the

boss - can not only aect employees health

and well-being but can also insidiously

undermine an organizations operationa

strategies and business goals.

Should bosses be held to a higher ethica

standard, given that they are in positions o

authority with the power to grant or deny

a benet and presumably are to be role

models? Please send your comments to the

[email protected] Watch or the nexeditorial or more on the dierence between

schoolyard bullies and those in the workplace

along with preventative and remedia

strategies or the employer.

edItorIal

By Flip Oberth

8


9/12


Te 15 cm snowall and ensuing commuting

chaos on March 5, 2008 did not bode well

or the Centres long-awaited launch o the

book Ethics & Governance: Developing and

Maintaining an Ethical Corporate Culture. On

that stormy morning I had visions o an emptyroom and possibly even no speakers - or this

special event which was to be the culmination

of18monthsworkbytheauthorsonthisbook

commissioned by the Centre.

As it turned out, even winter storms cannot

deter those interested in corporate ethics.

Indeed, attendance at the lunch actually

surpassed the 85who had pre-registered for

the event! Proessor Leonard Brooks and

David Selley provided the audience with a

brie yet inormative overview o their book

and, as promised, a complimentary copy o the

book was provided to all in attendance. Copies

were also later mailed to the Centres corporate

and individual members. (Copies are available

or $10 rom [email protected]). Blair

Peberdy and his team at oronto Hydro are

to be thanked or their contribution to the

success o this event through their marketing

eorts, promoting the launch with the media

and various organizations. We could not have

done it without them.

In our previous newsletter, I noted that we

were planning to increase the number o

member only breakast events. We have

since held three breakasts eaturing (i)

Proessor David Shugarman, Director o YorkUniversitys Centre or Practical Ethics on the

Federal Accountability Act co-sponsored with

ransparency International Canada, Inc.; (ii)

Georges Dessaulles, RBC Compliance Director,

on Insider rading and ipping Managing

the Risks; and (iii) Louise Cannon, Senior

Vice President, Compliance, Scotiabank on

Outsourcing Risk Management. Te excellent

attendance and eedback has encouraged

us to plan more breakast events, beginning

with one in September eaturing Vince Power,

Director o Corporate Communicationsat Sears, speaking on corporate charitable

and community investment programs. Your

suggestions or uture topics or these practical

and inormal learning sessions are welcome.

On March 25 our Speaker Series guest

speaker was Michael Jantzi, President o Jantzi

Research. A leading Canadian spokesperson

on socially responsible investing (SRI), Michael

explored the evolution o SRI in Canada and

internationally, reasons underpinning its

growth, legal and duciary developments, and

what the uture may hold. Michaels power

point presentation can be viewed on the

Centres web site under Past Events. Our April

17 Speaker Series lunch event generously

sponsored by First Canadian itle Inc. (and

sold out with 116 in attendance), eatured

Julie Dickson, Superintendent o Financia

Institutions, speaking on ethics, incentives

and risk management in the context o recen

nancial market turmoil. We will conclude this

yearsSpeakerSerieswithourMay28Annual

General Meeting where we will welcome Mary

Dawson, Q.C, Conict o Interest and Integrity

Commissioner, as guest speaker.

Tose o you who visit our web site may

have noticed that we have introduced a newcalendar o events on which we are posting

ethics related events o other organizations

which may be o interest to our members

We are also inquiring into the cost o creating

a member only section on the site to allow

or communications with members and

inormation exchanges among members.

In concluding this message I would like to

extend a warm welcome to the Centres three

new corporate members: Ontario Power

Generation, the Public Accountants Councior the Province o Ontario and Starbucks Inc

With nine new corporate members this pas

year, we have attained a record high number o

corporate members or the Centre. Tis is very

encouraging as our corporate members are

key to the Ethics Centres success as it is their

nancial support which allows the Centre

to carry out its various activities promoting

corporate ethics. Should your organization

wish to discuss membership in the Centre

pleasecontactmeat416-368-7525orathmyj@

ethicscentre.ca.

I look orward to meeting you at our events

and thank you or your support o the Centre.

Hlne Yaremko-Jarvis, B.C.L., LL.B.

Executive Director

A Messae from the Exective Director


10/12


Leislative WatchProposed Chaes to Exective Compesatio Disclosre

Te Canadian Securities Administrators (the

CSA) have proposed amendments to the rules

governing executive compensation disclosure

in order to improve the transparency and

consistency o that disclosure. Te proposed

eective date or the new requirements is

December31,2008.

In releasing its proposals, the CSA noted that it

believes that the rules governing the specicso what must be disclosed are out o date and

that current disclosure requirements do not

provide investors with adequate inormation

about the basis on which Boards o Directors

make decisions about senior executive

compensation. Te proposed amendments

are designed to provide investors with more

complete inormation to assess the stewardship

and governance o a company and to assist in

their understanding o a companys executive

compensation practices.

Compesatio Discssio ad Aalysis

Te proposed amendments would require an

issuer to include a Compensation Discussion

and Analysis (the CD&A) section in its

annual disclosure with respect to how senior

executives have been compensated (typically

ound in a public companys proxy circular).

Te purpose o the CD&A would be to provide

a narrative overview that would help investors

understand the disclosure that ollows. A

company would be required to explain all

signicant elements o compensation awarded

to its most senior executive ocers (the

Named Executive Ocers or the NEOs)

or the most recently completed nancial year,

including:

the objectives of the compensation

program;

what the compensation program i

designed to reward;

eachelementofcompensation;

why the company chooses to pay each

element;

howthecompanydeterminestheamount

(and, where applicable, the ormula) or

each element;

howeachelementofcompensationandthe

companys decisions about the element into the companys overall compensation

objectives and aect decisions about other

elements;

any new actions, decisions or policie

that were made afer the end o the mos

recently completed nancial year tha

could aect a reasonable understanding

o an NEOs compensation or the most

recently completed nancial year;

in a signicant development, benchmark

ing data used in determining compensa-

tion including the peer group and how

companies were included and excluded in

the selection criteria; and

in another signicant development, targets

based on objective identiable measures

(or i targets are subjective, a description

o the targets without providing specic

measures).

Te proposed requirements would also

contain a condentiality provision that may

allow a company to exclude target levels tha

relate to specic quantitative and qualitative

actors or criteria i disclosure would seriously

prejudice the companys interests. Where

perormance target levels are not disclosed

a company would however have to state what

percentage o the NEOs total compensation

relates to this undisclosed inormation and

10

Robert Yalde ad Tara Law - Osler, Hoski & Harcort LLP


11/12


how dicult it could be or the NEO, or how

likely it would be or the company, to achieve

the undisclosed target levels. Tis exemption

would not be not applicable i the target

levels have been publicly disclosed.

Te CSA states that companies should be

prepared to explain any decision to omit

target inormation on the basis that it would

seriously prejudice their interests. Tus,

while one might be able to omit inormation

regarding the objective identiable measures

that went into the decision relating to, or

example, the bonus awarded to a Senior Vice-

President, Marketing on the grounds that

revealing that inormation would disclose

sensitive inormation about sales targets,

the CSA is still calling or a discussion o

the challenges associated with meeting those

sales targets.

The Smmary Compesatio Table

Te CSA also proposes amending the

Summary Compensation able (the SCT)

that is included in executive compensation

disclosure to ensure that it calls or the

ollowing:

the inclusionof a Totalcompensation

column or each NEO. Te presence o a

total compensation number is meant to

acilitate the objective o communicating

what the board o directors intended

to pay each NEO. Te CSA eels that s

single compensation gure will also be

helpul to investors as it will be easier

to compare compensation o individual

executives;

disclosure of share awards and option

awards based on the grant date air

value;

adescriptionofthemethodologyused

to calculate the grant date air value,

disclosure o the key assumptions and

estimates used or the calculations, an

explanation o why the company chose

that particular methodology, and an

explanation o any dierence between

the grant date air value and accounting

air value;

removal of the Bonus column in the

SC since the CSA believes that the

distinction between bonuses and non

equity incentive plans could lead to

potentially misleading and conusing

disclosure. All non-equity incentive

plans, including bonuses, will be

disclosed in the Non-equity incentive

plan compensation column;

disclosureofonlycompensatoryamounts

rather than the change in actuarial value(which includes both compensatory

and non-compensatory amounts) when

calculating pension values; and

narrative disclosure of any signican

actors necessary to understand the

inormation provided in the SC.

Te director compensation table would also

be amended to reect the changes made to

the SC.

Retiremet Pla Beets

Amendments are also being proposed

to the dened benet plans table ound

in executive compensation disclosure to

reect emerging Canadian best practices

in this area. Te table would now have to

include a continuity schedule with respect

to the accrued obligation to date. A dened

contribution plans table would also be added

to the Form that contains the rules governing

compensation disclosure.

It is not yet clear whether the CSA wil

implement all o these changes in the

orm proposed, but it is clear that the CSA

is concerned to see public companies

provide more ocused inormation tha

it believes will address investor concerns

about some o the perceived deciencies in

the existing rules.


12/12


ethIcscentre ca

MANAGEMEN EHICS

is published seasonally

by EthicsCentre CA.

We welcome appropriate

announcements, letters to

the editors, short articles o

300to1000words(which

will be subject to usual

editorial processes) and

suggestions rom readers.

MANAGEMEN EHICS

is edited by Flip Oberth.

Back issues of MANAGEMEN

EHICS are on-line at the

Centres web site. The opinions

expressed in MANAGEMEN

EHICS do not necessarily

represent the opinions of

EthicsCentre CA.

This newsletter may be reproduced

without permission as long as

proper acknowledgement is given.

YoU CAn rEACh US At:onE YongE StrEEt, SUItE 1801,

toronto, ontArIo M5E 1W7

Pe: 416-368-7525

Fax: 416-369-0515

E-mail: [email protected]

Web sie:

www.ethicscetre.ca

Pii: Cortesy of The Caadia

Istitte of Chartered Accotats.

Layu: Jeifer Cottrea, Sears Caada

CHARITABLE REgISTRATIOn nuMBER:

12161 1932 RR 0001

12

Vicet Power, Vice-Presidet,Corporate Commicatios,Sears Caada Ic.

Members Oly Breakfast Meeti

Wednesday, September 17, 2008

8:00 am - 9:00 amBell Canada Ofce, 483 Bay Street,

Basement Level, Room 45

Mr . Power s remarks on corporate

charitable/community investment programs

will ocus on how to start them, how to

engage with meaningul organizations,

how much to give, potential pitalls and

communication to your publics about your

programs.

Cortey Pratt, Chairma & CEO,Toroto Reio Research Alliace

Lcheo Series

Wednesday, November 5, 2008

12 noon until 2 pm

The Albany Club, 91 King Street East, Toronto

Register on the Centres web site at www.

ethicscentre.ca or contact the Centre by

phone:(416)368-7525ore-mail:lmarsh@

ethicscentre.ca, noting any special dietary

requirements.

Derek Hayes, (Ret.) CIBC, ChairChristia Doely, DCo Consulting, Past ChairMichael Davies, (Ret.) General Electric Canada Inc.,

Vice Chair and SecretaryJoa grass, Bell Canada, Vice ChairRoma Kosmya, Workplace Safety & Insurance Board,

TreasurerLachla MacLachla, FetF Consulting, Vice ChairM.J. Marrocco, University of St. Michaels College,

Vice Chair

Loise Cao, ScotiabankJim Christie, Blake, Cassels and Graydon LLPgeores Dessalles, RBC Financial GroupLisa gressel, NortelSally gz, University of WaterlooHoward Kafma, Fasken MartineauMary McBride, Export Development Canada

Michael Mcgra, BMO Financial GroupChristopher Motae, TD Bank Financial GroupFlip Oberth, Flipside Solutions Inc.Blair Peberdy, Toronto HydroVicet C. Power, Sears CanadaSeymor Trachimovsky, Zenon Membrane SolutionsMaree Wareham, Hydro One Inc.Robert Yalde, Osler, Hoskin & Harcourt LLP

Board of Directors

Upcoming Events

Register on the Centres web site at www.ethicscentre.ca or contact the Centre by phone:

(416)368-7525ore-mail:[email protected],notinganyspecialdietaryrequirements.

Date post:	05-Apr-2018
Category:	Documents
Upload:	ragini-sharma
View:	218 times
Download:	0 times

Ethics on the Top Management

Documents