Ethics Column - Beyond Compliance: New U.S. Laws Usher in a Brave New World of “Ethical Culture” in the Workplace

Learn about the impact of the 2004 Revised Federal Sentencing Guidelines on the workplace New U.S. laws now require the creation of an “Ethical Culture” at work Find out what we’re doing at Bertelsmann to live up to these requirements Ethics Column - Beyond Compliance: New U.S. Laws Usher in a Brave New World of “Ethical Culture” in the Workplace By Andrea Bonime-Blanc, senior vice president and chief ethics & compliance officer, Bertelsmann, Inc. Corporate Scandals Continue With ethics scandals continuing to be uncovered in the midst of the multiple high-profile cases already being tried (witness the recent eruption of freshscandals at Marsh & McClellan, AIG and Boeing), it is not surprising that the ethics and compliance (E&C) legal and regulatory landscape in the U.S. is becoming increasingly demanding. In late 2004, the U.S. Congress approved revisions to the 1991 United States Federal Sentencing Guidelines (the FSGs). The original FSGs prescribed a set of seven E&C program guidelines for U.S.-based companies to follow if they wanted to keep out of trouble or redeem themselves after getting into trouble. The seven guidelines included: A code of conduct and relevant policies Ethics leadership and resources Communications and training A system of approval delegation and accountability Monitoring and auditing Enforcement of policies A system for reporting and continual improvement So what happened with the 2004 revisions? Because of the many scandals we have had in the past five years as well as the passage of increasingly onerous legal requirements (e.g., the Sarbanes Oxley Act of 2002), what used to be a prescribed system of best practices has now become a mandatory set of legal requirements. All companies (whatever shape or size, whether publicly traded or private) must now adopt the requirements of the Revised FSGs or risk paying dearly in fines, damages or jail time when and if a major investigation, litigation or prosecution takes place. How to Implement an “Ethical Culture”? The centerpiece of the Revised FSGs is the requirement that companies go beyond just complying with the law to creating an “Ethical Culture”. How to do this? While the Revised FSGs do not provide specific guidance on this particular topic, a number of new and additional requirements point in the direction of building some of the elements of an Ethical Culture: Education. All employees must now undergo mandatory periodic code of conduct training Oversight. All senior management and boards of directors must take responsibility and are accountable for oversight of a company’s ethics and compliance program More Education. All senior management and boards of directors are required to undergo appropriate periodic E&C education Resources. Companies must provide their ethics officers with appropriate resources –people and money – to carry out the E&C mandate Risk Assessments. Companies must undergo E&C risk assessments, implement recommendations and conduct periodic re-assessments Anonymous Reporting. Companies must afford their employees with anonymous ways to report E&C concerns Measuring Effectiveness. Companies must find ways to monitor and measure the effectiveness of their E&C programs What Are We Doing at Bertelsmann? As you can see from this list, the new requirements present a fairly tall order. The good news is that we have been working on many of these elements over the past three years, already have a number of them in place or are in the process of implementing them. For example, last year we launched (a) the Family Feud Ethics Game Code of Conduct multimedia training program available to all of our companies to conduct periodic employee training (see related story on the BeNet Ethics & Compliance page); (b) the E&C Website (ethics.bertelsmann.com ) which provides all our employees with access to a broad range of resources and information (see related story on the BeNet Ethics & Compliance page); and (c) the EthicsLines for each of our North American businesses providing employees with the anonymous reporting capabilities described above (see related story on the BeNet Ethics & Compliance page). During 2005, we are continuing to work on a number of additional projects that address the Revised FSGs -- including the development of senior management education modules, the development of surveys and other tools to measure the effectiveness of our programs and a follow up on company E&C risk assessments conducted in 2003. This column provides general advice on business ethics topics and should not be relied on for guidance on a specific situation. Consult your in-house counsel or other relevant professional for details regarding your company’s policy or approach to your specific question or concern. For additional information, please contact: Andrea Bonime-Blanc, senior vice president, chief ethics & compliance officer, Bertelsmann, Inc. E-mail: andrea.bonime-blanc@bertelsmann.com .