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The Ethics and Compliance Handbook: A Practical Guide from Leading Organizations

 ECOA Foundation


Introduction to The Ethics and Compliance Handbook


The Enron Corporation is in many ways the genesis of this book. The company’s implosion in 2001 and the spate of corporate crimes that came to light thereafter—engulfing such then-respected companies as WorldCom, Parmalat, Adelphia Com­munications, Royal Ahold, and Tyco International—led to profound doubts about the ways corporations function.

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With each scandal, the general public grew ever more distrustful of, and cynical about, corporations of every stripe. Governments around the world responded: in the United States alone, Congress, the Securities and Exchange Commission (SEC), the Department of Justice (DOJ), and the United States Sentencing Commission (USSC) each took significant steps aimed at mini­mizing the risk that such scandals would repeat.


In the wake of Enron, numerous corporations and other organizations, both public and private, looked for models on ways to establish or enhance ethics and compliance programs, and to create an organizational culture that fosters ethical conduct. Guidance for such work, however, was markedly absent. The main bench­mark for organizational programs was found in an unlikely source: the USSC’s Sentencing Guidelines. Chapter eight of the Sentencing Guidelines listed the criteria for assessing whether a company has an effective compliance program that would justify the reduction of a criminal sentence. The Sentencing Guidelines provide much-needed feedback as to what the government considers an adequate compliance program and, more generally, norms to apply in creating a functioning program.


"This handbook brings practical, real-world experience right to the hands of the reader." —Anne M. Mulcahy, former Chairman & CEO, Xerox Corporation

The Sentencing Guidelines, however, have obvious limitations as a systematic guide for the creation and measurement of effective programs. They were created for a much different purpose—namely, to help judges determine whether an orga­nization convicted of criminal acts deserves leniency in its sentence because of its compliance program. The thinking is that, if an organization has done all it can to prevent and detect illegal activities among its employees, it should not be punished as harshly as an organization that has not done so. From a practitioner’s perspective, the Sentencing Guidelines’ biggest shortcoming is that their creation did not involve professionals at major public and private organizations who work in the ethics and compliance field. Additionally, they were not designed to systematically evaluate the practical problems in creating and running an effective program and, of course, they target a narrower problem—detecting and deterring criminal conduct.


This volume aims to change that. Under the auspices of the ECOA Foundation, a working group of senior ethics and compliance officers at premier large and small organizations created this handbook for the implementation of organizational ethics and compliance programs. These standards were created by the people with the most knowledge about the ethics and compliance issues that organizations most commonly face; individuals with decades of front-line experience in the field. Thus, while chapter eight of the Sentencing Guidelines serves as a useful backdrop—and indeed is the “floor” on which our industry standards are built—the actual norms described in this volume were set by practicing experts rather than government regulators. Their goal is for industry to take the lead in establishing the norms for its own conduct. The spirit behind this effort is that voluntary initiative is undoubtedly preferable to strict reliance on the Sentencing Guidelines or DOJ memoranda.


The standards in this book, developed by organizations themselves and promul­gated by the ECOA, should have great force in encouraging consistent and effective ethics and compliance programs at leading organizations. It will be beneficial for companies to demonstrate publicly and in concrete ways that they are effectively policing themselves and honoring the highest ethical standards. Ethics and com­pliance programs serve the salutary purpose of deterring and detecting wrongful conduct and promoting a healthy organizational culture. While even the best such programs cannot guarantee that no employee will stray, they can serve to demonstrate that when a misdeed occurs, it is aberrational and not emblematic of the institution in which the employee works.


The approach taken in this book is general and broad, since it seeks to address internal programs at a wide range of organizations, large and small, public and private, domestic and international, and heavily regulated and not. As such, the book aims to discuss 10 key components of an effective ethics and compliance program and to offer systematic thinking about the various features and attributes of each component. Rather than offer a series of prescriptions—that is, dos and don’ts—the book outlines a series of issues that a program should address, as well as the potential benefits and pitfalls of different approaches to each topic.


There are topics still to explore and a number of important developments that are yet to be fully grappled with as they continue to evolve. Two such areas include the now critical need to develop an ethical culture within an organization and the inexorable movement toward the globalization of ethics and compliance programs. While all chapters in this book address aspects of these two developments, it will be for the next edition of the handbook to address these topics more fully as they continue to take shape and evolve.


Finally, the book is not meant to be the final word on ethics and compliance at leading organizations. Cultural norms evolve over time, and organizations learn from their experiences. As they do, this book will be revised to stay current with best practices and developing standards for good corporate citizenship. This book is but another significant step in that mission.





Never before in the field of ethics and compliance has there been a practical hand­book like this, in which some of the best and brightest minds in the field have gathered to collaborate on the writing of a guide focused on the most important elements of an effective ethics and compliance program. The Ethics and Compliance Officer Association (ECOA) is proud to have assembled such an illustrious group of practitioners who have shared openly and generously of their own experience and knowledge so that the larger community can benefit from and contribute to the discussion. The boards of directors of the ECOA and the ECOA Foundation express their deepest gratitude to the companies, organizations, and individuals listed here.


The Ethics and Compliance Handbook began as the brainchild of two close sup­porters of the ECOA exactly two years ago. Andrew Weissmann, former Enron Task Force Director, currently a partner in the white collar practice at Jenner & Block LLP, and a frequent speaker and contributor to ECOA events; and Andrea Bonime-Blanc, Senior Vice President & Chief Ethics & Compliance Officer at Bertelsmann and a director on the ECOA board, put on their respective hats as former prosecutor and E&C officer and developed the idea behind this book. The result is a book written by practitioners from leading organizations for practitioners and the larger business, regulatory, academic and non-profit communities that illustrates in clear and practical terms the major elements of an effective ethics and compliance program, using the U.S. Sentencing Guidelines as the jumping-off point. I thank both Andrew and Andrea for their tireless and generous dedication over the past two years leading the structuring, writing, and editing of the handbook and ensuring its ultimate quality and value.


I also express our deepest thanks to the following individuals and organizations (in alphabetical order by organization) for their generous and thoughtful participation as core team members in bringing the vision for this handbook to life, through their clear thinking and writing of the handbook: Lauren Ferrari of Alcatel-Lucent; David Greenberg of Altria; Andrea Bonime-Blanc of Bertelsmann; Martha Ries of Boeing; Patrick Gnazzo of CA, Inc.; Tom Brocks of CH Energy Group Inc.; Harold Tinkler, Maureen Mohlenkamp, and Miira Velia of Deloitte LLP; Joan Elise Dubinsky of the International Monetary Fund; James D. Berg of International Paper; Andrew Weissmann of Jenner & Block LLP; Jacqueline E. Brevard of Merck & Co., Inc., Whitehouse Station; John O’Byrne of New York Life; Emmanuel Tchividjian of Ruder Finn; and David Frishkorn of Xerox Corporation.


Additionally, I extend our sincerest thanks to a group of advance reviewers who kindly reviewed and commented on the final draft assembled by the core team. Again, in organizational alphabetical order, the ECOA board recognizes the following individuals and organizations: Doug Cotton of American Airlines; Kimberly Strong of AOL LLC; James Nortz of Bausch & Lomb; Russ Berland of Bearing-Point; Dean Krehmeyer of the Business Roundtable Institute for Corporate Ethics; Amelia McCarty of Cardinal Health; Gretchen Winter of the Center for Professional Responsibility in Business and Society at the University of Illinois; Lucille P. Davis of CIGNA; Deidre A. Wilson of Citizens Financial Group, Inc.; Harry Britt of El Paso Corporation; Melody R. Morehouse of EMBARQ; Jeffrey R. Hoops of Ernst & Young; Paula Desio of the Ethics Resource Center; Carol Murin of Georgia-Pacific; and Sheryl Corrigan of Koch Industries Inc. Note that the findings and recommendations included in this work are not necessarily endorsed, in whole or in part, by any of the companies and organizations mentioned herein.


For their countless hours of editing work, I offer a special thanks to Matthew Alsdorf and Andrew Weissmann at Jenner & Block LLP; Tim Mazur and Jack Hansen at the ECOA; Joan Elise Dubinsky at the International Monetary Fund; and Andrea Bonime-Blanc at Bertelsmann. Several additional organizations deserve special mention: thanks to the team at Ruder Finn for providing the great design and layout of the handbook; to the team at Digital Print Services at Offset Paperback Mfrs., Inc. (a Bertelsmann company) for donating the printing of the first 1,000 copies; and to the team at Xerox Corporation for providing the paper on which the first run of the handbook was printed. Finally, there are several individuals deserving of separate thanks for their help on this project over the past many months: Christine Caci of the ECOA, and Katharina Wulf and Matthew Hayworth of Bertelsmann.


To conclude, what is powerful about this handbook is that it is intended not simply as a stand-alone work to be used practically and frequently in workplaces at large—it is also intended as a living and breathing document that will be reviewed and revised periodically, with new editions assembling new contributors and thoughts to help refresh and enliven the very healthy and exciting debate in which we all find ourselves thoroughly engaged.


Keith Darcy
Executive Director
Ethics and Compliance Officer Association
Ethics and Compliance Officer Association Foundation

April 2008





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