ethics on the top management
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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
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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)
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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
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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
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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.
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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
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The Evolvi Role of theEthics ad Compliace Ofcer
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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.
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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
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Maaeme Eics Summe 2008 9
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
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Smmer 2008 Maaeme Eics
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
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Maaeme Eics Summe 2008 11
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.
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Smmer 2008 Maaeme Eics
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.