final assessment cae inc - transparency...

CAE INC 26/09/14 HTTP://WWW.CAE.COM/

FINAL ASSESSMENT

CAE INC

The following pages contain the detailed scoring for your company based on

public information.

The following table represents a summary of your scores:

Topic Number of

questions

% score

based on

public

information

Leadership, Governance and

Organisation

10 30%

Risk Management 7 35.7%

Company Policy and Codes 12 79.2%

Training 5 0%

Personnel and Helplines 7 64.3%

Total 41 47.6%


A1:

Does the company publish a statement from the Chief Executive Officer or the Chair of the Board supporting the ethics and anti-corruption agenda of the company?

Score:

1

Comments:

Based on public information, there is evidence that the company has published a statement from the President and Chief Executive Offier supporting the ethics and anti-corruption agenda of the company, as a preface to the code of conduct within the last two years. The company therefore scores 1. To score higher the company would need to provide evidence of at least two other such statements from the last two years, or one statement from the last two years that specifically supports the company’s strong stance against corruption.

References:

Public:

CAE Code of Business Conduct (February 2012), p.4:

‘Dear Colleagues, CAE’s reputation for conducting its business with the highest ethical standards has earned the trust of its customers, suppliers, investors and the general public. CAE is committed to conducting its business in accordance with these standards and requires that all its employees, including individuals and organizations working on its behalf, strictly adhere to these standards. The CAE Code of Business Conduct outlines CAE’s position and expectations for appropriate corporate and individual conduct. The Code provides general guidance as to acceptable behaviour. The Code supplements but does not over-ride existing CAE policies, company standard practices and laws related to specific business activities. It does not address every potential issue and relies upon CAE staff to use their common sense in an ethical and honest manner. As a very general guideline, if you would be embarrassed to read in the media about a decision or action you have taken on CAE’s behalf, this a key signal that you need to discuss this decision or action with your supervisor. Integrity, trust and respect are foremost amongst CAE’s corporate values. As you review the Code of Business Conduct, please remember the trust that CAE places in you and the respect we have for your judgment to conduct all CAE business with the highest degree of integrity and in accordance with the Code’s rules of ethical behaviour. I particularly count on members of the management to lead by example in demonstrating the ethical behaviour and core business principles this Code embodies. If you believe in good faith that a breach


of this Code has occurred or likely will occur in the future, please promptly contact either the Human Resources or the Legal departments. Bernard Cormier, Vice President, Human Resources, and Hartland Paterson, Vice President, Legal, are CAE’s Chief Ethics Officers and responsible for the administration of this Code. Alternatively, you can report a breach of this Code anonymously to the EthicsPoint hotline (see CAEvox – Employees’ Corner – Employees’ toolkit – Programs & Policies – Ethicspoint). Go to www.ethicspoint.com and click on “File a Report” or call 1-866-294-9551 (toll free in Canada and the USA – see CAEvox for international toll free numbers to call). See the end of this Code for more details on using Ethicspoint. CAE will not tolerate any punitive action being taken against an employee for making a good faith report of a violation of this Code. Thank you for your support, and for your commitment to protecting CAE’s reputation and conducting business with the highest ethical standards.

Marc Parent President and Chief Executive Officer’

http ://www.cae.com/uploadedFiles/Content/BusinessUnit/Corporate/About_CAE/Media_Centre/Document/CAE-Business-conduct-english.pdf

http://www.cae.com/uploadedFiles/Content/BusinessUnit/Corporate/About_CAE/Media_Centre/Document/CAE-Business-conduct-english.pdf



A2:

Does the company’s Chief Executive Officer or the Chair of the Board demonstrate a strong personal, external facing commitment to the ethics and anti-corruption agenda of the company?

Score:

0

Comments:

Based on public information, there is no readily available evidence that the company’s Chief Executive Officer or the Chair of the Board demonstrate a strong personal, external facing commitment to the ethics and anti-corruption agenda of the company.

References:

Public:

NA


A3:

Does the company’s Chief Executive Officer demonstrate a strong personal, internal-facing commitment to the ethics and anti-corruption agenda of the company, actively promoting the ethics and anti-corruption agenda at all levels of the company structure?

Score:

0

Comments:

Based on public information, there is no readily available evidence that the company’s Chief Executive Officer demonstrates a strong personal, internal-facing commitment to the ethics and anti-corruption agenda of the company, actively promoting the ethics and anti-corruption agenda at all levels of the company structure.

References:

Public:

NA


A4:

Does the company publish a statement of values or principles representing high standards of business conduct, including honesty, trust, transparency, openness, integrity and accountability?

Score:

0

Comments:

Based on public information, there is insufficient evidence of a statement on the company’s values and standards within the Corporate Social Responsibility Report. No information is provided on what these values mean for the company and how they translate into company policies and codes.

References:

Public:

TI notes:

Company Website, Governance, Sustainable Corporate Development:

‘CAE is committed to maintaining the highest standards in corporate governance and corporate social responsibility.’

Corporate Social Responsibility Report (2014), p.1:

‘CAE’s approach to Corporate Social Responsibility

CAE’s vision to be the Partner of Choice for our customers is supported by our approach to corporate social responsibility (CSR). Our governance processes are intended to meet the expectations of our customers and our shareholders, and also ensure that our business model is sustainable for our employees, our suppliers, the communities we work in and governments.

We have already taken major steps in terms of corporate social responsibility and we are committed to both furthering these initiatives and increasing transparency and visibility of our CSR actions for our stakeholders.

We believe CSR helps to create sustainable economic value by promoting opportunities and managing risks, as well as ensuring that we remain a responsible corporate citizen.

Our Investment Philosophy

As a company, we are committed to investing and operating responsibly in places where we


do business. Our philosophy is to contribute to the sustainable development of communities, including hiring locally, achieving a return on our investments so that we can economically contribute locally, participating in activities that will benefit our local communities and making sure we do our part for the local environment.

CAE always respects all applicable laws and international standards. We operate transparently and in consultation with host governments and local communities. We think that the best way to achieve corporate social responsibility is by applying our values and practices everywhere we do business.’

(p.2): ‘We are committed to continuing to uphold the highest level of corporate governance, including ethics, compliance, controls, corporate responsibility and risk management.

Good governance is essential to sustainability and our approach toward ethical and good governance is embedded in our Code of Business Conduct and our Corporate Policies and Procedures, which apply globally to CAE and our controlled subsidiaries.’

http://www.cae.com/uploadedFiles/Content/BusinessUnit/Corporate/About_CAE/Media_Centre/Documents/CAE-Corporate-Social-Responsibility.pdf




A5:

Does the company belong to one or more national or international initiatives that promote anti-corruption or business ethics with a significant focus on anti-corruption?

Score:

0

Comments:

Based on public information, there is no readily available evidence that the company belongs to one or more national or international initiatives that promote anti-corruption or business ethics with a significant focus on anti-corruption.

References:

Public:

NA


A6:

Has the company appointed a Board committee or individual Board member with overall corporate responsibility for its ethics and anti-corruption agenda?

Score:

2

Comments:

Based on public information, there is evidence that the company has appointed an audit committee and a governance committee with overall corporate responsibility for its ethics and anti-corruption agenda. Their responsibilities include annually updating the Code of Business Conduct and the company’s system to monitor compliance, as well as reviewing legal compliance issues.

References:

Public:

CAE Audit Committee Mandate:

‘ETHICAL AND LEGAL COMPLIANCE

Oversee, review, and annually update the Company’s code of business conduct and the company’s system to monitor compliance with and enforce this code.

Review, with the Company’s general counsel, legal compliance and legal matters that could have a significant impact on the Company’s financial statements.’

http://www.cae.com/uploadedFiles/Content/BusinessUnit/Corporate/About_CAE/Media_Centre/Documents/CAE-Audit-Committee-Mandate.pdf

CAE Governance Committee Mandate:

‘Review, and have specific oversight responsibility for, the Company’s compliance process in respect of laws of an export control/national security or anti-corruption (including without limitation the U.S. Foreign Corrupt Practices Act) nature, and receive at least annually a report on such compliance from the Company’s general counsel or such other member of the Company’s management as the Committee shall approve.’

http://www.cae.com/uploadedFiles/Content/BusinessUnit/Corporate/About_CAE/Media_Centre/Documents/CAE-Governance-Committee-Mandate.pdf







‘Ultimate responsibility for compliance with this Code will rest with CAE’s Vice-President, Human Resources and Administrative Services and Vice President, Legal, General Counsel & Corporate Secretary.’





A7:

Has the company appointed a person at a senior level within the company to have responsibility for implementing the company’s ethics and anti-corruption agenda, and who has a direct reporting line to the Board?

Score:

2

Comments:

Based on public information, there is evidence that the company has appointed a general counsel responsible for its ethics and anti-corruption agenda, who is identifiable by name.

References:

Public:


Bernard Cormier, Vice President, Human Resources, and Hartland Paterson, Vice

President, Legal, are CAE’s Chief Ethics Officers and responsible for the administration

of this Code.

(p.12): ‘Ultimate responsibility for compliance with this Code will rest with CAE’s Vice-President, Human Resources and Administrative Services and Vice President, Legal, General Counsel & Corporate Secretary.’


‘Hartland Paterson Vice-President, Legal, General Counsel and Corporate Secretary +1-514-734-5779’

http ://www.cae.com/investors/governance/



http://www.cae.com/investors/governance/


A8:

Is there regular Board level monitoring and review of the performance of the company’s ethics and anti-corruption agenda?

Score:

1

Comments:

Based on public information, there is evidence that the company has general Board level monitoring and review of the performance of the company’s governance, but it is not clear whether this is continuous review or a scheduled major review of the entire agenda. The company therefore scores 1.

References:

Public:

CAE Governance Committee Mandate (February 2014), p.2:

‘To monitor conflicts of interest, real or perceived, of both the Board of Directors and

the Company Management and to ensure that the company’s Code of Business

Conduct is implemented throughout the Company.

Review, and have specific oversight responsibility for, the Company’s compliance

process in respect of laws of an export control/national security or anti-corruption

(including without limitation the U.S. Foreign Corrupt Practices Act) nature, and

receive at least annually a report on such compliance from the Company’s general

counsel or such other member of the Company’s management as the Committee shall

approve.’





A8(a):

Is there a formal, clear, written plan in place on which the review of the ethics and anti-corruption agenda by the Board or senior management is based, and evidence of improvement plans being implemented when issues are identified?

Score:

0

Comments:

Based on public information, there is no readily available evidence of a formal, clear, written plan in place on which the review of the ethics and anti-corruption agenda by the Board or senior management is based, or evidence of improvement plans being implemented when issues are identified.

References:

Public:

NA


A9:

Does the company have a formal process for review and where appropriate update its policies and practices in response to actual or alleged instances of corruption?

Score:

0

Comments:

Based on public information, there is no readily available available evidence that the company has a formal process for review and where appropriate updates its policies and practices in response to actual or alleged instances of corruption.

References:

Public:

NA


A9(a):

Does the company have a formal anti-corruption risk assessment procedure implemented enterprise-wide?

Score:

0

Comments:

Based on public information, there is no readily available evidence that the company has a formal anti-corruption risk assessment procedure implemented enterprise-wide.

References:

Public:

NA


A10:

Does the company have a formal anti-corruption risk assessment procedure for assessing proposed business decisions, with clear requirements on the circumstances under which such a procedure should be applied?

Score:

0

Comments:

Based on public information, there is no readily available evidence that the company has a formal anti-corruption risk assessment procedure for assessing proposed business decisions, with clear requirements on the circumstances under which such a procedure should be applied.

References:

Public:

NA


A11:

Does the company conduct due diligence that minimises corruption risk when selecting or reappointing its agents?

Score:

2

Comments:

Based on public information, there is evidence that the company has formal procedures in place for selecting agents, and requires an annual review for multi-year contracts.

References:

Public:

CAE Corporate Policies and Procedures, Foreign Agents (December 2011), pp.6-7:

‘Due Diligence Procedures

4.3 After the use of an agent has been justified but before any arrangement and/or agreement with a foreign agent can be concluded or renewed and before any activities can be carried out by the potential agent, CAE must use due diligence in checking the

background of the proposed foreign agent and for the specific project being considered.

This responsibility will generally fall to the Marketing Director or Vice President of

Sales & Marketing. The Legal department will provide support where applicable.

Documentation should be retained in the foreign agent’s file outlining the background

research conducted and the reasons why the firm or individual was selected. Exhibit B

to this Policy contains the due diligence forms, checklists and questionnaires that must

be completed during the due diligence process and thereafter as required under this

Policy.

4.4 A detailed due diligence shall be conducted using the Part I Due Diligence form found in

Exhibit B of this Policy for each new potential agent or where a detailed due diligence

has never been performed for an existing agent or if there is a material change in the

relationship or the nature of the foreign agent (i.e. change in ownership or key

personnel). If the due diligence forms cannot be fully completed, it will be a judgment exercise by senior management whether CAE has sufficient, valid information to form

an adequate conclusion to proceed. An agreement with the potential foreign agent can

only be finalized and entered into after the detailed due diligence exercise has been


completed and approved by all required parties.

4.5 Where a detailed due diligence has been previously conducted for an existing agent,

there must be an annual review of the arrangement with the foreign agent completed in

accordance with the Part III Monitoring checklist provided in Exhibit B. Where there is

a multi-year agreement the monitoring checklist should be done prior to each contract

anniversary date. In the year where an agreement is being renewed, the monitoring

checklist should be prepared as part of the renewal process and fully approved prior to

the effective date of services and date of signing the renewal agreement.

4.6 The prescribed due diligence forms included in the Exhibits to this Policy should be used in all cases, whether the arrangement or agreement with the foreign agent is long-term, or is project-specific.

4.7 Once the due diligence has been completed, the CAE Legal Department is responsible

for reviewing the results. The CAE Legal Department shall also investigate the laws of

the country which the potential foreign agent is located and will be working to determine

any specific regulations/ prohibitions on use of such foreign agent. For example, many

countries prohibit the use of a percentage fee contract for sales representatives. Further,

there are specific guidelines to be reviewed if the resulting contract in question is funded

in the United States by Foreign Military Financing (FMF). Based on such considerations, appropriate edits to the agreements can be made.

4.8 A copy of all completed due diligence forms should be provided for approval to the

Group President of the relevant business unit, or the EVP Strategy in the case of

Healthcare, Mining & Energy/Presagis where a new Candidate is being proposed (Part I

form) or in the case of annual monitoring, the forms should be provided for approval to

CAE VP Legal and VP Sales and Marketing (Part III form) where no new red flags are

noted.’

http ://www.cae.com/uploadedFiles/Content/BusinessUnit/Corporate/About_CAE/Media_Centre/Documents/Foreign%20agents.pdf

http://www.cae.com/uploadedFiles/Content/BusinessUnit/Corporate/About_CAE/Media_Centre/Documents/Foreign%20agents.pdf



A12:

Does the company have contractual rights and processes for the behaviour, monitoring, control, and audit of agents with respect to countering corruption?

Score:

2

Comments:

Based on public information, there is evidence that the company has formal procedures and contractual rights in place for the behaviour, monitoring, control, and audit of agents with respect to countering corruption.

References:

Public:

CAE Corporate Policies and Procedures, Foreign Agents (December 2011), p.1:

Policy, Purpose and Scope

2.0 The purpose of this Policy is to assign responsibilities and establish procedures to ensure full compliance with the anti-bribery provisions of the Canadian Corruption of Foreign Public Officials Act (“CFPOA”), the US Foreign Corrupt Practices Act (“FCPA”), and other related local legislation (collectively, “Foreign Corruption Laws”).

2.1 The main reason for this Policy is to ensure that CAE does not participate indirectly in bribery, through an agent, consultant or any other type of intermediary. This Policy establishes a process to make sure that any Foreign Agent (as defined below) receives a fair amount of money based on the risk assumed by the Agent, the value of the work performed (which must be commensurate with the fee) and the costs incurred by the Foreign Agent working for CAE.

2.2 This Policy sets out a procedure that must be observed by all CAE employees, agents and contractors worldwide whenever the appointment of a foreign representative or consultant is proposed, or whenever there are any requests or requirements to directly or indirectly provide commissions, payments or gifts to foreign officials.

2.3 Agreement templates, checklists and questionnaires to ensure compliance with this

Policy are set out in Exhibits A and B.

2.4 If you believe that a breach of the Policy has occurred or likely will occur in the future, please promptly contact the Legal Department. Alternatively, you can report any such problem anonymously to the EthicsPoint hotline (see CAEvox – Employees’ Corner –


Employees’ toolkit – Programs & Policies – Ethicspoint). Go to www.ethicspoint.com and click on ”File a Report” or else call 1-866-294-9551 (toll free in Canada and the USA) (see CAEvox for international toll free numbers to call). See the end of this Policy for more details. EthicsPoint is a third party confidential Internet and telephone based reporting tool that assists management and employees to work together to address fraud, abuse, misconduct, and other violations in the workplace, while helping to cultivate a positive work environment.

(p.3):

‘3.3.4 The FCPA contains very severe criminal penalties for violations. A corporation

may be fined as much as US$2,000,000 per violation. An officer, director,

shareholder, employee or other agent of a corporation may be fined as much as

US$250,000 per violation and imprisoned for up to five years. Willful violations

of the books and records and internal control provisions can result in criminal fine

of up to US$25 million for a company and a criminal fine up to US$5 million as

well as imprisonment for up to 20 years for culpable individuals. Such fines and

penalties are in addition to harsh collateral sanctions that can result from an FCPA

violation, including termination of government licenses or contracts and

debarment from government contracting programs. In addition, the Security

Exchange Commission (“SEC”) is able to seek disgorgement of a CAE’s profits

on contracts secured with improper payments. Further, enforcement agencies are

increasingly seeking appointment of an independent compliance monitor over

FCPA corporate violators for multi-year periods, a process which can be

cumbersome and expensive for companies. Moreover, the FCPA prohibits

reimbursement by a corporation of any fines that are paid by any officer, director,

shareholder, employee or other company agent.

3.3.5 The scope of the FCPA is very broad. It forbids not only payments to foreign

officials, but also offers, promises (even if not fulfilled) and even authorizations

to pay. Such payments, offers, promises or authorizations may be direct or

indirect, i.e. if made through an unrelated third party. Both objective and

subjective standards are used to determine if the FCPA was violated. This means

that if CAE or its employees or agents knew or ought to have known that an

improper payment was made or directed to a public official, party or candidate,

then CAE and those persons would be subject to the above penalties.’

(p.8):

‘Monitoring of Agency Activities

4.17 In order to assist the Group Presidents, and the EVP Strategy in the case of Healthcare,

Mining & Energy/Presagis, with their responsibilities for CAE’s compliance with the


Foreign Corruption Laws, the Vice Presidents responsible for administering the process

for foreign agents of each segment should provide them periodic information for

monitoring purposes (monthly). The monitoring information should include highlights

of activities such as amounts paid, details on the largest contracts with agency fees and

overall status of negotiations or renewals with potential or existing agents.

4.18 Each segment shall prepare a summary report to be included in the financial reviews to the CEO twice a year (at the end of Q2 and end of Q4).’

(p.23)


A13:

Does the company make clear to contractors, sub-contractors, and suppliers, through policy and contractual terms, its stance on bribery and corruption and the consequences of breaches to this stance?

Score:

1

Comments:

Based on public information, there is evidence that the company makes clear its ethics and anti-corruption agendas. However, the consequences of non-compliance are not explicit nor is there evidence of contractual rights or sanctions. The company therefore scores 1.

References:

Public:


‘Supplier engagement

CAE’s Supplier Quality Manual (SQM) is intended to facilitate supplier compliance with CAE requirements, assist in the processing of enquiries, and improve communication between CAE and its suppliers. It is part of CAE’s continuing effort to meet the objectives of the company’s quality policy through improvement of supplier quality processes. CAE’s quality policy is to align all elements of the organization on consistent delivery of world-class products and services that meet or exceed customer expectations and to promote a culture of continuous improvement built on effective processes.

The principal objective of the SQM’s Process Control is to ensure that changes to manufacturing or processing operations of parts will yield components equal to those which previously satisfied CAE’s requirements. CAE also evaluates its suppliers through its comprehensive Quality Assurance Facility Survey Report.’



‘CAE employees (which includes for the purposes of this Code all employees of CAE Inc. And its wholly-owned or controlled subsidiaries, including any employees seconded to joint venture companies), agents, representatives, contractors, suppliers and consultants shall :

1. conduct business fairly, honestly and with respect to all parties involved ;



2. avoid personal conflicts of interests ;

3. not accept or offer bribes, kickbacks or other forms of pay-offs ;

4. not engage in any unfair business practice ;

5. not use or disclose insider information for personal financial gain ;

6. strictly comply with confidentiality obligations with respect to CAE’s proprietary

information and that of its customers and suppliers and other parties who have disclosed

information to CAE under a Non-Disclosure Agreement ;

7. respect the spirit and letter of our contracts with both customers and suppliers ;

8. not violate export, import or other applicable government regulations or laws ;

9. not use or disclose CAE’s intellectual property or that of its customers or suppliers except

as legally authorized ;

10. maintain accurate financial records of all transactions in accordance with CAE policies

and procedures ;

11. avoid making any public statements regarding the business of CAE, unless specifically

authorized to do so by an officer of CAE ;

12. respect the rights of all individuals and specifically abstain from any and all forms of

harassment, physical, mental or sexual ;

13. not carry any firearms or weapons in the workplace ;

14. not use or possess any controlled substance or alcohol in the workplace ;

15. comply with all Health and Safety policies governing the workplace ; and

16. use and care for company equipment and assets in accordance with this Code and

Company Standard Procedures.

Those individuals and companies whose services CAE retains are expected to conduct themselves in accordance with the Code of Business Conduct in their CAE-related activities. It is the responsibility of the CAE employee retaining such persons to ensure that they are aware of the contents of this Code and that they agree to accept by these provisions with respect to all dealings with or on behalf of CAE.’





A13(a):

Does the company explicitly address the corruption risks associated with offset contracting?

Score:

0

Comments:

Based on public information, there is no readily available evidence that the company explicitly addresses the corruption risks associated with offset contracting.

References:

Public:

TI notes:

Company website:

‘International Offsets and Industrial Cooperation

CAE is always on the lookout for qualified suppliers and business partners, big or small, with a drive to provide unparalleled goods and services. CAE’s Offset and Industrial Cooperation group has the mandate to act as a liaison between the interested suppliers and CAE’s internal organization.

Through CAE’s regional investment programs and offset obligations, your firm could be located in an area of interest and be providing goods and/or services that CAE is looking for. If you think that your business is well positioned to offer the best value for its products, please contact us using the link indicated below.’

http://www.cae.com/potc/



A13(b):

Does the company conduct due diligence that minimises corruption risk when selecting its offset partners and offset brokers?

Score:

0

Comments:

Based on public information, there is no readily available evidence that the company conducts due diligence that minimises corruption risk when selecting its offset partners and offset brokers.

References:

Public:

TI notes:

Company website:

‘International Offsets and Industrial Cooperation

CAE is always on the lookout for qualified suppliers and business partners, big or small, with a drive to provide unparalleled goods and services. CAE’s Offset and Industrial Cooperation group has the mandate to act as a liaison between the interested suppliers and CAE’s internal organization.

Through CAE’s regional investment programs and offset obligations, your firm could be located in an area of interest and be providing goods and/or services that CAE is looking for. If you think that your business is well positioned to offer the best value for its products, please contact us using the link indicated below.’




A15:

Does the company have an anti-corruption policy that prohibits corruption in its various forms?

Score:

2

Comments:

Based on public information, there is evidence that the company has a policy that prohibits the giving and receiving of bribes, and is explicit on the various forms corruption can take.

References:

Public:

CAE Code of Business Conduct (February 2012), pp. 6-7:

‘Improper Payments

CAE strictly prohibits giving or taking bribes, kickbacks, or commissions or any other form of pay-off to or from our suppliers, customers or any other party (including employees), in an attempt to gain business or in exchange for favourable treatment. Such actions are grounds for dismissal and possible criminal liability. CAE funds must not be used to make payment, directly or indirectly, in money, property, services or any other form:

• to a government official from any jurisdiction;

• to an individual whom the payer knows will pass the payment on to a government official;

• to an agent or consultant who might be expected to offer, give or promise part of the funds to a government official (please see CAE’s Corporate Policies & Procedures, Foreign Agents Policy for further directions and guidance in this regard);

• to persuade an individual to induce a government official to do or omit to do any act in violation of his/her lawful duty;

• to bribe an individual employed by another company to do, or not do, something.

Choosing the services of dealers, lawyers, consultants, other professionals and suppliers should be done on the basis of qualifications, quality and price.’





A16:

Is the anti-corruption policy explicitly one of zero tolerance?

Score:

2

Comments:

Based on public information, there is evidence that the company has a zero tolerance policy of bribery.

References:

Public:

CAE Code of Business Conduct (February 2012), pp. 6-7: ‘Improper Payments












A17:

Is the company's anti-corruption policy easily accessible to Board members, employees, contracted staff and any other organisations acting with or on behalf of the company?

Score:

2

Comments:

Based on public information, there is evidence that the company’s anti-corruption policy is easily accessible to board members, employees, and all other affiliate organizations through their website, and is also available in several languages.

References:

Public:

Company Website, Governance, Ethics :

‘The CAE Code of Business Conduct outlines CAE’s minimum position and expectations regarding appropriate corporate and individual conduct. The Code is intended to provide general guidance as to acceptable behaviour. It is intended to supplement and not to supersede existing corporate policies, company standard practices or additional legal requirements related to specific business activities. This Code outlines the standards that must be respected by CAE, its employees as well as those individuals or organizations working on CAE’s behalf and sets the tone for appropriate conduct. It does not address every situation or potential issue and relies upon each individual to use his or her common sense in an honest and conscientious manner. Integrity, trust and respect are foremost amongst CAE’s corporate values.’


CAE Code of Business Conduct (February 2012):






A17(a):

Is the company’s anti-corruption policy easily understandable and clear to Board members, employees and third parties?

Score:

2

Comments:

Based on public information, there ie evidence that the company’s code of conduct and references to anti-corruption measures are written in clear, comprehensible language.

References:

Public:


‘The success of CAE and its employees, in both their personal and their professional capacities depends upon the way in which they conduct themselves. Honesty, integrity and respect are keys to that success.

CAE employees (which includes for the purposes of this Code all employees of CAE Inc. and its wholly-owned or controlled subsidiaries, including any employees seconded to joint venture companies), agents, representatives, contractors, suppliers and consultants shall:

1. conduct business fairly, honestly and with respect to all parties involved;

2. avoid personal conflicts of interests;

3. not accept or offer bribes, kickbacks or other forms of pay-offs;

4. not engage in any unfair business practice;

5. not use or disclose insider information for personal financial gain;

6. strictly comply with confidentiality obligations with respect to CAE’s proprietary information and that of its customers and suppliers and other parties who have disclosed information to CAE under a Non-Disclosure Agreement;

7. respect the spirit and letter of our contracts with both customers and suppliers;

8. not violate export, import or other applicable government regulations or laws;

9. not use or disclose CAE’s intellectual property or that of its customers or suppliers except as legally authorized;

10. maintain accurate financial records of all transactions in accordance with CAE policies

and procedures;

11. avoid making any public statements regarding the business of CAE, unless specifically


authorized to do so by an officer of CAE;

12. respect the rights of all individuals and specifically abstain from any and all forms of

harassment, physical, mental or sexual;

13. not carry any firearms or weapons in the workplace;

14. not use or possess any controlled substance or alcohol in the workplace;

15. comply with all Health and Safety policies governing the workplace; and

16. use and care for company equipment and assets in accordance with this Code and

Company Standard Procedures.

Those individuals and companies whose services CAE retains are expected to conduct themselves in accordance with the Code of Business Conduct in their CAE-related activities. It is the responsibility of the CAE employee retaining such persons to ensure that they are aware of the contents of this Code and that they agree to accept by these provisions with respect to all dealings with or on behalf of CAE.’





A18:

Does the anti-corruption policy explicitly apply to all employees and

members of the Board?

Score:

2

Comments:

Based on public information, there is evidence that the company’s anti-corruption policies apply to all employees. Additionally, there is a Board Member Code of Conduct that applies to the Board.

References:

Public:

Company Website, Governance, Ethics:

‘Code of Business Conduct

CAE's long standing reputation for conducting its local and international business with the highest ethical standards has earned it the trust of its customers, suppliers and investors as well as that of the general public.

CAE is committed to conducting its business in accordance with these standards and requires that all of its employees, as well as individuals and organizations working on its behalf, strictly adhere to these standards.

The CAE Code of Business Conduct outlines CAE's minimum position and expectations regarding appropriate corporate and individual conduct. The Code is intended to provide general guidance as to acceptable behaviour. It is intended to supplement and not to supersede existing corporate policies, company standard practices or additional legal requirements related to specific business activities. This Code outlines the standards that must be respected by CAE, its employees as well as those individuals or organizations working on CAE's behalf and sets the tone for appropriate conduct. It does not address every situation or potential issue and relies upon each individual to use his or her common sense in an honest and conscientious manner.

Integrity, trust and respect are foremost amongst CAE's corporate values.’

‘The purpose of our committees is to build long-term value for the Company’s shareholders and to ensure the continuity and vitality of the Company’s businesses by setting policy for


the Company, monitor the Company’s performance and provide management with appropriate advice and feedback. Management is responsible for and the Board is committed to ensuring that CAE operates in a legal and ethically responsible manner.’


CAE Board Member Code of Conduct (May 2011), p.1:

‘Introduction

CAE directors are obliged to avoid situations or circumstances which result or could result in

conflicts of interest and to adhere to the procedures set forth in this Code designed to identify such situations or circumstances and, where applicable, to resolve them. CAE directors are also obliged to keep non-public information about CAE and its business relationships confidential.

Using confidential information for personal gain is prohibited by CAE. It is also illegal to trade in securities with the benefit of Inside Information. This Code is for the benefit of CAE and its directors. Adherence to this Code will assist CAE directors to avoid potentially embarrassing or damaging conflicts of interest and charges of insider trading or wrongfully using confidential information.

This Code shall be reviewed annually by the Governance Committee of the CAE board.’

(p. 3):

‘PART THREE – COMPLIANCE WITH LAWS AND REGULATIONS, INCLUDING

INSIDER TRADING IN SECURITIES

3.1 Compliance with Laws, Rules and Regulations

It is CAE’s policy to comply with all laws and regulations governing it and its operations.

Generally speaking, it is management and not CAE directors who are involved directly in the

day-to-day management of the operations of CAE and its subsidiaries. However no CAE director shall sanction, authorize or condone any breach by CAE or a subsidiary of any applicable laws and regulations governing it and its operations. If any such breach comes to the attention of a CAE director, they shall promptly communicate the details of it to the Chairman, the President & CEO and the General Counsel of CAE.’

(p. 4): ‘PART FOUR – DIRECTORS’ DUTIES AND CONFLICTS

4.1 Directors Duties and Standards of Conduct

The directors of CAE have responsibility for the supervision of the management of the business and affairs of CAE. In exercising their powers and discharging their duties to CAE, directors must comply with the Canada Business Corporations Act (Canada), its regulations, CAE’s bylaws, and all other applicable legislation. Directors must observe two standards of conduct. The first is a fiduciary standard, which requires directors to act honestly and in good faith with a view to the best interests of CAE. The second is a performance-related standard, which requires directors to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Directors stand in a fiduciary relationship to CAE. Their consequent duties to CAE are supplemented in many instances by a concurrent duty of confidentiality. Directors’ conduct should be governed by the basic principle that personal interests should not be brought into conflict with duties to CAE.’



http://www.cae.com/uploadedFiles/Content/BusinessUnit/Corporate/About_CAE/Media_Centre/Document/CAE-Board-Member-Code-Of-Conduct.pdf




A20:

Does the company have a policy on potential conflicts of interest, and does it apply to both employees and board members?

Score:

2

Comments:

Based on public information, there is evidence that the company has a policy on potential conflicts of interest, which includes a definition and examples.

References:

Public:


‘Conflict of Interest

Employees have a duty to avoid financial, business or other relationships that might be opposed to CAE’s interests or might cause a conflict (or potential conflict) with the performance of their duties. All employees shall conduct themselves in a manner that avoids even the appearance of conflict between their personal interests and those of CAE.

A conflict of interest arises in many ways. Examples include:

serving as a director, officer, partner, employee, consultant or in any other key role in an organization which does or seeks to do business with CAE, or is a competitor or customer of CAE;

any interest (other than nominal shares in publicly-traded companies) in any supplier, customer or competitor of CAE;

any personal, financial or business interest competing with CAE’s interests.

Situations presenting an actual or potential conflict for an employee may also present a conflict if it involves a member of their family. Employees are encouraged to consult their

supervisor if they are unsure if certain activities are permitted.’



‘PART ONE - CONFLICTS OF INTEREST

1.1 General Principle




CAE directors must not engage, directly or indirectly, in or have any direct or indirect interest in or connection with any business activity that competes or conflicts with CAE’s interests or in any other activity that is an apparent conflict of interest.

1.2 Outside Financial Interest

CAE directors should not have or acquire a substantial financial interest in or with a company or other entity they know to have a business relationship with CAE, except for previously acquired holdings in publicly traded securities of such a company. However, if such an interest exists or is contemplated, it must be disclosed immediately to the Chairman of the Governance Committee for a determination as to the propriety of such interest.

1.3 Outside Business Interests

It is considered a conflict of interest should a director conduct business other than CAE business utilizing CAE equipment, staff or facilities, unless prior approval has been obtained from either the President & CEO, the Secretary or the CFO of CAE.

1.4 Financial or Other Considerations

Directors must not accept lavish gifts or entertainment from companies they know to have, or which are proposing to have, a business relationship with CAE. In situations where the director is uncertain as to the appropriateness of accepting a gift or entertainment, counsel should be sought from the Chairman of the Governance Committee.

Unethical business solicitation and/or acceptance activity is forbidden, and any payments or offerings suggestive of bribes, or unauthorized commissions for new or enlarged business placements, must be referred to the Chairman of the Governance Committee for investigation.

Any solicitation or acceptance of commissions or bribes for placement of CAE’s business

elsewhere is grounds for removal from office.’





A21:

Does the company have a policy for the giving and receipt of gifts to ensure that such transactions are bona fide and not a subterfuge for bribery?

Score:

2

Comments:

Based on public information, there is evidence that the company has a policy on the giving and receiving of gifts, sets an upper limit for senior authorisation and recommends public disclosure. Furthermore, it also provides scenarios and cases as guidance to better understand the policy.

References:

Public:

Corporate Policies and Procedures, Gifts and Entertainment (March 2012), p.1:

‘CAE has many business relationships that are designed to meet the financial and operational objectives of our Company. The exchange of certain business courtesies – i.e., gifts, meals, entertainment, travel and lodging – can help us develop and maintain these relationships. However, it is important to understand the rules concerning the exchange of business courtesies so that we can avoid conflicts of interest or even the appearance of conflicts of interest with our customers, suppliers or any others with whom we do business. This Policy is designed to communicate CAE’s rules for the exchange of business courtesies, and to help you identify and avoid potential conflicts of interest. This Policy is divided into the following four sections : (1) Definitions (2) Scope ; (3) Guidelines for Exchanging Business Courtesies and (4) Special Circumstances. On the issue of avoidance of corruption of foreign and other Government Officials, please also see CAE’s Foreign Agent Policy, Section 22 in these Corporate Policies & Procedures, as well as CAE’s Code of Business Conduct.’

(pp. 3-5) : ‘Gifts, Meals and Entertainment

4.0 In general, it is permissible to exchange Gifts, meals and Entertainment that are

reasonable in nature, frequency and cost, provided the Gift, meal or Entertainment :

is unsolicited ;

has a business purpose (e.g., furthers or complements the business relationship, is provided in connection with business meetings or conferences, etc.) ; and

If a Gift or Entertainment, has a total value of $350 or less.


4.1 The exchange of the following business courtesies is unacceptable even if doing so

would otherwise comply with the general rule stated above :

money or Cash equivalents, such as gift certificates, gift cards or vouchers ;

extravagant Gifts, meals or Entertainment ;

any Gift, meal or Entertainment when you are the decision maker or are involved in the decision-making process during an active or planned Request for Proposal (RFP), Request for Information (RFI), or contract negotiation with a prospective customer or supplier ;

Gifts, meals or Entertainment that are received multiple times each year from the same customer, supplier, or other third party ;

any Gift that has a value equivalent to or greater than $350 but less than $500 (unless approved in advance, in writing, by your supervisor) ;

any Gift that has a value equivalent to or greater than $500 (unless approved in advance, in writing, by your Group President, or in the case of CAE Mining, the

Executive Vice President responsible, and in the case of CAE Healthcare, the President thereof) ;

any Gift, meal or Entertainment that violates the CAE Code of Business Conduct, other corporate policies or procedures, or applicable laws ;

any Gift, meal or Entertainment that you know violates the recipient’s ethics code or known related policies, such as the recipient’s Gift policy.

4.2 Unacceptable gifts should be returned to the provider. If returning a gift could harm our

business relationship with the provider, your supervisor can approve keeping the gift to

share it with co-workers, use for employee recognition or donate to a charity «

« Travel and Lodging

5.0 Your business-related travel and lodging accommodations should generally be paid for

by CAE, unless the contract between CAE and the customer specifies the customer will

pay for it. Likewise, customers, suppliers and other third parties should generally expect

to pay for their own travel and lodging accommodations. In rare circumstances where

separating travel and accommodation expenses is not possible, prior approval from your

Group President, or in the case of CAE Mining, the Executive Vice President responsible,

and in the case of CAE Healthcare, the President thereof, is required before

accepting/offering travel and/or lodging accommodations from/to a customer, supplier or

other third party.

5.1 Where CAE is contractually obliged to fund certain specific customer travel and

accommodation for visits to/from CAE facilities, paying for such travel and

accommodations is permitted provided that :

the travel and accommodation is just for trips to/from CAE and does not include

any recreational side trips that would constitute a personal Gift to the

customer’s representative ;

the customer’s senior management is aware of the travel arrangement and to

CAE’s reasonable knowledge approves of it ;


CAE does not exceed the agreed upon travel arrangements.’

‘Disclosure and Approval Requirements

6.0 Disclosing the exchange of business courtesies to your supervisor is always a good idea

and can help avoid even the appearance of conflicts of interest with our customers,

suppliers or any others with whom we do business. Also, it is your responsibility to

comply with the following disclosure and approval requirements.

6.1 You are required to obtain your supervisor’s advance, written approval before

exchanging any Gift that has a value equivalent to or greater than $350 but less than

$500.

6.2 You are required to obtain advance, written approval from your Group President, or in

the case of CAE Mining, the Executive Vice President responsible, and in the case of

CAE Healthcare, the President thereof, before exchanging any Gift that has a value

equivalent to or greater than $500. Group Presidents, Executive Vice Presidents and the

President of CAE Healthcare are not themselves required to seek approval for Gifts given

by them personally provided they are in compliance with this Policy, the Code of

Business Conduct and applicable law. »

‘Exchanging Business Courtesies with Government Officials

Exchanging any business courtesy with government employee or public officials – such

as a single lunch paid for by CAE, regardless of the actual or perceived value – may

violate various laws to which CAE and the recipient are subject. The permissibility of a

gift turns on whether it was provided with corrupt intent ; that is if there will be an official

action in exchange for the gift and not simply the desire to foster an overall favorable

business climate. A gift of nominal value provided to a foreign Government Official as

courtesy, token of friendship or expression of gratitude, made in accordance with the

laws and customs of the country in question, avoids the corruption element prohibited

under the Foreign Corrupt Practices Act (FCPA). Note that when it comes to Government

Officials, you really need to inform yourself of the local legal requirements ; for example

in Canada and the US gifts above the $25 range would not be acceptable.

A reasonable and bona-fide gift of a nominal value to a foreign Government Official

directly related to a promotion, demonstration or explanation of a product appears to be

within the scope of permissible acts of the FCPA. However, the problem is both the

potential for abuse and the lack of any clear statutory guidelines as to what is a

permissible gift in such circumstance. A course of conduct providing frequent gifts to

foreign Governmental Officials in conjunction with a pattern of favorable governmental

actions would provide evidence of corrupt intent even if no particular gift could be tied to

a specific act.’

http://www.cae.com/uploadedFiles/Content/BusinessUnit/Corporate/About_CAE/Media_Centre/Documents/Gifts%20and%20entertainment.pdf




A22:

Does the company’s anti-corruption policy include a statement on the giving and receipt of hospitality that ensures that such transactions are bona fide and not a subterfuge for bribery?

Score:

2

Comments:

Based on public information, there is evidence that the company has a policy on the giving and receipt of hospitality under their gifts and entertainment policy that sets a specific threshold for senior authorisation.

References:

Public:

Code of Board Member Conduct:

‘Business Courtesies

Business courtesies (gifts and entertainment) are intended to create goodwill and not to gain an improper advantage. They may be extended and/or accepted provided that good judgment is exercised and the expenses involved are kept at reasonable levels and in accordance with local customs. Giving or accepting gifts and entertainment may lead others to believe that your decision has been improperly influenced. Giving or receiving a lavish gift or entertainment could be interpreted as giving/taking a bribe.Some countries have strict laws regarding both offering and accepting anything of value that might influence a person’s business judgment. It is thus very important that you make yourself aware of local laws and customs.

Accepting or offering modest gifts is permitted in the following circumstances:

• if a reasonable person would clearly not perceive the gift as a means of influencing the purchasing process;

• it is legal and consistent with ethical standards;

• neither party would be embarrassed if the situation were publicized.

Acceptable gifts and entertainment include:

• Occasional meals, refreshments, invitations to sports, theatre or similar events;

• Inexpensive advertising or promotional materials, such as pens or key chains.

Where it would be extraordinarily impolite or otherwise inappropriate to refuse a gift of


substantial value, you should consult with your supervisor who will determine whether the gift should be displayed in CAE’s offices, given to a charity auction or otherwise dealt with in a manner that does not create a conflict of interest.’


Corporate Policies and Procedures, Gifts and Entertainment (March 2012), pp.2-3:

‘CAE has many business relationships that are designed to meet the financial and operational objectives of our Company. The exchange of certain business courtesies – i.e., gifts, meals, entertainment, travel and lodging – can help us develop and maintain these relationships. However, it is important to understand the rules concerning the exchange of business courtesies so that we can avoid conflicts of interest or even the appearance of conflicts of interest with our customers, suppliers or any others with whom we do business. This Policy is designed to communicate CAE’s rules for the exchange of business courtesies, and to help you identify and avoid potential conflicts of interest. This Policy is divided into the following four sections: (1) Definitions (2) Scope; (3) Guidelines for Exchanging Business Courtesies and (4) Special Circumstances. On the issue of avoidance of corruption of foreign and other Government Officials, please also see CAE’s Foreign Agent Policy, Section 22 in these Corporate Policies & Procedures, as well as CAE’s Code of Business Conduct.’

‘Gifts, Meals and Entertainment

4.0 In general, it is permissible to exchange Gifts, meals and Entertainment that are

reasonable in nature, frequency and cost, provided the Gift, meal or Entertainment:

is unsolicited;

has a business purpose (e.g., furthers or complements the business relationship, is provided in connection with business meetings or conferences, etc.); and

If a Gift or Entertainment, has a total value of $350 or less.

4.1 The exchange of the following business courtesies is unacceptable even if doing so

would otherwise comply with the general rule stated above:

money or Cash equivalents, such as gift certificates, gift cards or vouchers;

extravagant Gifts, meals or Entertainment;

any Gift, meal or Entertainment when you are the decision maker or are involved in the decision-making process during an active or planned Request for Proposal (RFP), Request for Information (RFI), or contract negotiation with a prospective customer or supplier;

Gifts, meals or Entertainment that are received multiple times each year from the same customer, supplier, or other third party;

any Gift that has a value equivalent to or greater than $350 but less than $500 (unless approved in advance, in writing, by your supervisor);

any Gift that has a value equivalent to or greater than $500 (unless approved in advance, in writing, by your Group President, or in the case of CAE Mining, the

Executive Vice President responsible, and in the case of CAE Healthcare, the President thereof);




any Gift, meal or Entertainment that violates the CAE Code of Business Conduct, other corporate policies or procedures, or applicable laws;

any Gift, meal or Entertainment that you know violates the recipient’s ethics code or known related policies, such as the recipient’s Gift policy.

4.2 Unacceptable gifts should be returned to the provider. If returning a gift could harm our

business relationship with the provider, your supervisor can approve keeping the gift to

share it with co-workers, use for employee recognition or donate to a charity «

« Travel and Lodging

5.0 Your business-related travel and lodging accommodations should generally be paid for

by CAE, unless the contract between CAE and the customer specifies the customer will

pay for it. Likewise, customers, suppliers and other third parties should generally expect

to pay for their own travel and lodging accommodations. In rare circumstances where

separating travel and accommodation expenses is not possible, prior approval from your

Group President, or in the case of CAE Mining, the Executive Vice President responsible,

and in the case of CAE Healthcare, the President thereof, is required before

accepting/offering travel and/or lodging accommodations from/to a customer, supplier or

other third party.

5.1 Where CAE is contractually obliged to fund certain specific customer travel and

accommodation for visits to/from CAE facilities, paying for such travel and

accommodations is permitted provided that:

the travel and accommodation is just for trips to/from CAE and does not include

any recreational side trips that would constitute a personal Gift to the

customer’s representative;

the customer’s senior management is aware of the travel arrangement and to

CAE’s reasonable knowledge approves of it;

CAE does not exceed the agreed upon travel arrangements.«

‘ Disclosure and Approval Requirements

6.0 Disclosing the exchange of business courtesies to your supervisor is always a good idea

and can help avoid even the appearance of conflicts of interest with our customers,

suppliers or any others with whom we do business. Also, it is your responsibility to

comply with the following disclosure and approval requirements.

6.1 You are required to obtain your supervisor’s advance, written approval before

exchanging any Gift that has a value equivalent to or greater than $350 but less than

$500.

6.2 You are required to obtain advance, written approval from your Group President, or in

the case of CAE Mining, the Executive Vice President responsible, and in the case of

CAE Healthcare, the President thereof, before exchanging any Gift that has a value

equivalent to or greater than $500. Group Presidents, Executive Vice Presidents and the

President of CAE Healthcare are not themselves required to seek approval for Gifts given


by them personally provided they are in compliance with this Policy, the Code of

Business Conduct and applicable law.’

‘Exchanging Business Courtesies with Government Officials

Exchanging any business courtesy with government employee or public officials – such

as a single lunch paid for by CAE, regardless of the actual or perceived value – may

violate various laws to which CAE and the recipient are subject. The permissibility of a

gift turns on whether it was provided with corrupt intent; that is if there will be an official

action in exchange for the gift and not simply the desire to foster an overall favorable

business climate. A gift of nominal value provided to a foreign Government Official as

courtesy, token of friendship or expression of gratitude, made in accordance with the

laws and customs of the country in question, avoids the corruption element prohibited

under the Foreign Corrupt Practices Act (FCPA). Note that when it comes to Government

Officials, you really need to inform yourself of the local legal requirements; for example

in Canada and the US gifts above the $25 range would not be acceptable.

A reasonable and bona-fide gift of a nominal value to a foreign Government Official

directly related to a promotion, demonstration or explanation of a product appears to be

within the scope of permissible acts of the FCPA. However, the problem is both the

potential for abuse and the lack of any clear statutory guidelines as to what is a

permissible gift in such circumstance. A course of conduct providing frequent gifts to

foreign Governmental Officials in conjunction with a pattern of favorable governmental

actions would provide evidence of corrupt intent even if no particular gift could be tied to

a specific act.’





A23:

Does the company have a policy that explicitly prohibits facilitation payments?

Score:

0

Comments:

Based on public information, there is no readily available evidence that the company has an explicit policy prohibiting facilitation payments. TI does note that there is evidence of a policy on improper payments in the Board Member Code of Conduct.

References:

Public:

CAE Code of Business Conduct (February 2012), pp. 6-7:

‘Improper Payments












A24:

Does the company prohibit political contributions, or regulate such contributions in order to prevent undue influence or other corrupt intent? Does the company record and publicly disclose all political contributions?

Score:

2

Comments:

Based on public information, there is evidence that the company prohibits political contributions.

References:

Public:


‘Political Donations

CAE does not seek to regulate the political affiliations or activities of CAE

employees, provided that you conduct such activities on your own time after

work hours and do not use CAE assets for such activities. CAE companies may NOT

make political donations, be it to a political party, a politician, a political candidate or otherwise.

Please consult the Charitable and Political Contributions Section of CAE’s

Corporate Policies & procedures for further details on this subject.’


Corporate Policies and Procedures, Charitable and Political Contributions (February 2012), pp.1-2:

‘The policy is to rationalize donations by CAE and its subsidiaries to charitable,

educational, health and welfare, political and civic institutions and organizations.

Coordination and administration of this policy is the responsibility of the Vice-President,

Public Affairs and Global Communications, CAE Inc.

1.1 As a general rule, CAE and its subsidiaries will only give to those institutions and

organizations providing facilities and services in those communities where the operation




is located and where the bulk of its employees reside, unless otherwise directed by the

Vice-President, Public Affairs and Global Communications.

1.2 All requests from international institutions and organizations should be politely rejected

at the subsidiary level, or passed on to the Vice-President, Public Affairs and Global

Communications only if they can be recommended by the subsidiary company as worthy

of corporate consideration on the subsidiary's behalf.

1.3 CAE business divisions and subsidiaries may budget an amount not to exceed .33% of

forecast after-tax profits for charitable donations, subject to CAE Corporate review and

approval.

1.4 Donations for CAE Inc. and all business divisions located at the CAE Corporate Office in

Montreal will be budgeted by the Public Affairs and Global Communications department

and is subject to a specific approval by the Board of Directors during the normal course

of the annual budget process.

1.5 Subsidiaries will not contribute to political parties or politicians.

1.6 To be eligible for consideration, an organization must be non-profit, acting in the

interests of the community as a whole, and must be registered as a non-profit charitable

organization by federal, provincial or state authorities

1.7 In addition to the United Way Appeal or equivalent, which fund local health and welfare

services, CAE's main interest is education, as follows:

with a significant number of graduates possessing key technical and engineering

skills.

nstitutions that conduct significant technical research in areas

of direct interest to CAE, and even possibly in partnership with CAE.

or interest among young people in science, technology and engineering.

CAE may provide scholarships (“CAE Scholarship”) to students completing their studies

(3rd or 4th year) in key technical and engineering sectors. Students are to be drawn from

universities as described above (1.7). The scholarships are to be actively promoted within

the university and awarded on a competitive basis by the appropriate faculty.

CAE companies may propose the names of participating universities or equivalent

institutions for their scholarship program. Selection will be determined in large part by a

weighting favoring those institutions that provide CAE with skilled staff.

All appeals requiring a multi-year commitment of funds must be approved by the Vice-

President, Public Affairs and Global Communications. CAE Inc.'s own donation policy

will be that determined from time to time by its Board of Directors.

Organizations, causes and projects which are usually ineligible for CAE assistance

include religious, fraternal, union, advocacy and sectarian groups. Exceptions may be


made only with approval from the Vice-President, Public Affairs and Global

Communications.

At no time will a contribution necessarily establish a precedent for future giving by CAE.

2 The following tests should be applied to requests for contributions:

a) Will the project contribute generally to improvement in the quality of life in a

community where CAE has operations and its employees reside?

b) Is the level of the donation appropriate in relation to the importance of the

company in that community?

c) Is special attention being given to employee activities, participation and needs?

1.13 Contributions will not be made in recognition or anticipation of a business relationship

with CAE.’

http://www.cae.com/uploadedFiles/Content/BusinessUnit/Corporate/About_CAE/Media_Centre/Documents/Charitable%20and%20political%20contributions.pdf




A25:

Does the company have a clear policy on engagement in lobbying activities, in order to prevent undue influence or other corrupt intent, and discloses the issues on which the company lobbies?

Score:

0

Comments:

Based on public information, there is no readily available evidence that the company has a clear policy on engagement in lobbying activities, in order to prevent undue influence or other corrupt intent, and discloses the issues on which the company lobbies.

References:

Public:

NA


A25(a):

Does the company prohibit charitable contributions, or regulate such contributions in order to prevent undue influence or other corrupt intent?

Score:

1

Comments:

Based on public information, there is evidence that the company has a policy to regulate charitable contributions to prevent corruption or other undue influence. As part of this, procedures for donations are clear, but there is no guidance for public declaration of recipients. The company therefore scores 1.

References:

Public:

Corporate Policies and Procedures, Charitable and Political Contributions (February 2012), pp.1-2:

‘The policy is to rationalize donations by CAE and its subsidiaries to charitable,

educational, health and welfare, political and civic institutions and organizations.

Coordination and administration of this policy is the responsibility of the Vice-President,

Public Affairs and Global Communications, CAE Inc.

1.1 As a general rule, CAE and its subsidiaries will only give to those institutions and

organizations providing facilities and services in those communities where the operation

is located and where the bulk of its employees reside, unless otherwise directed by the

Vice-President, Public Affairs and Global Communications.

1.2 All requests from international institutions and organizations should be politely rejected

at the subsidiary level, or passed on to the Vice-President, Public Affairs and Global

Communications only if they can be recommended by the subsidiary company as worthy

of corporate consideration on the subsidiary's behalf.

1.3 CAE business divisions and subsidiaries may budget an amount not to exceed .33% of

forecast after-tax profits for charitable donations, subject to CAE Corporate review and

approval.

1.4 Donations for CAE Inc. and all business divisions located at the CAE Corporate Office in

Montreal will be budgeted by the Public Affairs and Global Communications department


and is subject to a specific approval by the Board of Directors during the normal course

of the annual budget process.

1.5 Subsidiaries will not contribute to political parties or politicians.

1.6 To be eligible for consideration, an organization must be non-profit, acting in the

interests of the community as a whole, and must be registered as a non-profit charitable

organization by federal, provincial or state authorities

1.7 In addition to the United Way Appeal or equivalent, which fund local health and welfare

services, CAE's main interest is education, as follows:

with a significant number of graduates possessing key technical and engineering

skills.

nstitutions that conduct significant technical research in areas

of direct interest to CAE, and even possibly in partnership with CAE.

or interest among young people in science, technology and engineering.

CAE may provide scholarships (“CAE Scholarship”) to students completing their studies

(3rd or 4th year) in key technical and engineering sectors. Students are to be drawn from

universities as described above (1.7). The scholarships are to be actively promoted within

the university and awarded on a competitive basis by the appropriate faculty.

CAE companies may propose the names of participating universities or equivalent

institutions for their scholarship program. Selection will be determined in large part by a

weighting favoring those institutions that provide CAE with skilled staff.

All appeals requiring a multi-year commitment of funds must be approved by the Vice-

President, Public Affairs and Global Communications. CAE Inc.'s own donation policy

will be that determined from time to time by its Board of Directors.

Organizations, causes and projects which are usually ineligible for CAE assistance

include religious, fraternal, union, advocacy and sectarian groups. Exceptions may be

made only with approval from the Vice-President, Public Affairs and Global

Communications.

At no time will a contribution necessarily establish a precedent for future giving by CAE.

2 The following tests should be applied to requests for contributions:

a) Will the project contribute generally to improvement in the quality of life in a

community where CAE has operations and its employees reside?

b) Is the level of the donation appropriate in relation to the importance of the

company in that community?

c) Is special attention being given to employee activities, participation and needs?

1.13 Contributions will not be made in recognition or anticipation of a business relationship

with CAE.


1.14 Public recognition of CAE's participation in a worthwhile community project or

endeavour is desirable, although it should not be the primary reason for contributing.’





A26:

Does the company provide written guidance to help Board members and

employees understand and implement the firm’s ethics and anti-corruption

agenda?

Score:

0

Comments:

Based on public information, there is evidence that the company has a separate Board code of conduct, along with designated ethics officers, to provide guidance to help board members and employees understand and implement the firm’s code of conduct. However, there is no evidence of written guidance beyond the codes of conduct.

References:

Public:

TI notes:






A27:

Does the company have a training programme that explicitly covers anti-corruption?

Score:

0

Comments:

Based on public information, there is no readily available evidence that the company has a training programme that explicitly covers anti-corruption.

References:

Public:

NA


A28:

Is anti-corruption training provided in all countries where the company operates or has company sites?

Score:

0

Comments:

Based on public information, there is no readily available evidence that anti-corruption training is provided in all countries where the company operates or has company sites.

References:

Public:

NA


A29:

Does the company provide targeted anti-corruption training to members of the Board?

Score:

0

Comments:

Based on public information, there is no readily available evidence that the company provides targeted anti-corruption training to members of the Board.

References:

Public:

NA


A30:

Does the company provide tailored ethics and anti-corruption training for employees in sensitive positions?

Score:

0

Comments:

Based on public information, there is no readily available evidence that the company provides tailored ethics and anti-corruption training for employees in sensitive positions.

References:

Public:

NA


A31:

Does the company have a clear and formal process by which employees declare conflicts of interest?

Score:

0

Comments:

Based on public information, there is no readily available evidence that the company has a clear and formal process by which employees declare conflicts of interest. TI notes that employees are only directed to inform their supervisors about any potential conflicts of interest.

References:

Public:

TI notes:


‘Conflict of Interest

Employees have a duty to avoid financial, business or other relationships that might be opposed to CAE’s interests or might cause a conflict (or potential conflict) with the performance of their duties. All employees shall conduct themselves in a manner that avoids even the appearance of conflict between their personal interests and those of CAE.

A conflict of interest arises in many ways. Examples include:

serving as a director, officer, partner, employee, consultant or in any other key role in an organization which does or seeks to do business with CAE, or is a competitor or customer of CAE;

any interest (other than nominal shares in publicly-traded companies) in any supplier, customer or competitor of CAE;

any personal, financial or business interest competing with CAE’s interests.

Situations presenting an actual or potential conflict for an employee may also present a conflict if it involves a member of their family. Employees are encouraged to consult their

supervisor if they are unsure if certain activities are permitted.’






‘PART ONE - CONFLICTS OF INTEREST

1.1 General Principle

CAE directors must not engage, directly or indirectly, in or have any direct or indirect interest in or connection with any business activity that competes or conflicts with CAE’s interests or in any other activity that is an apparent conflict of interest.

1.2 Outside Financial Interest

CAE directors should not have or acquire a substantial financial interest in or with a company or other entity they know to have a business relationship with CAE, except for previously acquired holdings in publicly traded securities of such a company. However, if such an interest exists or is contemplated, it must be disclosed immediately to the Chairman of the Governance Committee for a determination as to the propriety of such interest.

1.3 Outside Business Interests

It is considered a conflict of interest should a director conduct business other than CAE business utilizing CAE equipment, staff or facilities, unless prior approval has been obtained from either the President & CEO, the Secretary or the CFO of CAE.

1.4 Financial or Other Considerations

Directors must not accept lavish gifts or entertainment from companies they know to have, or which are proposing to have, a business relationship with CAE. In situations where the director is uncertain as to the appropriateness of accepting a gift or entertainment, counsel should be sought from the Chairman of the Governance Committee.

Unethical business solicitation and/or acceptance activity is forbidden, and any payments or offerings suggestive of bribes, or unauthorized commissions for new or enlarged business placements, must be referred to the Chairman of the Governance Committee for investigation.

Any solicitation or acceptance of commissions or bribes for placement of CAE’s business

elsewhere is grounds for removal from office.’

(p. 4): ‘4.2 Conflicts of Interest

Directors must provide CAE with complete information of all entities in which they have a

material interest so that any conflicts, which they may have regarding these entities, can be

identified. This requirement is extremely important in permitting the Governance Committee to properly identify and review “related party” transactions under applicable legislation. Directors (and officers) who (i) are parties to, (ii) are directors or officers of any entity who is a party to, or

(iii) have a material interest in any person who is a party to a material contract or proposed

material contract with CAE, must disclose in writing to CAE or request to have entered in the

minutes of a board meeting the nature and extent of that interest. Applicable legislation provides for the time when such disclosure must be made (see s. 120 of the CBCA, set out in Annex A hereto). The disclosure should be accurate and complete in every instance. Directors should excuse themselves from participation in any board discussions of matters in respect of which they may have a real or potential conflict of


interest.’http://www.cae.com/uploadedFiles/Content/BusinessUnit/Corporate/About_CAE/Media_Centre/Document/CAE-Board-Member-Code-Of-Conduct.pdf




A32:

Is the company explicit in its commitment to apply disciplinary procedures to employees, Directors and Board members found to have engaged in corrupt activities?

Score:

2

Comments:

Based on public information, there is evidence that the company has clearly stated it will apply disciplinary procedures to employees and directors who have violated its anti-corruption policies.

References:

Public:

CAE Board Member Code of Conduct (May 2011), p. 6:

‘Any Director who fails to comply with the Code, or who withholds information during the course of an investigation regarding a possible violation of the Code, is subject to disciplinary action up to and including termination as Director.’


CAE Code of Business Conduct (February 2012), p. 20:

‘Any employee who fails to comply with the Code of Business Conduct, or who withholds information during the course of an investigation regarding a possible violation of the Code is subject to disciplinary action up to and including termination of employment. Depending upon the nature of the non-compliance, CAE may have the legal obligation to report the situation to the appropriate authorities.’







A33:

Does the company have multiple, well-publicised channels that are easily accessible and secure, to guarantee confidentiality or anonymity where requested by the employee (e.g. web, phone, in person), to report concerns or instances of suspected corrupt activity?

Score:

2

Comments:

Based on public information, there is evidence that the company has multiple internal and independent channels to report instances of corruption that are well-publicised and allow for anonymity.

References:

Public:


‘If you believe in good faith that a breach of this Code has occurred or likely will occur in the future, please promptly contact either the Human Resources or the Legal departments. Bernard Cormier, Vice President, Human Resources, and Hartland Paterson, Vice President, Legal, are CAE’s Chief Ethics Officers and responsible for the administration of this Code. Alternatively, you can report a breach of this Code anonymously to the EthicsPoint hotline (see CAEvox – Employees’ Corner – Employees’ toolkit – Programs & Policies – Ethicspoint). Go to www.ethicspoint.com and click on “File a Report” or call 1-866-294-9551 (toll free in Canada and the USA – see CAEvox for international toll free numbers to call). See the end of this Code for more details on using Ethicspoint.’

(p.18): ‘If you believe that a breach of the Code of Business Conduct has occurred or will most likely be committed in the future, promptly contact your immediate supervisor, the Human Resources department or the Legal department.

Alternatively, you can report any such problem confidentially to the Ethicspoint hotline. EthicsPoint is a confidential Internet and telephone based reporting tool that assists management and employees to work together to address fraud, abuse, misconduct, and other violations in the workplace, while helping to cultivate a positive work environment.’

(pp.18-19): ‘EthicsPoint is carefully designed to maintain your confidentiality and anonymity


at every step. Step-by-step instructions guide you to help ensure that you do not inadvertently compromise its safeguards.’

‘CAE Intranet : Click on link provided on CAE’s intranet site. You will automatically be linked to EthicsPoint’s secure home page.

Public Internet : From any computer having Internet access (home, public library, neighbor, etc.), go to www.ethicspoint.com and click on ”File a Report”.

Toll-Free Phone : Call your EthicsPoint’s toll-free hotline. The phone number of each country where CAE is present is available on the Ethicspoint website. A compliance specialist will assist you in entering your report into the EthicsPoint system.’





A33(a):

Are the whistleblowing channels available to all employees in all geographies?

Score:

2

Comments:

Based on public information, there is evidence that across geographies all employees have access to more than one reporting channel. This includes the Human Resources and Legal Departments, as well as the EthicsPoint hotline. The company therefore scores 2.

References:

Public:


‘If you believe in good faith that a breach of this Code has occurred or likely will occur in the future, please promptly contact either the Human Resources or the Legal departments. Bernard Cormier, Vice President, Human Resources, and Hartland Paterson, Vice President, Legal, are CAE’s Chief Ethics Officers and responsible for the administration of this Code. Alternatively, you can report a breach of this Code anonymously to the EthicsPoint hotline (see CAEvox – Employees’ Corner – Employees’ toolkit – Programs & Policies – Ethicspoint). Go to www.ethicspoint.com and click on “File a Report” or call 1-866-294-9551 (toll free in Canada and the USA – see CAEvox for international toll free numbers to call). See the end of this Code for more details on using Ethicspoint.’

(p.18): ‘If you believe that a breach of the Code of Business Conduct has occurred or will most likely be committed in the future, promptly contact your immediate supervisor, the Human Resources department or the Legal department.

Alternatively, you can report any such problem confidentially to the Ethicspoint hotline. EthicsPoint is a confidential Internet and telephone based reporting tool that assists management and employees to work together to address fraud, abuse, misconduct, and other violations in the workplace, while helping to cultivate a positive work environment.’

(pp.18-19): ‘EthicsPoint is carefully designed to maintain your confidentiality and anonymity at every step. Step-by-step instructions guide you to help ensure that you do not inadvertently compromise its safeguards.’


‘CAE Intranet : Click on link provided on CAE’s intranet site. You will automatically be linked to EthicsPoint’s secure home page.

Public Internet : From any computer having Internet access (home, public library, neighbor, etc.), go to www.ethicspoint.com and click on ”File a Report”.

Toll-Free Phone : Call your EthicsPoint’s toll-free hotline. The phone number of each country where CAE is present is available on the Ethicspoint website. A compliance specialist will assist you in entering your report into the EthicsPoint system.’


‘Hartland Paterson Vice-President, Legal, General Counsel and Corporate Secretary +1-514-734-5779’






A33(b):

Does the company have formal and comprehensive mechanisms to assure itself that whistleblowing by employees is not deterred, and that whistleblowers are treated supportively?

Score:

0

Comments:

Based on public information, there is no readily available evidence that the company has formal and comprehensive mechanisms to assure itself that whistleblowing by employees is not deterred, or that whistleblowers are treated supportively.

References:

Public:

TI notes:


‘ Step 3: Follow-Up: Six business days after you complete your report, please return to the

EthicsPoint system to see if CAE has any follow-up questions or requests.

1. Reconnect with the EthicsPoint system using any of the three channels of communication:

CAE Intranet, Public Internet, or Toll-Free Phone.

2. This time click on (or ask to perform) a Follow-Up.

3. Provide your Report Key and Password.

4. You can now elect to review report details, respond to questions, and add information.

- To review your report, just click “Review Report Details” or ask the compliance

specialist.

- You will be told if CAE has entered questions about your report. Answer the questions

verbally or by typing.

- You can add information to the report verbally or by typing in the “Submit New

Information” box.

5. If you have agreed to participate in an EthicsChat, click “Join a Chat” at the specified time. Type your comments into the field at the bottom of the window and click “Submit.”

An EthicsChat is a real-time communication between you and an EthicsPoint


representative to clarify details and answer questions. Like the rest of the EthicsPoint

system, it is confidential and anonymous.

6. You may return regularly to review your report, answer questions, and add information.

If you receive a written enquiry or complaint with respect to CAE’s accounting practices

and/or financial records, a copy of such communication should be forwarded to the

Human Resources department and the Legal department. If such communication

is addressed to the Audit Committee, Board of Directors or any member thereof, you

and the Secretary will ensure that the communication is forwarded immediately to the

Chairman of the Audit Committee with, if the communication is open, a copy to the

Human Resources department and the Legal department.’

(p. 20):

‘No punitive action will be taken against an employee for making a good faith report of a violation. However, if said employee participated in the prohibited activity, disciplinary action may nonetheless be necessary. The employee’s decision to report will, in all cases, be given due consideration. Any employee who fails to comply with the Code of Business Conduct, or who withholds information during the course of an investigation regarding a possible violation of the Code is subject to disciplinary action up to and including termination of employment. Depending upon the nature of the non-compliance, CAE may have the legal obligation to report the situation to the appropriate authorities. Retaliation Disciplinary action up to and including dismissal will be taken against any supervisor who punishes, directly or indirectly, or encourages others to do so, against an employee who reports a violation of the Code. It is CAE’s objective to establish an environment in which employee reports are expected and accepted and in which employees feel free to voice a concern or report a violation without fear of intimidation.’



‘Employee engagement

The management team meets regularly with employees to communicate the company’s strategies and progress. Global management meetings are held every quarter to review financial results and the strategy forward. Many Vice-Presidents and Directors do the same at a more focused level through employee meetings. CAE employees are encouraged at each one of these sessions to ask questions and provide comments.’






A34:

Does the company have well-publicised resources available to all employees where help and advice can be sought on corruption-related issues?

Score:

1

Comments:

Based on public information, there is evidence that employees have access to supervisors and legal representatives, but there is no evidence that they are trained for the advisory job. The company therefore scores 1.

References:

Public:


‘Interpretation of the Code of Business Conduct

In interpreting the Code of Business Conduct, the spirit as well as the literal meaning must be observed. CAE managers have the initial responsibility to interpret and to provide you with explanations regarding this Code. The individuals listed below or their designates are available to assist CAE managers in the interpretation and application of this Code. Each CAE location is supported by a Human Resources Representative who is granted the status of as CAE ethic officer and is available to support the management and the employees in the interpretation of the Code. Ultimate responsibility for compliance with this Code will rest with CAE’s Vice-President, Human Resources and Administrative Services and Vice President, Legal, General Counsel & Corporate Secretary.

The Code of Business Conduct may be changed at any time by CAE.

Sources of Assistance

Conflict of Interest : Supervisor, Human Resources Representative, Vice President, Legal

Employee Issues : Human Resources Representative

Insider trading : Vice President, Legal Vice President, Finance and Chief Financial Officer

Legal Matters : Vice President, Legal

Media Inquiries : Vice President, Public Affairs and Global Communications

Suspected breach of the Code of Business Conduct : Supervisor, Human Resources department, Legal department.’

http ://www.cae.com/uploadedFiles/Content/BusinessUnit/Corporate/About_CAE/Media_C



entre/Document/CAE-Business-conduct-english.pdf



A35:

Is there a commitment to non-retaliation for bona fide reporting of corruption?

Score:

2

Comments:

Based on public information, there is evidence that the company has a clear, legally enforceable, non-retaliation policy for bona-fide reporting of corruption and commits to disciplinary measures when this is breached.

References:

Public:

CAE Code of Business Conduct (February 2012), p. 20:

‘No punitive action will be taken against an employee for making a good faith report of a violation. However, if said employee participated in the prohibited activity, disciplinary action may nonetheless be necessary. The employee’s decision to report will, in all cases, be given due consideration. Any employee who fails to comply with the Code of Business Conduct, or who withholds information during the course of an investigation regarding a possible violation of the Code is subject to disciplinary action up to and including termination of employment. Depending upon the nature of the non-compliance, CAE may have the legal obligation to report the situation to the appropriate authorities. Retaliation Disciplinary action up to and including dismissal will be taken against any supervisor who punishes, directly or indirectly, or encourages others to do so, against an employee who reports a violation of the Code. It is CAE’s objective to establish an environment in which employee reports are expected and accepted and in which employees feel free to voice a concern or report a violation without fear of intimidation.’





Information Sources:

Company website:

www.cae.com



CAE Audit Committee Mandate:


CAE Governance Committee Mandate:


Board Member Code of Conduct (May 2011):


http://www.cae.com/







