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Susan Du Becker Cisco Systems BV

SCCE European Conference April 2nd, 2017

A Tale of Two Worlds

Ethics & Compliance

Ruth Steinholtz – AretéWork LLP

Ruth Steinholtz

• Ethics, values & culture guru

• Recovering Lawyer

• Wrote the book on Ethics ambassadors

• European, Road cyclist

Who Are We ?

Susan Du Becker

• Lawyer no more

• Engineer

• Business & Cultural SME

• Star Trek Fan !

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The Cart without the Horse ?

Policies

Regulatory Input

Industry Standards

Structure

ToolsProcess

Striking the Perfect Balance

Ethics,Attitude, Beliefs,Values,People

The Culture

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Compliance is an outcomeNot an approach

Ethics is EVERYONES’S responsibility

Getting the balance right

Ethics,Culture &

ValuesCompliance

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Compliance

Exercise:

Where is your department/company on the culture-compliance continuum?

How are decisions made?Does your programme favour rules or principles?

Culture &

Values

Guiding Principles

Perspective 1One way to do it

There is NO one right or wrong way

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Cisco Story - Framework & Methodology

Business Focused – Risk based Framework- scalable, - consistent

Underpinned By Guiding Principles

- Defining Ownership- Structure & Guidance- Assigning Responsibility &

Accountability

Enforcement, Discipline & Incentives

Investigations & Response

Policies & Processes

Ongoing Risk Assessment

Program Governance &

Resources

Compliance Communications

Monitoring & Auditing

Compliance Training

Cisco Compliance

Anti-Corruption& Bribery

Data Protection/ Privacy

Import/ExportCompliance

Product Regulatory

Third Party Relationships

Environment, Health &Safety

Enterprise Records & Information

Management

Conflict of Interest

Insider Trading

Intellectual Property

Labor & Employment

Antitrust & Competition

Financial Responsibility

Cisco’s Compliance FrameworkElements of an Effective Compliance Program

Risk Assessment Targets are aligned to

YOUR business

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Cisco StoryEthics Compliance

Remediation & Resolution

Investigations

Education,Communications

Risk Management

Travel, Expenses

Anti-Bribery & Corruption

Conflict of Interest

Policies & Guidelines

CoBC

Tools

Internal Audit

External Audit

Compliance Program Outcome

Audit Committee / Board / Authority

Function / Division /

Business Unit input

Risk Assessment /

Audit / Investigations

Market Influence /

Global & Local regulatory /

Environment

Ethics & Culture

Structure & Guides

Effective Compliance Program

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Guiding Principles

Perspective 2Another View

There is NO one right or wrong way

What are Values?

A shorthand way of describing ourindividual and collectivemotivations

and what is important to us.

They are the drivers of ouraspirations, intentions and

sometimes, ourbehaviours.

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Culture is the way we do things around here and influences and, is influenced by:

Humans,especially

leaders

Values

Law & Regulation

Context, Societal Norms

Policies and Procedures

Systems

Culture

Intrinsic Motivation Extrinsic Motivation

Values Rules

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What do I mean by a culture and values approach?

Compliance Assumptions Culture & Values Assumptions

bad people do bad thingsWhat are these?

Most people want to do the right thing butcontext, situation, cognitive & behavioral factors can lead them astray

Deterrence & threats of punishment work best A strong, positive, ethical culture that minimises ability to rationalise is the best approach. Of course, controls for the sociopaths.

Detailed rules and procedures are necessary to ensure everyone does the right thing, values statements are additional.

Strong ethical values that are truly lived will be more inspirational and effective. Rules are important but are often too complicated.

Punishment is key Just culture and open & transparent communication creates improvement. Blame drives behaviour underground.

Compliance is a cost A strong ethical culture is good for business

We need a large compliance department to ensure compliance.

Ethics is everyone’s responsibility so embed it directly in the business, i.e.. Ethics ambassadors.

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Behavioural ethics (economics + psychology)

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What does this mean for communications?

What is your relationship with the rest of the business, and why does it matter?

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“A culture of collective secrecy existed within the engine development department of Volkswagen”

Where do you start to focus on values and culture ?

• Measure/understand the culture• Pick appropriate core values• Inspire/involve/motivate people• Do not to demotivate them• Start with people who are

creating/influencing the culture• Ethics ambassadors

– Consciously vs. unconsciously

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Regulators are increasingly focusing on culture

So, how can we measure and explain our culture in this context?

Exercise

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Exercise: Measuring and Reading Culture

Positive Focus Excessive Focus

Financial StabilityShareholder value, organisational growth, employee health, safety. Control, corruption, greed

BelongingLoyalty, open communication, customer satisfaction, friendship. Manipulation, blame

High PerformanceSystems, processes, quality, best practices, pride in performance. Bureaucracy, complacency

Continuous Renewal and LearningAccountability, adaptability, empowerment, teamwork, goals orientation, personal growth

Building Corporate CommunityShared values, vision, commitment, integrity, trust, passion, creativity, openness, transparency

Strategic Alliances and PartnershipsEnvironmental awareness, community involvement, employee fulfillment, coaching/mentoring

Service To Humanity And The PlanetSocial responsibility, future generations, long-term perspective, ethics, compassion, humility

Stages in the Development of Organizational Consciousness

Service

Making a difference

Internal Cohesion

Transformation

Self-esteem

Relationship

Survival

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What Employees Value at different levels of consciousness

A safe working environment and pay and benefits that are sufficient to take care of family

Opportunities to work in a congenial atmosphere where people care and respect each other

Opportunities to grow professionally with support, feedback and coaching

Opportunities and challenges by being made accountable for projects and processes

Opportunities for personal growth and development to support you in living your life purpose

Opportunities to leverage your contribution by collaborating with other like-minded individuals

Opportunities to serve others and care for the well-being of the Earth’s life support systems

Surviving

Relationship

Self-esteem

Transformation

Internal cohesion

Making a difference

Service

Levels of Consciousness Primary Motivations

Entropy and (Ethical) Culture Risk

Cultural Entropy Most employees are ….

Potentially limiting values showing up in current culture

Culture Risk

10% or less Highly Engaged Low Risk

11% to 20% Engaged Relatively Low Risk

21% to 30% Becoming Disengaged Bureaucracy, Hierarchy, Confusion Medium Risk

31% to 40% Disengaged Bureaucracy, Hierarchy, Confusion, Control, Short-term focus, Silo-mentality, Long hours

High Risk

41% or more Highly Disengaged Bureaucracy, Short-term focus, Hierarchy, Blame, Control, Confusion, Information Hoarding, Silo-mentality

Very High Risk

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Flexlite (53)

Level 7

Level 6

Level 5

Level 4

Level 3

Level 2

Level 1

Personal Values Current Culture Values Desired Culture Values

PL= 10-0 | IRS (P)= 5-5-0 | IRS (L)= 0-0-0 PL= 4-7 | IROS (P)= 0-0-4-0 | IROS (L)= 0-4-3-0 PL= 11-0 | IROS (P)= 1-5-5-0 | IROS (L)= 0-0-0-0

Matches

PV - CC 0CC - DC 1PV - DC 2

1. honesty 27 Level 5

2. commitment 24 Level 5

3. accountability 20 Level 4

4. adaptability 18 Level 4

5. reliability 18 Level 3

6. responsibility 18 Level 4

7. trust 17 Level 5

8. fairness 16 Level 5

9. caring 15 Level 2

10. humor/fun 15 Level 5

Black Underline = PV & CC Orange = CC & DC P = Positive L = Potentially Limiting I =

Individual O = Organizational

Orange = PV, CC & DC Blue = PV & DC (white circle) R =

Relationship S = Societal

1. blame (L) 27 Level 2

2. long hours (L) 24 Level 3

3. profit 23 Level 1

4. bureaucracy (L) 22 Level 3

5. control (L) 21 Level 1

6. cost reduction 20 Level 1

7. productivity 20 Level 3

8. short-term focus (L) 18 Level 1

9. manipulation (L) 15 Level 2

10. continuous improvement 14 Level 4

11. power (L) 14 Level 3

1. customer satisfaction 31 Level 2

2. accountability 26 Level 4

3. continuous improvement 24 Level 4

4. commitment 20 Level 5

5. quality 15 Level 3

6. teamwork 15 Level 4

7. cooperation 14 Level 5

8. employee fulfillment 14 Level 6

9. employee recognition 14 Level 2

10. information sharing 13 Level 4

11. respect 13 Level 2

Values Plot Copyright 2008 Barrett Values Centre August 2008

Compliance & the Enterprise

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Enablement Purpose

- Company identity- Mission Statements- What/Who are you ?

Culture- Purpose shapes your

policies

Strategy- What- How- Where

Goals- What do you want?- How do you want to

get there ?

Portfolio- What are you

selling/doing/buying

Operations- Staff- Mobility- Tools

Metrics- Measure of Success

Culture- Creates the drive towards

your goals

Culture- Creates a clear line of sight from where we are to where

we want to go, together.

Culture- Creates the understanding of the impact of our product

Culture- Drives how we work

together; ethically, emotionally, strategically with

impact

Culture- Continuous alignment with our purpose, goals,

metrics, portfolio and operations

Ethics ambassadors for global reach and input

culture bearersculture bearers

Communicate& trainCommunicate& train

ethical decision-making coach

ethical decision-making coach

listenlisten

provide the local

perspective

provide the local

perspective

be creative& develop material

be creative& develop material

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Culture

Walking the Talk ?Empowerment – are you ?Communications – The 360 ViewTone from the Top – support from the middle Polling – does the company hear, listen and understand the employees ?Are you focused on the right priorities - learning and education ?

Critical meetings – Involvement, Collaboration & Interaction ?

Reporting lines & Visibility & Autonomy – ease of use, respect of the function ?

Compliance function Stature –are you a Partner, Support or a seen as a ‘necessary evil’ ?

Controls – Due Diligence, Investigations, Audit, Compliance Program, Remediation planning

Effective Compliance Program(Compliance activities)

What do Regulators Look for ?

Corporate / Local – the 360 Dilemma

Understand YOUR business Don’t Over Pivot

Communicate

• Are you Global or local

• Listen to your outfield

• Respect differences

• ‘Champions’ at executive level

• Don’t forget middle management

• Stakeholder relationships• Metrics &

Reporting

• Keep your program simple

• Use Tools such as Risk Assessments

to verify• Clarity of roles • Ownership &

Accountability

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ExerciseCultural risk and culture change over time

Entropy 25%

Bank: Current Culture Evolution

1. cost consciousness2. profit3. accountability4. community involvement5. client driven6. process driven7. bureaucracy (L)8. results orientation9. client satisfaction10. silo mentality (L)

2005

1. cost consciousness2. accountability3. client driven4. client satisfaction5. results orientation6. performance driven7. profit8. bureaucracy (L)9. teamwork10. community involvement

2006

1. client driven2. accountability3. client satisfaction4. cost consciousness5. community involvement6. performance driven7. profit8. achievement9. being the best10. results orientation

2007 2008

1. accountability2. client driven3. client satisfaction4. community involvement5. achievement6. cost consciousness7. teamwork8. performance driven9. being the best10. delivery

4 matches 5 Matches4 matches3 matches

Entropy 19% Entropy 17% Entropy 14%

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Bank: Current Culture Evolution

2009 2010 2011

6 matches6 matches6 matches

1. accountability2. client driven3. client satisfaction4. cost consciousness5. community involvement6. achievement7. teamwork8. employee recognition9. being the best10. performance driven

1. accountability2. client satisfaction3. client driven4. teamwork5. brand reputation6. being the best7. achievement8. commitment9. community involvement10. cost consciousness

1. accountability2. client driven3. client satisfaction4. brand reputation5. achievement6. teamwork7. environmental awareness8. commitment9. being the best10. cost consciousness

Entropy 14% Entropy 11%Entropy 13%

Cultural Entropy Evolution

Entropy risk bands

0 -10% Healthy functioning11-20% Some problems 21-30% Significant problems 31-40% Serious situation 41%+ Critical situation

Entropy reduced or stayed the same every year. Entropy reduction led to improved performance through increased employee engagement—increased revenues, productivity, share price, etc.

Working toward entropy of 10% will result in healthy functioning of the organisation and improved staff morale.

25%

19%17%

14% 13% 13%11% 10%

0%

5%

10%

15%

20%

25%

30%

2005 2006 2007 2008 2009 2010 2011 2012

Cutlural Entropy

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Wrap Up

What have we learned

“Culture is vital to overall strategy and performance”

Source: EY Culture and Boards at a glance 2016. Survey of 100 board members of FTSE 350 companies.

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Compliance

Any Change to your view?:

Where is your department/company on the culture-compliance continuum?

How are decisions made?Does your programme favour rules or principles?

Culture &

Values

Key TakeawaysStrategy, Process,

Assessment & Roadmap

Relatable Policies

Defined program

Follow Up – Control, Audit

& Investigation,

Take values seriously

Understand your culture, culture

risk, nurture +

Cooperate w/business/functions

Get the right balance & think

long term

Ethical Behaviours

Compliance Structures