lrn ethics and compliance survey preliminary findings

ConfidentialConfidential

February 23, 2012

All-Partner Community Update

ConfidentialConfidential

Findings from the 2011-2012 Ethics & Compliance Survey Report

Mark HelmkampKnowledge and Solutions Leader

© 2011 LRN®

LRN Proprietary and Confidential. Not for Redistribution.

Today we will focus on: Insight into projected 2012 E&C budget and staffing levels Use of relevant E&C metrics An understanding of the top E&C priorities, challenges and the most critical

risks for 2012 Relevant trends in E&C education and communications

Preview of the Results

Key deliverables in March (middle/end): Final report with responses from more than 150 E&C leaders Webinar with two former CECOs to discuss the results and

implications Detailed industry benchmarking reports on our Ethics & Compliance

Alliance

© 2011 LRN®


35%

55%

35%

10%

1. A Growing Number of Companies Project an Increase in E&C Budgets

43%

51%

6%

Q: Not including salaries and benefits, how do you plan to allocate your E&C function’s annual budget next year? Please indicate estimated percentages for each budget item (adding up to 100 percent):

Education and Communications 27 %

Administration 14%

Consultants 9%

Technology 8%

Investigations 8%

Travel and Entertainment 7%

Risk Management 6%

Other 5%

N =172

6%

N = 172

KEY INSIGHTS 42% of E&C leaders

project their budgets will increase this year, a 7% increase compared to last year.

22% of E&C leaders expect that their budgets will increase by a margin of 2% to 5% in 2012.

Education and communications remains the biggest budget line item for 2012, followed by Administration then Consultants.

Q: For next year, your projected E&C function's annual budget will:

Increase

Remain Unchanged

Decrease

5%

53%42%

© 2011 LRN®


Remain unchanged

Incr. by 1 employee

Incr. by 2-5 employees

Incr. by 10+ employees

Decr. by 6-9 employee

Incr. by 6-9 employees

Decr. by 2-5 employees

2. Staffing Levels are Projected to Remain Unchanged

N = 17069%

1%

Q: What changes do you project in your E&C staff size next year?

KEY INSIGHTS

E&C staffing levels are projected to remain largely unchanged for 2012, continuing the 2011 trend.

ADDITIONAL FACTS 18% of participating

companies have only one dedicated E&C employee

55% of participating companies have two to nine E&C employees

27% of participating companies have 10 or more E&C employees

0

15

30

45

60

75

2%

15%

9%

69%

2% 1%

© 2011 LRN®


General Counsel / Law

CEO

Audit Committee of the Board of Directors

Other C-Suite Executives

Other

Finance

Other Board of Directors committees

Internal Audit

Risk

3. Reporting to the General Counsel is Most Prevalent

N =162

Human Resources

57%

15%

12%

5%

4%

2%

2%

1%

1%

1%

Q: To whom does the E&C function directly report to?

KEY INSIGHTS Not surprisingly, the

majority of all E&C functions continue to report directly to the General Counsel, followed by a direct line to the Chief Executive Officer.

This is also reflected in the importance of functional relationships for E&C programs. E&C leaders indicate that General Counsel / Law (96%) is of critical importance for their E&C program effectiveness, followed by the CEO (92%), Audit (89%) and Board of Directors (87%).

0 15 30 45 60

© 2011 LRN®


47%

Conflicts

of

InterestGifts

and

Entertainment

Electronic

Data

Protection

Bribery

and

Corruptio

n

Data Priv

acy

Environment,

Health, a

nd Safety

Trade Contro

ls

Government

Contracti

ng

Labor and

Employment

Antitrust

Aggregate Percentage : (5) = High Priority & (4) Moderate-high Priority

4. Conflicts of Interest is the Most Critical Ethics & Compliance Risk

Q: Please indicate your company’s most critical E&C risks.

N = 131

Scale: 5 = High Priority, 1= Very Low Priority

KEY INSIGHTS

67% of E&C leaders indicate that Conflicts of Interest is the most critical compliance risk area, followed closely by Bribery & Corruption and Gifts & Entertainment.

ADDITIONAL FACTSMost risk areas E&C leaders specified as critical in this year’s E&C survey are consistent with last year’s findings. One notable shift is the increased focus on Gifts & Entertainment with a 46% to 67% jump. The top five E&C risks from 2011 were: Conflict of Interest (72%) Data Privacy (64%) Electronic Data Protection

(60%) Environment, Health and

Safety (51%) Bribery & Corruption (50%)

0

15

30

45

60

75

63% 62%

55%

49% 48% 48%

65%67%

65%

© 2011 LRN®


5. Helpline and Investigations Data is the Top Metric Reported to the BoD

Q: What ethics and compliance metrics do you report to the Board of Directors?

ADDITIONAL FACTS 49% of participants updated

their Board on the E&C program quarterly, followed by 22% annually and 12% bi-annually.

Only 11% of participants update their Board more than four times a year.

KEY INSIGHTS

While E&C leaders almost always report tactical data on helpline trends and Code violations, they rarely discuss the year-over-year effectiveness of the E&C program with the Board of Directors.

0 15 30 45 60 75 90

Helpline and investigations Data and Trends

Code of Conduct Violations

Education Completion Rates and Certification

Key Risk Assessment and Mitigation Plans

Relevant Regulatory Developments

Ethics and Compliance-Related Dismissals

Results of Compliance Audits

Ethical Culture Survey Results

Year-Over-Year Trends on the Effectiveness of the E&C

We don’t report metrics to the Board of Directors

Other

85%

78%

70%

70%

65%

63%

53%

46%

43%

6%

1% N = 141

© 2011 LRN®


6. Promoting an Ethical Culture a Key 2012 Priority

Q: How important are the following E&C program goals to your company in 2012?

KEY INSIGHTS

The three biggest 2012 priorities for E&C leaders center on promoting an ethical culture. Increasing employee comfort with speaking up on alleged misconduct is a top goal, not surprisingly in the aftermath of Dodd-Frank.

ADDITIONAL FACTSThe 2012 priority focus on promoting an ethical culture suggests a longer term trend in which ethics and compliance programs are moving away from traditional control and risk management activities. Last year’s key priorities also focused on culture:

1. Promote Alignment Between Core Values and Day-to-day Operations

2. Increase Employee Comfort With Speaking Up

0 15 30 45 60 75

Aggregate Percentage : (5) = Very Important & (4) Important

Scale: 5 = Very Important, 1= Not Important

Increase Employee Comfort With Speaking Up

Strengthen Ethical Leadership

Promote Alignment Between Core Values and Day-to-day Operations

Manage Shifting Regulatory Expectations

Innovate Design and Delivery of E&C Education

Adapt Ethics and Compliance Program to Changing Business Needs

Strengthen the Ethical Culture

Drive E&C functional efficiency

Build a More Consistent Global E&C Program

Build a Stronger Case for Ethics and Compliance as an Enabler of Business

Performance

73%

68%

66%

64%

62%

61%

61%

57%

49%

48% N = 144

© 2011 LRN®


Aggregate Percentage : (5) = High Effectiveness & (4) High-moderate Effectiveness

Corporate Conscience (e.g., promoting an ethical culture through education and addressing employee

concerns)

Overseer (e.g., focusing on controls,

risk management and investigations)

Business Enabler (e.g., providing

advice/counsel, enabling better decision making)

7. E&C Programs Not Seen as Very Effective in Providing Business Support

N = 156

Scale: 5 = High Priority, 1= Low Effectiveness

66%

64%

58%

Q: How do you perceive the effectiveness of the E&C program in the following areas?

KEY INSIGHTS

E&C leaders perceive that their program is most effective in traditional areas of promoting culture and managing risks. Yet, they struggle to align their program with business goals.

ADDITIONAL FACTS

While 25% of E&C leaders assess their program on a need basis (e.g., because of new regulatory requirements), 44% evaluate their program annually and 14% do it every other year. 0 15 30 45 60 75

71%

67%

58%

© 2011 LRN®


Organizatio

nal

Complexity

Lack of A

ppreciatio

n of

Culture as a

Busin

ess D

river

Lack of S

upport By

Middle Management

Inability t

o Identify

Which

Initiativ

es Enhance

Cultu

re

Lack of C

lear

Accountabilit

yOther

Lack of C

EO/Board

Sponsorsh

ip

Lack of C

learly S

tated

Corporate Values

Lack of a

Clear S

tatement

of Ethica

l Standards

8. Organizational Complexity is the Largest Barrier to Promoting an Ethical Culture

N = 131

ADDITIONAL FACTS

The most critical obstacles reported in 2011 were: Organizational complexity

(58%) Lack of appreciation of

culture as a business driver (34%)

Lack of support by middle management (34%)

Q: What are the biggest obstacles to building a strong ethical culture in your company?

KEY INSIGHTS Organizational

complexity (i.e., dispersed operations) is the most significant obstacle to building a strong ethical culture.

0

15

30

45

60

75

36%

26%

21%

8% 8% 7%

40%

69%

5%

© 2011 LRN®


3%

Moderate Impact

Moderate-High Impact

Low-Moderate Impact

High Impact

Low Impact

9. A Minority of E&C Leaders Believe That Education Has a High Impact

N = 129

0

25

50

12%

40%38%

6%

Q: What impact does your current E&C education have on employee behavior and decision-making?

KEY INSIGHTS

Only 6% of E&C leaders believe that their education has a high impact on employee behavior and decision-making.

© 2011 LRN®


Relevance of Educatio

n to Day-

to-Day W

ork

Online Education

Fatigue

Limite

d Financial Resources

Cultural D

ifferences in

Global

Locations

Technology Constra

ints

Functional R

esistance

Regulatory Diffe

rences in G

lobal

Locations

Lack of Dedicated Sponsorship

From Senior Management Other

10. Lack of Relevance to Work is the Biggest Educational Challenge

N = 130

0

15

30

45

60

75

Q: What are the biggest challenges you face when providing E&C education?

KEY INSIGHTS

E&C leaders continue to struggle with making education applicable to daily work and online education fatigue, similar to last year’s challenges:

Online Education Fatigue (59%)

Relevance of Education to Day-to-Day Work (49%)

Technology Constraints (34%)

Cultural Differences in Global Locations (32%)

Limited Financial Resources (27%)

49%

34%32%

27%

15%12%

59%

9%7%

© 2011 LRN®


Intranet

E-mail campaigns

Team meetings

Print materials (e.g., quick reference guides,

brochures)

Newsletters

Web-enabled Interactive Code

Award or recognition programs

Social media

Other

11. The Intranet is Top Channel to Raise Awareness about E&C Programs

N = 131

0 15 30 45 60 75 90

87%

77%

60%

52%

46%

24%

22%

6%

5%

Q: Which communications channels do you use to raise awareness and reinforce your E&C program? Please select all that apply:

KEY INSIGHTS

The Intranet continues to be the top channel to raise awareness and reinforce E&C programs, followed by: E-mail campaigns (77%) Print materials (60%) Newsletters (52%) Team meetings (46%)

ADDITIONAL FACTS

In 2011, 84% of participants used the Intranet as a channel to raise awareness and reinforce their E&C programs, followed by: E-mail campaigns (72%) Posters (62%) Newsletters (50%) Team meetings (38%)

lrn ethics and compliance survey preliminary findings

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