Talk is Cheap: The Board's Role in an Ethical Culture

SVDXAs Advertised: Board resolve can be critical to the development of an effective ethical culture — defined as the values that inform the behavior toward the organization’s stakeholders. Features of an ethical culture will be examined, along with its value to the bottom line, company brand and reputation. Examples of effective board involvement will also be explored, that still hold management responsible for operational execution and performance.

Our Panel

Steve Gomo

Steve Gomo

Steve Gomo has served as a director of SanDisk since 2005. He was CFO from 2002 until his retirement in 2011 at NetApp, Inc., a storage and data management company. He was also CFO of Gemplus International S.A. from 2000 to 2002, Asera, Inc. in 2000 and Silicon Graphics, Inc. from 1998 to 2000. Previously, Steve spent 24 years at Hewlett-Packard Company serving in various finance, financial management, manufacturing and general management positions.

Penny Herscher

Penny Herscher

Penny Herscher leads FirstRain with a passion for growing companies in new markets. As CEO since 2005, she has transformed FirstRain into the leading provider of solutions that find and transform high-value, business web content into actionable intelligence for marketing, sales and finance professionals around the globe. Prior to FirstRain, Penny was CEO of Simplex Solutions, an electronic design automation company serving the global semiconductor industry. Penny serves on the boards of JDSU and Rambus.

Chris Kenber

Chris Kenber

A native of the UK and a graduate of Oxford University, Chris Kenber has had a 40-year career in sales, marketing and management, the last 20 as a CEO of public and private companies. Starting his career at IBM in the UK, Chris moved to the USA to launch IBM’s entry into retail and supermarket point of sale, helping to grow this business to more than half a billion in sales. Chris has been an inside director of a number of private health care and related institutions in both the US and UK.

Catherine Lego

Catherine Lego

Catherine Lego is the founder of Lego Ventures LLC, a consulting services firm for early stage technology companies formed in 1992. From 1999 to 2009, she was the general partner of The Photonics Fund, LLP, an early stage venture capital investment firm focused on investing in components, modules and systems companies for the fiber optics telecommunications market, which she founded. She currently serves on the boards of directors at SanDisk, Lam Research and Fairchild Semiconductor.


Jim Balassone

Jim Balassone

Jim Balassone, executive-in-residence, directs the business ethics programs of the Markkula Center for Applied Ethics, Santa Clara University. Jim works with corporate boards, executive teams and nonprofit advisory boards on business ethics challenges, organizational obstacles to ethical behavior, and campaigns to improve ethical culture. His business career spans IBM, Hitachi Data Systems and several hi-tech start-ups.

This program, like all SVDX programs, is subject to the Chatham House Rule.

I think the photos are more important than my scribbles for this program. See Elements and Takeaways slides to give you a hint of subject matter. Key is the fact that people kept taking in small groups and pairs long after the program had ended. This one really got people thinking and discussing. Some of the “hypotheticals” raised were obviously real problems those in attendance were facing as directors. Plenty of excellent advice was provided, both from the panelists and in those after program chats that have drawn so many to become members of SVDX. View the wrap-up video.

Ethical culture is a set of values that describes the desired behaviors of an organizations, are rewarded and have serious consequences when violated. ElementsOfEthicalCulture

CEO & Chair selection/behavior – Clearest Board Responsibility. CEO leads the culture and values. Their ethics are paramount. Broad, diverse set of candidates. Conscientiously diverse candidates. Checks around cronyism. Exhaustive background checks. CEOs are doing similar diligence of board.

Clear Values Statement – Board validation – must be relatively general, aspirational, brief. Dedication to every clients success, trust and personal responsibility in all relationships.  Apply equally to employees and company. Perks create conflicts… spills over into ethical behavior. Beware of the imperial CEO. Transparency. The more you get shut down in your queries, the more likely something is amiss. Ethical tone is set by how you respond to and pursue answers. Are issues being buried. Diligent background check is a must, not just for CEO and CFO, but for all board members as well. Ethics is what you do, not just what you say.

Usable Code of Conduct – Applies to all. Every employee needs to sign off on code of conduct every year and it should be updated almost as frequently, after widespread discussion. Enforcement is as valuable as the code itself. Values, operating principles. Sets the standard of behavior with customers, shareholders, employees, community. Reference section on who to contact. Topics – insider trading, relationship of company to law, etc. Obeying the law is a minimum bar. Companies should want to go beyond that. Take the law a notch higher. Board is measured by how you act when code is breached. Applies to all. When three’s an incident, it isn’t usually simple… especially when you have to enforce against a top performer. Either the code counts or it doesn’t. It doesn’t if it doesn’t apply to everyone. Make those material adjustments quickly.

Repeated Training & Communication – Periodic Oversight. Needs to be lived every day and it feeds back. Tone at the top. How board, CEO and execs live. Every leader has to understand they are a role model. Values of the company. Everyone looks up to their boss. If the boss isn’t respected, the code won’t be either. Code needs to be read, signed, refreshed. Taught by a combination of line management and top management. Managers should have a special class to ensure they know thoroughly. Corporate ethics – winning with honor, by the rules. Ethical culture needs to be present at all corporate functions.

Effective Hotline / Feedback Reporting – periodic oversight – Your not obeying the law. How do I communicate the breach? Compliance culture vs ethical values based. You can’t have a rule for everything. Principles cover the holes in the rules. Values, audits, checks, and examples of what you mean are critical to convey. Reed Hastings (king of culture). Follow Twitter to learn who the good guys and bad guys are. Notoriety goes to the bad guys. Oversight often falls to audit committee. Hotline is critical part of the training. Safety, harassment, bribery, fraud, discrimination issues are floating through hotlines. Employee must see it working. Educate and send in internal audits. Look at the T&E claims of execs to ensure culture followed at the top.

Compliance / Enforcement System – ensure funding & experienced staff. Robustly go through violations and make examples of people. The values of the company must spans all countries. Countries have minimal listing standards but values go beyond that. Teams are often global. Treatment of women is frequently an issue. Ethical standards must be the same globally. You can’t put a border around ethics and values. Audit committee must reach down much further than CFO. People respect that. They want to bring something to your attention. You have a line to me if you ever feel you are shut down by your boss. Being on a board, you are buying into the management team. They need to be people you can trust. There should be an open line for senior managers to anyone on the board. Board members should be able to talk to anyone without first clearing with CEO.  SEC has a number and website. You want employees going to your system, not the SEC’s. To be successful, you have an obligation to follow-up.

SVDXEthicsConversationsPeriodic Assessment / Renewal Process – Ongoing oversight  External counsel reviews directors each year individually in board assessment. Survey. Third party evaluation. Present findings at shareholder meeting?

SVDXethicsContinueThe Seven Signs of Ethical Collapse: How to Spot Moral Meltdowns in Companies… Before It’s Too Late
Excellent book.  The path to ethical collapse is “a pattern of devolution.” Learn to spot the signs.SVDXethicsTakeaways


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