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People used to say that you can’t legislate ethics. Then Congress and the stock exchanges did, with the Sarbanes-Oxley legislation and new corporate governance requirements. If you’re a general counsel at a publicly held company, now it’s your turn. Sarbanes-Oxley’s Section 406 requires all publicly traded businesses to disclose whether or not they have a code of ethics for their CEO, CFO, and principal accounting officer. If they haven’t, they must explain why. If they have, they must make the full code publicly available in their annual report, on their public Web site, or individually upon request. They must report all changes and exceptions in their Securities and Exchange Commission filings and online. The stock exchanges have gone even further. As of May 4, 2004, Nasdaq requires all companies listed on its exchange to develop, enforce, and publicly display codes of conduct and ethics for all executives, employees, and directors. The New York Stock Exchange has a similar mandate: Companies listed on its exchange are required to have a code in place by Oct. 31, 2004. Those who don’t will have some explaining to do. Both stock exchanges and the SEC say that businesses that fail to comply with the upcoming deadlines risk being delisted. Adding to the challenge is the lack of specific direction about the codes’ content. The SEC says only that the documents should address conflicts of interest, disclosure, compliance with laws and regulations, reporting of violations, and accountability. But the commission leaves specific language, provisions, and penalties for violation up to individual corporations. For in-house lawyers who are still fine-tuning their corporations’ codes of conduct, here’s a glimpse of a few companies’ ethics statements. The documents (available for reading online) are as different as the businesses that drafted them. The Wachovia Corp. of Charlotte, N.C., included a code of conduct in its employee handbook for years and updated it during a 2001 merger with the First Union Corp. Then, in response to the raft of new regulations, a 20-member employee team began overhauling the code in the fall of 2002. “We were struggling with creating a document that people would look at and refer to, but that wouldn’t scare them with its length and complexity,” says Anthony Augliera, Wachovia’s senior vice president and assistant general counsel. They ended up with a 16-page document. They posted it on Wachovia’s Web site and mailed it to all employees in June 2003. The revised code covers much of the same material, but in far more depth. For instance, says Augliera, earlier versions mentioned the importance of keeping accurate records. “As a result of Sarbanes-Oxley and Enron, there’s now more specific language regarding corporate records and reporting,” he says. The current code also includes far more details on conflicts of interest, a key factor in several recent corporate scandals. Read the code at www.wachovia.com/file/CorpGovCodeofConductEthics.pdf. Avon Products Inc., the New York-based cosmetics company, published a new “Code of Business Conduct and Ethics” on its investor Web site in July 2003. The 25-page document, signed by Chairman and CEO Andrea Jung and President and COO Susan Kropf, stands out because of its breadth. It outlines the company’s policies in nearly 20 areas, including conflicts of interest, acceptance of gifts, e-mail and Internet use, record retention, and sexual harassment. Its final page lists contact information for executives on the company’s compliance committee and a toll-free hot line for questions, complaints, and reports. Read the code at www.avoncompany.com/investor/corporategovernance/codeofbusinessconduct.html. Whole Foods Market Inc., a natural foods retailer based in Austin, Texas, has a code that is particularly noteworthy because of its emphasis on ethics at the business’s senior ranks. It includes a two-page “disclosure information checklist” that all directors and officers must complete when they join the company. Questions include: • Are you related by blood, marriage, or adoption to any director or executive officer of WFM? • Were you selected to serve in your present capacity with WFM pursuant to any arrangement or understanding with any other person(s)? • In the past five years, have you filed any bankruptcy petition or had one filed against you? Been the subject of or been convicted in a criminal proceeding? Been found by a court or the SEC to have violated any state or federal securities laws? All executives must update their answers annually. Unlike the code, the completed checklists aren’t posted online, but they are kept on file at the company. Read Whole Foods’ code at http://wholefoods.com/investor/codeofconduct.pdf. Motorola Inc., the communications technology manufacturer, acknowledges the murkiness of many ethical dilemmas. “If you find yourself in a situation where the ‘right thing’ is unclear or doing the right thing is difficult, remember our key beliefs” of integrity and respect, the company advises in its code of conduct. Bottom line, it says is: “If you wouldn’t want your action to appear in the media, it’s probably not the right thing to do.” Last year, the Schaumburg, Ill.-based business added a dedicated “audit committee line” that lets employees anonymously report suspected accounting or auditing problems directly to the company’s board of directors. Read the code at motorola.com; click on “About Motorola,” then “Ethics and Code of Business Conduct.” Among the best-known ethics guides is the one developed by the Lockheed Martin Corp. of Bethesda, Md. The nation’s largest defense contractor first published its code, a booklet entitled “Setting the Standard,” in 1995; it has been updated nearly every year since. Today the guide is widely used as a model in college business classes, and is available in all languages spoken by employees of the global aeronautics company, including English, Arabic, Greek, Hebrew, Japanese, Russian, and Turkish. The guide includes a list of phrases described as “warning signals that you’re on thin ethical ice.” Among them: “Well, maybe just this once . . . ,” “We didn’t have this conversation,” and, of course, “Shred that document.” The company encourages employees facing ethical dilemmas to do a gut-check with a self-administered quiz that includes questions such as “Are my actions legal?” “Will I sleep soundly tonight?” “How will I feel about myself afterward?” and “What would I tell my child to do?” “Setting the Standard” offers employees several options for reporting ethics violations, including toll-free hot lines for domestic, international, and hearing- or speech-impaired employees. “Caller ID is not used on ethics phone numbers,” the guide notes. It closes by assuring workers that they won’t be penalized for good-faith reporting of potential violations: “People in a position of authority can’t stop you; if they try, they’re subject to disciplinary action up to and including dismissal.” Read the code at www.lockheedmartin.com/data/assets/360.doc. Of course, writing the code is simply the first step. Making sure everyone understands and abides by it is an ongoing effort. HCA Inc., the Nashville-based hospital network, requires all directors and employees to take a two-hour orientation focused around its code of conduct, followed annually by a one-hour refresher course. HCA’s 38-page, full-color brochure includes a tear-out, wallet-sized card with key points and hot-line contact information. Read the code at http://ec.hcahealthcare.com. Such efforts help companies avoid “the three-P approach: Print it, post it, and pray that people actually read it,” says Stuart Gilman, president of the Ethics Resource Center in Washington, D.C. “You have to make [ethics] part of the organizational DNA.” Anne Stuart is a Boston-based free-lance business journalist. This article first appeared in the May issue of Corporate Counsel, an American Lawyer Media magazine.

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