The Commentary about Recommendation 3.1 states:
“In formulating its values, a listed entity should consider what behaviours are needed from its officers and employees to build long term sustainable value for its security holders. This includes the need for the entity to preserve and protect its reputation and standing in the community and with key stakeholders, such as customers, employees, suppliers, creditors, law makers and regulators.”
Listed entities are subject to a new requirement to ensure that their organisational values are aligned with business strategy, remuneration structures and delivery of long-term growth.
Code of Conduct
Listed companies must also ensure that they have in place a Code of Conduct ‘to underpin the desired culture within the entity“, which has been considered and approved by the Board.
The Code of Conduct must apply to all employees, senior executives and Board directors, and articulate the standards of behaviour expected. All employees must receive appropriate training on their obligations under the Code. There is detailed guidance in the Principles (4th ed) about what should be included in the Code of Conduct, which we recommend companies check carefully. Many of the existing Codes of Conduct that we have seen would be non-compliant.
Whistleblower, Anti-Corruption and Bribery Policies
Recommendations 3.3 and 3.4 require that a listed entity should have and disclose a whistleblower policy, and an anti-bribery and corruption policy. The Board or a Committee of the Board must be informed of any material incidents reported under those policies.
Board Obligations to Lead a Considered, Ethical Culture
A number of changes to the role and responsibilities of the Board are made in Recommendation 1.1, including the role of the board in “instilling of the entity’s values and performance generally“.
The Board must approve the entity’s statement of values and “code of conduct to underpin the desired culture within the entity“.
Reporting to Board
To enable the Board’s work on organisational culture, the reports from the senior executive team must not be limited to information about the financial performance of the entity, but also include “its compliance with material legal and regulatory requirements” and “any conduct that is materially inconsistent with the values or code of conduct of the entity” (see commentary on Recommendation 1.1).
In our experience, usually the Committee’s Terms of Reference and reporting expectations on executives are clear, however the data collected and records created by complaints-handlers are often insufficient to ensure that information is reported up, or can be analysed over time for trends and opportunities for systemic improvement.