Ethics Awareness Module 4 Reputational Risk
Introduction Events in the banking (LIBOR fixing allegations) and private security industries (G4S and the Olympics) demonstrate the ease with which a company s reputation can be seriously damaged, and indeed, the actions of one company or part of a company can seriously affect the perception of an industry as a whole. It is important to remember that it is not just deliberate, illegal or unethical actions that can cause damage to a company s reputation. Even the perception of a company or its employees being somehow involved in unethical practices can be damaging. Therefore, all employees must be aware of unacceptable behaviours that can damage Thales reputation and how to counter them.
2 / Agenda Reputation and Thales Damaging behaviours Why are these behaviours ethical concerns?
3 / Reputation and Thales
Reputation and Business A good reputation is more valuable than money Thales reputation is as important as the products and services that it sells. It is important to consider what effect your actions will have on Thales reputation. It is important to remember that even the perception of unethical behaviour by Thales can seriously damage our reputation.
Reputation and Business In the defence industry in particular, the reputations of many companies have been severely damaged by bribery/corruption allegations. However, in many of these instances the alleged events happened more than 10 years ago and yet the negative public perception of those particular companies and the industry still persists despite extensive efforts to combat the perception. This means actions taken now could have serious lasting consequences on Thales, way into the future.
6 / Reputational Risk Examples Following the 2008/9 banking crisis, NatWest Bank ran an advertising campaign aimed at restoring trust in banking. A key aspect of this campaign was NatWest s dedication to customer service, including a Customer Charter and a slogan of Helpful banking. In June 2012, NatWest s IT systems suffered major problems, causing customers bills to go unpaid and wages not to be credited to accounts. This incident highlights how fragile a company s reputation can be NatWest s reputation for customer service is now significantly damaged in an environment when, due to other banking issues, trust in banking is at an all time low. Although this is not an ethical example, it shows a company s reputation can be damaged by actions taken.
7 / Reputational Risk Examples In 2012, Barclays Bank paid a fine of 290m in relation to fixing of the inter-bank lending rate. It soon became apparent that Barclays was not the only culprit, and other major banks were complicit. As a result, both the Chairman and CEO of Barclays resigned and a parliamentary inquiry into the banking industry is to be held. The damage done to the banking industry by this incident and previous practices is significant as a result of this latest controversy and there is now a perception that something is wrong with the culture of UK banking. The SFO is also investigating to determine whether or not to bring individual prosecutions. This potentially illegal action was also fundamentally unethical. This clearly does not pass the How would it look in the newspapers? test.
8 / Damaging behaviours
What behaviour could damage Thales reputation? Three possible areas where this could involve you are: Conflict of Interests Undue Influence Lobbying For some in Thales there are many other areas that are more specific to their roles, so this list is not exhaustive.
10 / Conflict of Interests a situation in which one cannot make a fair decision because they will be personally affected by the result Cambridge Business English Dictionary Examples: A manager interviews a candidate for a role. However, the manager s son is the candidate. The manager has a personal interest in the outcome, and therefore should arrange for someone else to interview him. A purchasing manager s daughter is a significant shareholder of a key supplier. The purchasing manager has a family connection to, and therefore, a personal (financial) interest in the supplier and should play no role in the choice of supplier or any placement of work thereafter. Thales is clear that neither of the above behaviours are acceptable and no employee, agent, partner or contractor should be involved in or condone such behaviour.
11 / Conflict of Interests The following example could also fit into this category if the rules noted are not complied with: A civil servant responsible for defence procurement has been offered a paid position with a multinational defence company once he leaves office. If the civil servant has been dealing with the defence company concerned, he/she might be inclined to act in favour of the defence company to the detriment of other suppliers and may feel they should take information and knowledge of certain competitors bids to their new employer. Ex-public sector (civil and military) personnel of all levels must comply with Civil Service/MoD rules designed to prevent such instances. Provided they have done so, there should be no issue. If you are hiring, you need to ensure they have done so!
12 / Conflict of Interests What should you do? Where possible, avoid conflicts of interest. Where a conflict of interests arises (or is likely to arise), be transparent and declare your interest(s) to line management and/or local Ethics Officer/Manager. Actively avoid/limit your personal involvement where there is a (potential) conflict of interest. Report to line management, the local Ethics Officer/Manager or the SPEAK UP helpline situations where you suspect others to have an undeclared conflict of interest. Follow the guidance/rules on conflict of interests of any applicable professional or trade body of which you are a member.
13 / Conflict of Interests The personal interests of a Group employee must not affect the choice of a supplier under any circumstances. Management must be particularly vigilant when a Group employee has a personal, family or financial tie with a supplier The staff of Thales are expected to be totally loyal to the Group. They are thus prohibited, except with the consent of the Group, from working for an existing or potential competitor. Thales Code of Ethics
14 / Undue Influence a situation in which someone uses their power or authority in an unfair way in order to influence a legal decision, a decision about who gets a contract etc. Cambridge Business English Dictionary Examples: A senior employee suggests that his son should be given a job in the company to the HR Manager. The senior civil servant in charge of a major procurement competition makes clear that participating companies bids would benefit if they included a substantial investment with a local supplier there is no requirement for such investment in the ITT. A junior bid manager writes a report that is realistically critical of the performance of an unsuccessful bid team. The company s lead bid manager asks him to change his conclusions to read more favourably. A software engineer frequently arrives at work under the influence of alcohol. However, the software engineer is friends with a senior manager, who blocks any attempt to discipline the software engineer. Such behaviours are totally unacceptable within Thales.
15 / Undue Influence What should you do? Do not abuse your position to influence others. Report any instances of improper behaviour to line management, local Ethics Officer/Manager or using the SPEAK UP helpline. Comply with Thales processes, procedures and rules, including CHORUS 2.0. Avoid situations where a conflict of interests may arise to remove the temptation to exercise influence inappropriately.
16 / Lobbying to try to persuade a politician, the government or an official group that a particular thing should or should not happen, or that a law should be changed Cambridge Business English Dictionary Thales has produced the document: Best practices Guide to lobbying, available on the UK Ethics Intranet.
17 / Lobbying Lobbying activities conducted on behalf of Thales or to defend the Group s interests must comply with a number of general conditions: They must be compliant with national regulations. They must be conducted in complete transparency. They must not be conducted with the objective of giving or obtaining a favour or any undue advantage in return. They must not lead to a conflict of interests. The information provided must be objective and not misleading, and no attempt must be made to dishonestly obtain information or decisions by exerting pressure of any kind. They must be conducted solely in a professional capacity and without any personal motive.
18 / Lobbying But this does not apply to me Formal lobbying is undertaken by paid, professional lobbyists operating at governmental/senior management level, but any employee who interacts informally with a third party may act or be seen to act as an advocate on behalf of Thales, eg. Providing details of a product s performance. Persuading another that Thales solution is better than a competitor s. Commenting about Thales operations or conduct. all of these activities could influence a decision-maker and it is important that you respect the boundaries between speaking positively and truthfully about our products and services and misrepresenting our offers, which could lead to customer dissatisfaction and reputational damage. When communicating to a third party about Thales and its solutions, operations, culture and/or conduct, you must do so in line with the best practice guide and must consider the potential long-term effect of your comments/opinion on Thales and its reputation.
19 / Why are these behaviours ethical concerns?
Why are these ethical concerns? An individual should not be allowed to benefit from a transaction at the expense of the company. Conflicts of interests and undue influence make it impossible to be objective. There is an inherent inability to conduct a fair competition. An individual with an interest in the performance of a supplier might be inclined to favour that supplier, including through inappropriate single source contracting and/or anti-competitive pricing. The perception of bias in decision-making can be just as damaging as actual bias being shown. A lack of transparency in lobbying in particular can give the impression of being underhand. There is a strong link to bribery and corruption: Excessive giving and/or receipt of gifts and hospitality could create a conflict of interests and be seen as seeking to influence someone to perform a function improperly. Giving gifts and providing hospitality to gain influence could be bribery. Using influence for one s own gain could be tantamount to asking for a bribe.
21 / Summary What should you do? Where possible, avoid conflicts of interests. Be transparent: Declare any personal interest in a (proposed) transaction. Limit your personal involvement where there is a (potential) conflict of interests. Do not abuse your position to influence others. Report attempts by others to abuse their position. Always act in accordance with the Thales Code of Ethics. Remember: Need advice? Are you concerned about a situation? When in doubt, share, speak up, ask for advice Contact UK Ethics E: ukethics@thalesgroup.com T: +44 (0)7969 118 135 Ethics Committee E: ethics.committee@thalesgroup.com T: +33 (0)157 77 87 19
22 / Reputational Risk A reputation once broken may possibly be repaired, but the world will always keep their eyes on the spot where the crack was Joseph Hall, English Bishop and Satirist (1574-1656)
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