Tag Archives: Expenses

Integrity or Not

Originally Published in The Bay Observer, September 2016

The questionable conduct of leaders does not go unnoticed. It can be embarrassing for the person, for the organization, and disappointing for those who want to look up to these leaders.

The CEO of one of the world’s most famous advertising agencies, Saatchi & Saatchi finds himself on leave as a result of his comments reported in a major financial newspaper. It was reported that the CEO stated “some women lack vertical ambition and that low numbers of women in senior positions was not a problem.” We could be kind and suggest that his comments were taken out of context and that he actually does not believe that the problem with women not being in senior positions is the fault of women themselves. In September 2014 there was the well covered story of the CEO of food service giant Centerplate Inc. caught on an elevator camera repeatedly kicking his friend’s cowering dog. The firestorm that erupted through social media pushed the Board of Directors to oust the CEO. Chip Wilson, then CEO of Lululemon is still well known for his inappropriate comments in 2013 when he pointed the finger at “some women’s bodies” as part of the reason why a line of yoga pants were recalled for being too sheer. And of course, we have the spending habits of a few senators (Duffy, Wallin) which certainly brought into question the integrity of senators’ spending of taxpayer dollars.

There is an expectation that leaders will conduct themselves with integrity and respect for others. There are five main responsibilities of a Board: oversight of planning and performance, talent management, risk governance, integrity of organization, and governance practices. Integrity of the organization – this covers the integrity of people, processes, and information. When I work with Boards of Directors, there is always an emphasis placed on the Code of Conduct to set the framework which creates the expected integrity of the organization’s people. It is not only having a code of conduct but also dealing with breaches to the code which creates the substance of integrity. I have observed expense reports submitted by Directors containing expenses not allowed. Some Directors become defensive when their expenses are challenged – even going so far as to advise staff members that staff are not to question the expenses of a Director. These situations call for an assertive and ethical Board Chair to remedy the situation and enforce the code. Consistent enforcement should lead to fewer attempts to circumvent the policy.

When I develop Codes of Conduct for Boards I caution them that it is impossible to provide direction to Directors and the organization’s executives on how to handle every situation that might occur. I advise that the code needs to contain language that states the difficulty in coding all elements that Directors and Officers should observe to meet the necessary level of business conduct. The Code should create a principles based approach to the aura of integrity rather than a rules based tick the box mentality. It is the general expectation that Directors and Officers will seek to do what is right for the protection of the organization, to act within the values of the organization, and to behave in a manner that reflects sound business conduct and ethical standards becoming to the integrity, image and good reputation of the organization.

Organizations generally outline the allowable expenses that can be incurred by Directors and Officers. While it is possible to address the typical expenses for travel, meals, accommodation, it is difficult to create a fulsome list of rules that covers all types of expenses. Recognizing that we are addressing the leaders of the organization, it should be sufficient to provide general direction to these individuals. For example, language in an expense policy should cover expectations: a policy that I wrote contained the following language.  “It is recognized that Directors will incur expenses in the conduct of their duties. Guidelines cannot be established to govern all situations which might confront a Director as far as expenses are concerned, but general principles have been established and Directors are expected to exercise discretion and good judgement in determining what is a reasonable and proper expense to be incurred on behalf of the organization. Directors are expected to demonstrate a good example for use of corporate resources. The reimbursement will be limited to expenses incurred and are not to be used to enrich a Director.”

The statements that I outline above for the code of conduct and the expense policy contain leadership statements. While a CEO should be provided with a code of conduct that sets out expectations of behaviour, CEO’s need to continually consider how their actions and behaviours demonstrate what the organization stands for. While a senator should be provided with a general outline of what is an allowable expense, if they are a leader working with integrity and considering they are spending someone else’s money, they should not need a laundry list of what is or is not allowed.

I give lots of credit to the Council for the city of Burlington for establishing a citizens committee periodically to examine and make recommendations for the compensation and allowable expenses for the mayor and Councillors. I was part of that committee, and one of the committee’s recommendations in its November 2013 report was that the City should establish a Code for Conduct for the members of Council. It is now August 2016 and while staff have proposed draft Codes of Conduct for Council, this item has been deferred multiple times and continues to be in abeyance. It is not a sign of leadership when the leaders are happy to have a code of conduct in place for the staff but not for themselves.

Fay Booker is principal of Booker & Associates, a firm focused on promoting good governance, enterprise risk management and operational effectiveness – www.bookerandassociates.com.