REPORT ON ETHICS COMPLIANCE 04/02/15

Transcription

1 REPORT ON ETHICS COMPLIANCE 04/02/15

2 CONTENTS A. Online training on the Iberdrola Code of Ethics and IUSA Networks Annex to the Code of Ethics. 3 B. Reports made to the Compliance Unit for the purpose of (i) reporting suspected or actual compliance violations; and (ii) seeking guidance on ethics and compliance matters and policies. 3 C. Annual conflict of interest survey and compliance statement. 3 D. Actions taken by the IUSA Networks Board of Directors. 4 E. Crime Prevention Program. 4 F. Compliance reporting protocol. 4 G. Ethics and compliance communications to IUSA Networks employees. 4 H. background check screening of new employees, persons promoted to Director-level or higher, and third-party contractors. 4 I. Additional ethics and compliance training initiatives. 5 J. Ethics and compliance certifications by the Company s compliance officers. 5 K. Amendments to the Company s leadership model. 5 L. ETHIE and Ethisphere Awards. 5 2

3 This report describes actions taken by the Iberdrola USA Networks, Inc. ( IUSA Networks or the Company ) Compliance Unit and subsidiary management in connection with the Company s Compliance Program and 2014 Master Compliance Plan (the Compliance Plan ). The Compliance Plan was approved December 4, 2013, by the Audit and Compliance Committee of the Iberdrola USA Networks Board of Directors (the ACC ). This report is made annually pursuant to the ACC Charter adopted by IUSA Networks Board of Directors. Based on the overall results of the Compliance Plan and other compliance-related initiatives taken by IUSA Networks and its subsidiaries in 2014, including, without limitation, those reflected in this report, the IUSA Networks Chief Compliance Officer and the IUSA Networks Director of Compliance certified to the IUSA Networks ACC at its February 2015 meeting that the Compliance Program is effective and complies in all material respects with applicable legal and regulatory requirements. In addition, pursuant to a Crime Prevention Program adopted in 2014 and described below, the IUSA Networks Chief Compliance Officer certified to the IUSA Networks ACC that IUSA Networks had implemented internal controls, policies and procedures designed to ensure IUSA Networks material compliance with certain laws with criminal penalties applicable to the Company s activities. The following are some of the actions taken in 2014 that support the certification made by the Chief Compliance Officer and the Director of Compliance: A. Online training on the Iberdrola Code of Ethics and IUSA Networks Annex to the Code of Ethics. The Company s online Code of Ethics training was launched to approximately 4,150 Iberdrola USA Networks subsidiary employees and select thirdparty service providers in early October of The completion rate was 100%, excluding certain employees unable to take the. The following were notable changes to the 2014 training from prior versions: The substantive training materials were completely updated, based on a global training module developed by Iberdrola, S.A. A supplemental training module was developed to reflect U.S.-specific concepts, including those in the IUSA Networks Annex to the Code of Ethics. These included restrictions on affiliate transactions and state law gift and hospitality restrictions applicable to government employees. A new interactive format was used to stimulate trainee attention and learning. A quiz was added to the end of the training to confirm retention of key concepts. A statement regarding the reporting of potential violations and compliance with the Code of Ethics was included for confirmation by trainees. B. Reports made to the Compliance Unit for the purpose of (i) reporting suspected or actual compliance violations; and (ii) seeking guidance on ethics and compliance matters and policies. The following bullets summarize ethics and compliance complaints and reports made directly or indirectly to the Company s Compliance Unit during 2014, including those made through the Company s Ethics and Compliance Helpline (the Helpline ). In each case, the Compliance Unit received the support necessary from Company management to ensure an appropriate investigation of the reported matter. Helpline reports were received with respect to 32 matters during In twenty-two of these matters (66%), the reporter or reporters were anonymous. Nine of these matters were found not to be compliance or ethics-related, but instead to be business management issues. In these cases, reports were referred to the appropriate Business Area for resolution. There were also cases where multiple Helpline reports were received with respect to the same underlying circumstances. Accounting for these variables, the number of Helpline reports represents a slight decrease in volume from prior years but remains reasonable given the Company s total employee population. The top five most common subject areas for Helpline allegations were (1) human resources matters; (2) company policies; (3) workplace violence; (4) accuracy of company records (fraud); and (5) harassment and discrimination. These subject areas have consistently been the top five over previous years. There were eighty-four reports made directly to the IUSA Networks Director of Compliance, of which fifty-two (62%) were inquiries seeking ethics and policy guidance. There was a substantial increase in the number of inquiries seeking guidance compared to prior years, which is an indicator of further progress in the Program s maturity as employees seek guidance prior to taking questionable actions. These increases may also be attributable to improvements in Program communications and outreach. Included in the eighty-three reports were ethics and compliance matters implicating the Iberdrola Code of Ethics that were first reported to Human Resources or other departments and then referred to the Compliance Unit. C. Annual conflict of interest survey and compliance statement. The annual conflict of interest survey (the Survey ) was distributed to all IUSA Networks officers and salaried employees (1,708 individuals) in early November of The Survey completion rate was 100%, excluding individuals who were unable to complete the survey. The first four questions of the Survey were intended to facilitate disclosure of outside activities and potential conflicts of interests. A fifth question was intended to facilitate disclosure of potential violations of the Iberdrola Code of Ethics, the Annex, or a company policy, that had not previously been reported to the Compliance Unit, Human Resources, or other appropriate Company management. Each response to a question in the affirmative was reviewed by the IUSA Networks Director of Compliance to identify potential conflicts of interest and other compliance issues. The Survey also reminded respondents of their obligations under the Code of Ethics with respect to outside interests and potential conflicts of interest (e.g., disclosure and abstention). At the end of the Survey, respondents executed a statement confirming their obligation as IUSA Networks employees to comply with the Code of Ethics and other applicable Company policies and procedures. Based on the review of Survey responses, and follow-up inquiry where appropriate, no material conflicts of interest or violations of company policy were identified. 3

4 D. Actions taken by the IUSA Networks Board of Directors. The IUSA Networks Board of Directors and the ACC approved a number of new or amended policies, codes, and procedures in 2014 in support of the Compliance Program. Updated copies of certain of these documents are publicly-available on the Company s website. Actions taken by the Board of Directors are supported by operational policies and procedures established by Company management. The Board of Directors and ACC were trained on compliance-related subjects during the year, including, without limitation, the operations of the Compliance Program and the Board s corporate governance and oversight obligations with respect to ethics and compliance. In addition, Compliance Unit personnel met with the ACC several times in 2014 to provide updates on activities and to discuss the status of the Compliance Plan and other compliance-related matters. E. Crime Prevention Program. In 2014, the Compliance Unit, pursuant to direction from its Board of Directors, implemented a Crime Prevention Program intended to enhance and support IUSA Networks existing Compliance Program. This program is in furtherance of the Iberdrola Group s Crime Prevention and Anti-Fraud Policy, adopted by the Board of IUSA Networks, which requires the Company to implement an effective program for the prevention of criminal offenses. The Policy contemplates a system of controls aimed at preventing, detecting, and reacting to possible criminal offenses, as well as other forms of frauds, regulatory violations, and financial irregularities. In a company-wide collaboration including Legal Services, outside consultants, affected Business Areas, and the IUSA Networks Compliance Unit, certain criminal laws applicable to the Company s activities were mapped and Business Areas within the Company were designated as responsible for compliance. These Business Areas then underwent a process of identifying controls applicable to these laws. As with other elements of the Company s Compliance Program, the Crime Prevention Program will be the subject of continuous improvement and refinement efforts. F. Compliance reporting protocol. In 2014, the Compliance Unit for IUSA Networks and its subsidiaries developed protocols for managers to use for reporting known or suspected violations of laws, regulations, the Code of Ethics, and company policies. Such reports are required under the Code of Ethics. The goal of these protocols was to ensure that information regarding known or suspected violations is quickly communicated to the Compliance Unit or other appropriate departments for investigation and resolution. These protocols were disseminated to the Company s senior leadership and all levels of management using a combination of communication methods, including webinar trainings, and intranet notices, and in-person meetings. G. Ethics and compliance communications to IUSA Networks employees. In 2014, the Compliance Unit launched a formal communication plan intended to provide guidance and raise awareness among employees on common ethics and compliance issues. This communication plan included monthly articles disseminated by newsletter and . Examples of topics included: Vendor gifts and hospitality Conflicts of interest Workplace harassment Helpline reporting Political activity in the workplace Additional communications were disseminated throughout the year as opportunities arose to improve employee awareness of the Program. Subjects included, without limitation, publication of the Company s annual Ethics and Compliance and Separation of Activities reports, the anniversary of the Compliance Unit, and direct access to the Helpline from the Company s intranet homepage. H. Background check screening of new employees, persons promoted to Director-level or higher, and thirdparty contractors. Pursuant to Company policy, all prospective employees are subject to a criminal background check prior to being hired. Persons promoted or hired into a Director-level or higher position are subject to both criminal and civil background checks. Such persons are considered by IUSA Networks to be substantial authority personnel under the U.S. Federal Sentencing Guidelines. Human Resources is responsible for ensuring that background checks are initiated and processed in compliance with Company policies and applicable law. Human Resources confirmed to the Compliance Unit that required background checks were conducted on all new hires and all persons promoted to Director-level or higher between November 1, 2013 and October 31, 2014 (the annual review period). The Company has also implemented a Contractor Background Check Rule (the Rule ). The Rule generally requires that affected contractors periodically conduct criminal background checks on their employees who have regular access to the Company s sensitive assets, computer systems, and confidential information. The IUSA Networks Business Area that engages an outside contractor is responsible for enforcing the Rule. IUSA Networks Business Area Leaders certify compliance with the Rule on an annual basis (after appropriate due diligence). All affected IUSA Networks Business Area Leaders certified compliance with the Rule for the period of November 1, 2013 through October 31, 2014 (the annual certification period). 4

5 I. Additional ethics and compliance training initiatives. IUSA Networks and its operating subsidiaries conduct periodic trainings for compliance regarding certain regulations applicable to their industries, including anti-market manipulation rules, FERC standards for conduct, and affiliate transactions. In addition, new employee orientations included an overview of the Compliance Program, Helpline reporting, and the Company s commitment to ethical conduct and compliance with the law. Numerous other compliance-related trainings on particular subjects were conducted during the year for certain departments and employees. J. Ethics and compliance certifications by the Company s compliance officers. In 2014, the IUSA Networks Chief Compliance Officer and the IUSA Networks Director of Compliance, both licensed attorneys, earned distinction as Certified Compliance and Ethics Professionals by the Society of Corporate Compliance and Ethics. In addition, the IUSA Networks Director of Compliance earned certification as a Leading Professional in Ethics and Compliance by the Ethics and Compliance Officers Association. These certifications by leading organizations in the field of ethics and compliance recognize the expertise of the Company s compliance officers and contribute to the overall quality of the Company s Compliance Program. K. Amendments to the Company s leadership model. The Company recognizes that leadership and tone from the top are fundamental elements of an effective compliance program. In 2014, promotion of an ethical culture and leading with integrity were formally added to the Iberdola Leadership Model. This model is applied to Director-level and higher employees as the standard for evaluating effectiveness as a leader. Communications announcing this addition to the Iberdrola Leadership Model were disseminated to affected Company leadership. L. ETHIE and Ethisphere Awards. In 2014, the Rochester Business Ethics Foundation granted its annual ETHIE Award to the Company and its operating subsidiary, Rochester Gas and Electric Corporation. In its 12th year, the ETHIE is awarded by an independent panel of judges in recognition of a company s commitment to business ethics and good corporate citizenship. Also in 2014, the Company s global parent, Iberdrola, S.A., was recognized by the Ethisphere Institute was one of the world s most ethical companies. The Ethisphere Institute is an internationally recognized thought leader in the field of corporate ethics and compliance. This concludes the Iberdrola USA Networks Annual Report on Ethics and Compliance.