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January/February 2010 - by Andrew Singer
Fluor’s Flexible and Fluid Compliance Program
At Fluor Corporation (Irving, Texas), the $23 billion engineering concern, business is often organized by projects—huge, billion-dollar affairs, like construction of a bridge, or an offshore oil platform, or a road, like the I-15 highway in Utah, where Fluor was recently
contracted to expand a 23-mile corridor.
This is reflected in Fluor’s compliance and ethics program, which is decentralized, fluid, and portable. “We rely on the individual,” says Wendy Hallgren, Vice President, Corporate Compliance, not just to know right from wrong—but to ask questions if something seems amiss.
Hallgren has only four people in her office, a modest number for a company with 46,000 employees. She relies on other departments to implement many of
her initiatives. With ethics and compliance training, for instance, her group develops the content, “but HR (human resources) pushes it out.” Human resources helped, too, in development of her office’s recent supervisor training protocol.
An ‘enforcement culture’
It helps that Fluor has an “enforcement culture,” noted Hallgren in a recent interview with Ethikos. Without enforcement, a program has no teeth. In recent years, two project managers—each of whom was running a huge, $1 billion-plus project—were terminated for ethical lapses.
Project managers have great autonomy and stature at Fluor, she
recounts—they are treated like “kings,” in a sense. In this case the managers were fired for conflicts of interest, and not the subtle kind: they had been “peeling off something for themselves,” e.g., a swimming pool that suddenly appeared in their back yard, explained Keith Stephens, a media relations officer. Both were working overseas.
People know” when something like this happens, and it is hugely important
that employees see that malefactors—even leaders of giant projects like these—will be disciplined for ethical transgressions, adds Hallgren, who says that from a purely business perspective it is difficult “to lose someone who shows skills and leadership” in their area of expertise.
A prevailing ethic
Hallgren, an attorney, came to Fluor in 2002, shortly after the enactment of the Sarbanes-Oxley Act
(SOX). Earlier she was in private practice, including a stint at Hogan and Hartson LLP in WashingtonD.C. She worked on SOX compliance matters at Fluor, initially. She assumed her present position in 2004. Her task has been made easier, she says, by the fact than an ethical culture existed prior to her arrival.
The prevailing ‘ethic’ at Fluor is “not about making money at any cost,” she explains. “The company does not expect you to do something wrong to make money.”
In November 2009, Fluor was named “Best overall governance, compliance and ethics program (small to mid-cap)” by Corporate Secretary magazine in its second annual Corporate Secretary Magazine Awards. Hallgren herself was named “Corporate secretary of the year” for “small to mid-cap companies.”
Through its participation in the World Economic Forum, Fluor has been a leader in the design and
implementation of multi-industry, zero-tolerance, anti-corruption programs. The company helped found the Forum’s Partnering Against Corruption Initiative (PACI), and Fluor CEO Alan Boeckmann continues to be a leader within PACI. (For more on this, see “Fluor Corporation Gets Behind PACI’s Anti-Corruption Drive,” Ethikos, November/December 2007.)
Ethics and compliance training
About 25,000 employees worldwide have completed Fluor’s Code of Business Conduct and Ethics training, primarily through web-based training modules.
Fluor also conducts live, interactive compliance training in specialized areas. Approximately 2,000 Fluor employees participated in the company’s recent anti-corruption training that took place in 16 countries and 26 offices, and also on project sites. Among those receiving training were individuals in sales and
marketing, project management, field operations, procurement, subcontractors, and legal personnel.
The company has conducted live fair-disclosure training for spokespersons and executive management, and export control and anti-boycott training for procurement and logistics personnel.
The live, interactive format is important because it allows participants to ask questions, notes Hallgren.
Indeed, she speaks about people lining up afterward for “penance”—e.g., “One time this thing happened …” Much employee feedback is generated in these live sessions. This might not happen if the training were outsourced to a third-party firm.
The company’s Compliance and Ethics Hotline is intended for Fluor employees, clients, suppliers, subcontractors, and partners to ask questions about the code of conduct or to anonymously report
misconduct. It is available toll-free 24 hours per day, seven days per week and is managed by a third-party firm. Language interpretation is provided in more than 150 languages.
In 2007, the Ethics Hotline received 257 calls, all of which were investigated. Call volume increased 25 percent in 2008.
Why the growth in calls? Hallgren attributes it, in part, to education—more employees know about the
hotline now. “But we’ve also had a corporate growth spurt.” The company has expanded, and there are simply more employees; hotline calls have increased accordingly.
Tough economic times might also be a factor. There has been an increase in reports of conflicts of interest—employees “taking a little extra” for themselves in some way or form.
Some calls are simply the result of exasperation or resentment. An individual is laid off. He calls the
hotline. “It shouldn’t have been me … ” Another employee should have been fired instead. “They think that layoffs are nota business issue but an ethics issue,” explains Hallgren. This sort of complaint happens more often during a recession.
Fluor has not received more calls about individuals being pressured to make their “numbers” (e.g., sales goals) or reports about fiddling with revenue or profit numbers. It’s more about individual transgressions.
Reporting to the CFO
Hallgren reports to the company’s chief financial officer (CFO), Fluor’s designated “high level” person (as per the U.S. Sentencing Guidelines for Organizations) assigned overall responsibility for the compliance and ethics program.” The CFO doesn’t hold this position at most companies. A company’s general counsel is more typically selected.
Why designate the CFO at Fluor? When Hallgren came to the company in 2002, she worked closely with the finance department on SOX compliance. She still has disclosure and risk management responsibilities associated with SOX, such as ensuring the integrity of the company’s financial statements.
Meanwhile, Fluor’s CEO has many direct reports. The CFO has fewer and as a practical matter has more time to attend ethics and compliance meetings.
It is a satisfactory structure. “He really gets it,” Hallgren says of CFO D. Michael Steuert. The CFO’s feedback is useful on a day-to-day basis, e.g., “Am I going too far?” “Sometimes it’s good just to have someone to bounce ideas off.”
Moreover, “It’s great to have finance as a double check, especially in areas like bribery and anti-corruption.”
“Alan [Boeckmann] is more the external ambassador” with regard to corporate ethics, notes Keith
Stephens, given his PACI leadership. “Everyone knows the CEO is on board.”
In any event, Hallgren could talk with the CEO “if I ever had a problem.”
Compliance and Ethics Committee
The audit committee of the board of directors oversees Fluor’s compliance and ethics program and receives periodic reports, at least quarterly, from management regarding the program. As noted, the
CFO has executive oversight and the vice president, corporate compliance (Hallgren) oversees the day-to-day activities of the program. Fluor also has a Compliance and Ethics Committee that develops policies and procedures for the program, audits and monitors adherence to those policies, implements incentives (where appropriate) to promote compliance, reviews the status of ethics hotline calls,
establishes procedures for ethics investigations, and reviews disciplinary action that is taken for ethics and compliance violations to ensure that they are appropriate and consistent throughout the organization.
The Compliance and Ethics Committee’s members include: the head of corporate compliance (Hallgren); legal counsel; chief information officer; head of IR (industrial relations), safety and security; head of
human resources; chief financial officer; chair of the company’s sales board; and group executives of the business lines.
The company’s Compliance and Ethics Council focuses more on investigations. Its members include: the chief financial officer; chief legal officer; head of human resources; head of IR, safety and security; head of internal audit; head of corporate compliance (Hallgren); and legal counsel.
Fluor has 11 task forces that were created to address the company’s main risk areas. According to the company’s website, these are:
1. Competitive Practices / Fair Competition
2. Document Management and Retention
4. Ethics & Employee Conduct
5. Financial Assurance
7. Government Contracts
8. Government Relations
9. Health, Safety and Environmental (HSE)
10. Intellectual Property
11. International Transactions
The task forces are led by subject matter experts (SMEs) and include a cross-section of employees from various business groups and functions. SMEs are mostly from the legal side of the organization, however, because it’s deemed important when conducting investigations—when dealing with ‘privileged’ information, say—to have participants with a legal background.
The task forces inventory existing company policies and practices, develop and implement action plans
for their risk areas, and monitor changes in Fluor’s business, laws, and regulations.
Even though task forces typically have a legal representative, not all are led by lawyers. The head of the export compliance task force is a person from procurement. That person spends perhaps 30 percent of his time on export compliance. This is fairly typical. Task force members have other duties.
Outspoken about corruption
CEO Boeckmann appears to have helped raise ethics awareness among senior management. He has been outspoken on the subject of corporate responsibility. In explaining his company’s early participation in PACI, for instance, he said at ECOA’s 2007 Annual Business Ethics & Compliance Conference in Los Angeles:
“When I became Fluor’s CEO in 2001, I had already formed strong convictions on this subject. I was sick
and tired of losing business to overseas competitors who played by different rules. The engineering and construction sector has an especially large exposure to corruption, and I was frustrated that our employees were pressured occasionally to pay up. I did not want our industry—and especially Fluor—to wind up as the ‘poster child’ for world bribery.”
It shouldn’t be so surprising, then, that at a recent executive management meeting attended by 700 of Fluor’s top managers that every speaker (but one) talked about compliance and ethics in his or her presentation, e.g., the importance of executing business plans ethically and properly.
Re ethics in a recession: ‘They think that layoffs are not a business issue but an ethics issue.’
And one of the first questions asked of CEO Boeckmann during a question-and-answer segment that followed his presentation went like this: “We’re talking about doing business in Russia.” Given that corruption still appears to be widespread in the Russian business system, however, “How can we do that ethically?”
‘A thoughtful process’
Overall, Fluor’s compliance and ethics program is “flexible and it leverages what’s out there,” says
Hallgren. Yes, there is monitoring and enforcement in place, but a lot of it comes down to trusting employees.
“It has to be a thoughtful process,” she adds, one that is tailored to a company’s structure and culture. In addition, the “tone at the top is huge” when it comes to ethics and compliance.
“High-level personnel of the organization shall ensure that the organization has an effective compliance and ethics
program, as described in this guideline. Specific individual(s) within high-level personnel shall be assigned overall responsibility for the compliance and ethics program,” 2009 Federal Sentencing Guidelines Manual, Chapter 8, Part B: Remedying Harm From Criminal Conduct, And Effective Compliance And Ethics Program, §8B2.1, “Effective Compliance and Ethics Program.”
 See “Fluor Corporation Gets Behind PACI’s Anti-Corruption Drive,” Ethikos, November/December 2007.
Andrew Singer is Publisher and Editor of Ethikos
Reprinted from the January/February 2010 issue of ethikos
© 2010 Ethikos, Inc. All rights reserved.
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