Today I want to return to Commonwealth Edison, the Illinois public utility trying to revamp its corporate culture and compliance program after a corruption scandal that erupted in 2020. As we sift through ComEd’s progress report on improvements it has made, let’s examine two subjects indispensable to effective compliance programs: tone at the top and disciplinary enforcement.
First, a recap for anyone joining our program already in progress. In 2020 ComEd settled charges that had offered lucrative lobbying contracts and no-show jobs to associates of now-former Illinois House Speaker Michael Madigan, a long-time Chicago pol and one of the most powerful Democrats in the state. In exchange, federal prosecutors said, Madigan shepherded several pieces of legislation beneficial to ComEd into law.
In addition to a $200 million fine and a three-year deferred-prosecution agreement, ComEd also agreed to implement a raft of compliance program improvements. The utility published a progress report on those improvements at the end of April, and it’s great reading for compliance professionals at other companies who might want inspiration about how to improve your own program.
Our previous post about ComEd looked at the revamped structure of its compliance program and how ComEd overhauled its approach to compliance risk assessments. As important as those elements are, however, the success of a compliance program truly depends on people within the enterprise taking it seriously. Well, employees take compliance seriously when they hear the boss talk about it and when they see coworkers getting punished for blowing it off. So let’s look at how ComEd tackled those two subjects.
ComEd Tone From the Top
Corruption scandals tend to focus the corporate mind, and ComEd appears to be no exception. New CEO Ed Quiniones joined the company in November 2021, and “has made ethics and integrity an important priority since his arrival,” the ComEd progress report says.
How so? With lots of meetings, town halls, and other outreach efforts, involving Quiniones and other ComEd senior executives.
For example, Quiniones invited representatives from the ethics and compliance team at Exelon (ComEd’s parent company) to join ComEd senior staff meetings. Earlier this year Quiniones also participated in a panel discussion on ethics that was held as part of a gathering of key ComEd managers.
Nor is Quiniones the only senior ComEd executive mounting this charm offensive for ethics and compliance. Chief operating officer Terrence Donnelly launched an effort last year to help key managers weave ethics and compliance discussions into their department meetings. Exelon CEO Christopher Crane recorded a video about ethics and compliance for all employees to view at the start of their online training. He also “has been visible in his support” of including David Glockner, Exelon’s executive vice president of compliance, audit, and risk, in management decisions relevant to compliance, ethics, and internal control issues. (Which, um, should be the norm, right?)
Glockner and Kristopher Keys, who serves as chief ethics and compliance officer for both ComEd and Exelon as a whole, also do all the usual meetings with other executives from across the ComEd enterprise that one would expect.
At the board level, the audit and risk committee of Exelon’s board gets a presentation at every meeting on the pace of compliance program improvements, plus a report on recent audit engagements and findings. Each meeting of ComEd’s board includes a review of compliance with policies about interacting with public officials (the issue that got ComEd into trouble in the first place), plus other significant compliance program developments.
All of that is good. We should still stress several important points.
First, as much as I appreciate a corporate board paying attention to compliance matters, that is more tone within the top, as top executives talk amongst themselves. That’s not the same as tone from the top, downward to the rest of the enterprise.
So in that case, I’m much more curious about how Quiniones, Glockner, Keyes, and other senior compliance executives talk with middle managers, and especially middle managers in the First Line operating units. Those people are the glue that binds management’s directives and employees’ activities together. The more we can talk about that outreach, the better.
Second, will this commitment to ethics and compliance endure beyond ComEd’s three-year DPA? I mean, I know ComEd (or any other company working under a DPA) will say yes, of course its commitment will endure, but let’s not kid ourselves. Plenty of companies take a more, ahem, relaxed attitude toward their compliance program as soon as the DPA or monitorship or consent decree ends. I hope that won’t be the case here.
Enforcement and Discipline
Like every other large organization, Exelon has an internal ethics hotline, which extends to ComEd employees as well. Exelon uses a single outside vendor for both its hotline and its case management. The case management system itself received an upgrade in February 2021 for better tracking and analytics. Like most systems, reporters receive a case number so they can follow up with their inquiry, as well as a confidential key and password so even anonymous reporters can follow up.
Exelon revamped its investigations team in late 2020 to establish a dedicated Centralized Investigations Team within the HR department, which handles most complaints about harassment, discrimination, and other workplace harassment issues. Prior to that centralized team, HR still handled most investigations, but cases were assigned to HR staffers based on who worked with the department where the complaint arose.
The centalized team is smaller and more focused, which gives the team more time to develop rigorous investigation procedures. The team also follows written procedures, and all investigations must include a final report that’s based on a template document included in the case management system.
So let’s say a compliance violation does happen. Then what?
Minor or accidental violations of the code of conduct typically result in coaching for the errant employee, ComEd says. More serious violations, repeat offenses, or violations that pose a safety risk can result in more serious punishment, from a reprimand to suspension or even termination.
The process to decide that discipline included representatives from the employee’s business unit, the HR department, the compliance team, and sometimes the security or labor relations team. All disciplinary actions related to code of conduct violations are reported to Exelon’s compliance team and logged in the case management system, so the compliance team can monitor disciplinary action for consistency and report significant violations to the board.
From a best practices perspective, all this makes tremendous sense; and the important points here are all about consistency:
- A dedicated investigations team, to develop sharp and consistent investigation skills that can be brought to each complaint;
- Written procedures, to assure consistent investigative process from one complaint to the next;
- A case management system with advanced analytics, so senior compliance offices can look for trends and assure consistency across all investigations;
- The compliance team involved in disciplinary decisions, to bring consistency in discipline, or at least see when disciplinary actions aren’t happening consistently.
That’s enough ComEd for today. There’s still lots more in the progress report, so look for another post next week.