Thinking globally, acting locally

Jan 01, 2010
<p><b>Best overall governance, compliance and ethics program (small to mid-cap)<br /></b>Fluor</p>

Fluor is a very interesting case. The judges said they found the multinational engineering and construction firm noteworthy not only for its intelligent and well-functioning compliance systems, but also for the fact that it works in an extremely difficult operating environment: a global construction industry rife with corruption.

The company’s Texas-based chairman and CEO Alan Boeckmann, in being a high-profile campaigner for higher ethical standards industry-wide, sets a distinguishing example for the kind of ‘tone at the top’ contemplated by policy makers in the US Federal Sentencing Guidelines. The judges noted, however, that the message is combined with a bottom-up ethos that gives all employees a sense of ownership of the mission. Honorable mentions in the small to mid-cap group went to AGCO, Brightpoint, the Hartford Financial Services Group and Xerox.

After more than 25 years as an engineer on projects across the globe, Boeckmann had seen his share of questionable business conduct. Having looked more closely at corruption statistics on becoming CEO in 2001, he decided to act. ‘He wanted to win bids on skill, quality and price as opposed to paying off somebody,’ explains Wendy Hallgren, vice president of corporate compliance at Fluor. ‘There were more than a few instances where we thought we should have won.’

After becoming chair of the Engineering and Construction Governors Group at the World Economic Forum, Boeckmann used the platform as a place from which to take on coordinated anti-corruption efforts. In this role, he challenged industry peers to adhere to a strict list of principles aimed at combating bribery and corruption, problems which are estimated to cost businesses $1 trillion per year. To date, the Partnering Against Corruption Initiative has 142
signatories across construction, energy and a range of other industries.

Zero tolerance

At the same time, Boeckmann needed to put Fluor on the cutting edge of standards and benchmarks while maintaining a zero-tolerance policy toward unethical behavior in the company’s own operations. It was a huge challenge for an $8 billion company of some 35,000 employees working on a thousand projects in 25 countries. A key step was the installation of
in-house counsel Hallgren as head of compliance. She had already played an important role in getting Fluor compliant with the Sarbanes-Oxley Act, and has since also taken on responsibility for the firm’s enterprise risk management functions.

Early on, Hallgren spent a year and a half on a kind of listening tour, visiting Fluor’s outposts in Asia, Europe and South America. Her meetings with engineers and project managers sent an important signal. ‘It was a really useful exercise,’ she says. ‘It wasn’t just me making orders from on high. The whole idea was to push the program so individuals would feel they had a vested interest in it.’

The effort attuned Hallgren to the variety of ethical dilemmas Fluor employees faced. It was becoming rare to see demands for bribery simply to win deals, she recalls. Instead, Fluor would face counterparties threatening to delay completion of projects or even to compromise site safety in the absence of favors. Hallgren has used real situations her colleagues have faced to train employees on how they should react in similar circumstances.

The experience also highlighted the fact that most off-the-shelf ethics training was aimed at manufacturers, and was not directly applicable to engineering and construction workers. With this in mind, Fluor collaborated with World Economic Forum peers to produce a movie about corruption in the global construction industry. The film, Ethicana, describes what corruption is, how it takes place and what can be done about it, in part with dramatizations about typical bribery situations on projects. Hallgren was one of the creative directors, and some sections of the movie were filmed at Fluor’s corporate headquarters. It has been seen by thousands of engineers, contractors, suppliers and students.

Hallgren says the company’s open-door policy helps her maintain a connection to far-flung employees now that she is back at headquarters. She also oversees an active ethics hotline that employees can anonymously tap for guidance and use to report any suspected violations. Each complaint is investigated and reported to the board of directors in an allegations and issues report.

Though the compliance and ethics team is not a part of the legal department, Hallgren says she leverages the legal department quite a bit in her daily work. She also says she collaborates often with the sales team, which is in many cases the first group to face ethically challenging situations. Additionally, she notes that members of the finance team are great safeguards for the compliance and ethics program. ‘I get a lot of questions from the controller,’ she says. ‘The finance team is an extra army of soldiers.’

Hallgren’s infectious enthusiasm seems to motivate all Fluor employees to think they work for compliance. She says the attention paid to these issues is part of the fabric of the company. ‘There is a great culture around compliance and great management support,’ she concludes.

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