Study in Ethicsfor the Directors, Officers and

Employees

December 201341 South High StreetColumbus, OH 43215

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Overview of Presentation

Overview of Ethical Considerations for JobsOhio, its Officers and Employees

I. Conflicts of Interest

II. Gifts Meals and Entertainment

III. Criminal Laws & Bribery

IV. Other Policies and Considerations

V. Reporting and Disclosure Requirements

VI. Corporate Governance Requirements

VII. The Appearance of Impropriety

VIII. Questions and Answers

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Unique status of JobsOhio

• Mission: Attracting and retaining jobs in strategic industry sectors.

• Created as a private, non-profit entity using a private-sector approach to be more nimble, flexible and competitive in its economic development efforts.

• Exempt from most of the ethics laws that apply to public employees, BUT:

• JobsOhio Policies apply• Ethics laws apply when dealing with public employees and

officials• Contractual Obligations to Development Services Agency• Principles of Corporate Governance apply to the Board• Scrutiny is high and avoiding an appearance of impropriety is

critical to JobsOhio mission!

Meaning of certain terms

• Board: the JobsOhio Board of Directors• Director: a member of the JobsOhio Board of Directors• Employees: all individuals employed by JobsOhio, on a

full or part-time basis. • GC: General Counsel for JobsOhio• Lobbying: actively advocating, on behalf of JobsOhio,

for a legislative or administrative action at the local, state or federal level

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I. Conflicts of Interest

JobsOhio Code of Regulations

JobsOhio Conflict of Interest Policy

DSA Contract

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JobsOhio Code of Regulations

Article VIConflicts of Interest

• Policy on conflicts • Annual Statement and Pledge by Directors and Officers

Article VIIStandards of Conduct

• Highest ethical conduct and fundamental honesty• Maintain confidentiality of JobsOhio information• Annual certifications and acknowledgement of Standards of

Conduct

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JobsOhio Conflicts of Interest Policy

JobsOhio Conflict of Interest Policy• Required by R.C. 187.06 and Board Regulations

• Applies to all JobsOhio Board Members and Officers

• Sets forth a Process for Reviewing Conflicts

• Sets forth a Process for Resolving Conflicts

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JobsOhio Conflict of Interest Policy

Definitions• Financial Interest: a financial ownership or investment interest

between you or your Family and any person or entity, such as:

• An equity interest in a non-publicly traded entity;

• An equity interest of 1% or more of any publicly-traded company;

• Remuneration of over $10,000 in the preceding year from an entity other than JobsOhio;

• Other significant contract or business arrangement; or

• Income from intellectual property rights.

• Fiduciary role: An obligation to act in the best interests (the financial success) of another, such as membership on a board of directors or a management role in a company or partnership

• Family: spouse or domestic partner, and dependent children or other individual claimed as dependents for tax purposes.

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JobsOhio Conflict of Interest Policy

Annual Declaration• Required of most Directors, officers and, as

designated by Policy or the Board, employees

• Requires disclosure of Financial Interest, potential conflicts of interest and other business interests

• Requires prompt notice of any new potential conflicts or changes to the form

JobsOhio Conflict of Interest Policy

Process for Review• The Compliance Officer or General Counsel will

review Annual Disclosure Forms and Updates and proposed or actual JobsOhio transactions

• The Compliance Officer or General Counsel will alert you if an entity listed on your form becomes an applicant for JobsOhio assistance

• If you recognize or suspect a conflict, consult with the Compliance Officer or General Counsel immediately

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JobsOhio Conflict of Interest Policy

Handling Identified Conflicts• Immediately withdraw – no formal or informal

involvement with the issue at all

• Compliance Officer or General Counsel will present the potential conflict to the Board, Investment Committee, or President and Chief Investment Officer, as applicable, who will decide:– No conflict exists; or

– Conflict exists, but is de minimus; or

– A conflict exists; (continue to abstain refer to Board of Directors or Investment Committee )

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JobsOhio Conflict of Interest Policy

Board or Investment Committee DeterminationIf you have a conflict (a Financial Interest, compensation arrangement or Fiduciary Role):• Board/Investment Committee will review• You will have an opportunity to discuss the conflict• Board or Investment Committee will determine if:

– A more advantageous transaction is available that would not result in a conflict or whether another disinterested entity could successfully proceed with the transaction and, if none;

– Whether the transaction is fair and reasonable to JobsOhio

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JobsOhio Conflict of Interest Policy

• Failure to disclose a conflict can lead to disciplinary action

• Directors are prohibited from seeking employment from any person or entity that receives a JobsOhio incentive or assistance

• Be mindful of any appearance of impropriety

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Development Services Contract

• Agreement mirrors the JobsOhio Conflicts of Interest Policy

• “Interested Person” is anyone who has or acquires an interest in a particular transaction

• Requires Interested Person to step away from transaction if the financial interest is “significant”

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State Laws: Conflicts of Interest

• R.C. 187.03: JobsOhio Employees, Officers and Directors are specifically exempted from the definition of “public employee” for purposes of the Ohio ethics laws

• State conflict of interest laws do not apply to JobsOhio and the JobsOhio policy governs

BUT. . . .

That is not the case with gifts and bribery. . .

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II. Gifts, Meals and Entertainment

• State and Local Laws applicable to JobsOhio

• Criminal Laws, Bribery and Role Play

• Foreign Corrupt Practices Act

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State and Local Laws

• JobsOhio is not exempt from all ethics laws and must abide by the law to the same extent any other private entity that is doing or seeking to do business with a public official or body must comply

• Always be aware of the ethics laws at the federal, state and local levels when dealing with public employees

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State Gift Laws

• R.C. 102.03: “No person shall promise or give to a public official or employee anything of value that is of such character as to manifest a substantial and improper influence upon the public official or employee with respect to that person’s duties”

• Ohio Ethics Commission violation test − Is the source of the gift improper?− Is the gift of substantial value?

• Yes to both might violate R.C. 102.03

• Criminal sanctions could be imposed for violations− $1,000 fine and six months in jail

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Improper Sources• Any entity –including JobsOhio– that is regulated by, doing

business with, seeking to do business with, or interested in matters before the public entity that employs the gift recipient is an improper source

• Any corporation –including JobsOhio– holding a public contract, grant or license with a public agency is an improper source for that public agency’s employees or officials

• NO EXCEPTIONS FOR PERSONAL RELATIONSHIPS

State Gift Laws

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Substantial Value• General Guidelines- Acceptable Gifts

− Modest lunch− Coffee mug or small gift

Note: Gifts are aggregated for calendar year

• “Substantial” Gifts if given by an Improper Source− Dinner at an upscale restaurant− Tickets to a professional sporting event− Lodging− Golf outings

State Gift Laws

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Local Laws and Policies

Remember – • State law applies to all public employees at the local

level

• Many local entities have ethics policies that will also govern public employees with whom you interact

• Avoid the appearance of impropriety

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Foreign Corrupt Practices Act

• FCPA prohibits paying, or promising to pay, “anything of value” to a foreign official in order to influence an act or decision. Applies to actions that:– Meet “business purpose test:” intended to influence

foreign official to assist in obtaining, retaining or directing business. Ex: influencing procurement process; circumventing importation rules; or obtaining exceptions to regulations;

– Are made “corruptly:” with an intent or desire to wrongfully influence the recipient; and

– Are made “willingly:” committed voluntarily and purposefully, and with a bad purpose.

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•“Anything of value” is not defined and could have different monetary values in different countries

•Ordinary and legitimate promotion of business is not covered if there is no corrupt intent

•Reasonable gifts to foreign officials as tokens of esteem or gratitude are acceptable:

– gifts must be given openly and transparently; – properly recorded in JobsOhio books and records; – appropriate under local law; – customary where given; and– reasonable for the occasion.

Foreign Corrupt Practices Act

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Foreign Corrupt Practices Act

Two defenses to FCPA violations:

• payment was lawful under the written laws of the foreign country; or

• money was spent as part of demonstrating a product or performing a contractual obligation: – travel and expenses to visit company facilities or

operations

– travel and expenses for training

– product demonstration or promotional activities, including travel and expenses for meetings

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Criminal Laws & Bribery

• R.C. 187.10

• JobsOhio Directors, officers, and employees may not knowingly solicit or accept any valuable thing or benefit to corrupt or improperly influence the person or another director in violation of the bribery laws.

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JobsOhio Gift Policy

• Applies to all gifts received by or for JobsOhio employees

• From any “business associate” (any person or entity, other than JobsOhio colleagues, with whom the employee interacts on a professional basis)

• Non-solicitation policy:– Employee may not solicit anything of value that could

reasonably be expected to influence the employee in the performance of duties

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JobsOhio Gift Policy

• Acceptance of gifts is generally prohibited unless:

– They are given without an express or implied understanding of obligation

– They do not violate law

– They do not place the employee in a compromising position

– They are not of such a character as to create an appearance of impropriety

– They comply with JobsOhio Policy

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JobsOhio Gift Policy

• Additional Guidelines– Business travel and lodging are not allowable as business

courtesies absent prior approval: Employees should seek reimbursement from JobsOhio

– Business courtesies related to job activities(meals at a business meeting, recreational activity, etc.) are permitted at reasonable costs and in compliance with the Gift Policy

– Invitations to Events may be accepted if:∙ Face value is less that $35; or∙ JobsOhio pays for the event; or∙ JobsOhio reimburses the contributor for the event; or∙ Prior approval is obtained

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JobsOhio Gift Policy

Additional Guidelines, cont.– Acceptances of repeated invitations for entertainment (more

than twice per 12 month period per source, or more than 12 invitations overall in any 12 month period) are strongly discouraged.

– Food or perishable gifts should be shared with the employee's team or donated to a local charity, if possible.

– Gifts of cash or of cash equivalents, such as gift cards (other than a single gift card with a value of $35 or less), are never allowable, no matter the amount .

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JobsOhio Gift Policy

Additional Guidelines, cont. Use Common Sense! – Attempts to circumvent the gift policy may result in

disciplinary action– You may not accept a stack of $20 gift cards or a series of small gifts from different representatives of the same business associate

– Cannot accept otherwise prohibited business courtesies under the guise of a "purchase" (must be available to the general public and purchased at fair market value.)

– Consider cultural differences when accepting accept business courtesies: consult JobsOhio's CIO, CFO, or GC for guidance.

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JobsOhio Gift Policy

Entertainment Disclosure Form:– is required for any business courtesy in excess of $35

unless prior approval obtained

– Failure to accurately report can result in disciplinary action

– Specific questions should be directed to the Compliance Officer or General Counsel

– Form is attached to the Gift Policy

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IV. Other JobsOhio Policies

• Whistleblower Policy

• Lobbying Considerations

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Whistleblower Policy

• Highest ethical standards are expected

• Report potential violation confidentially to General Counsel, the Compliance Officer, or to the JobsOhio Outside Consultant, Tom Charles at the numbers provided

• No one who reports a potential violation of JobsOhio policies in good faith will be retaliated against

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Lobbying Law Provisions

• State and federal law governs lobbying activities

• If you engage in lobbying, you and JobsOhio may be required to register and file regular reports about your activity

• Please see the Legislative and Community Outreach Director if in doubt and before engaging in any lobbying activity

• All entertainment of Public Employees or Officials, whether or not you are lobbying, must comply with JobsOhio policies

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V. Reporting and Disclosure Requirements

– Financial Disclosure Statements

– Post-Employment Disclosure Statements

– Form 990

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Financial Disclosure Statements

R.C. 187.03(B)(2)• Does apply to Jobs Ohio

• Directors and employees with significant administrative, supervisory, contracting or investment authority must file

• Annual disclosure due to the Ohio Ethics Commission on or before April 15th of each year

• For all former public officials or employees who had to file, additional filings may be required for 1 year after leaving public service

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Post-Employment DisclosurePED Reports

• Applies to certain Jobs Ohio employees If you were required to file financial disclosure statements with Ohio Ethics Commission while employed with the State:– Must file PED with Joint Legislative Ethics Commission (JLEC)

– PED must be filed three times per year and for two years following state service

– Requires disclosure of:∙ lobbying income; ∙ income from the employer of a lobbyist; ∙ Income from certain entities awarded state contracts during the two

calendar years immediately preceding your departure; ∙ any expense made on behalf of any employee of your former state

employer(s) R.C. 102.021

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Form 990 Requirements

• Federal tax laws require JobsOhio to file Form 990

• Requires numerous disclosures, including:

– Family or business relationships between Board Members

– Conflicts of Interest by Directors, Officers and Key Officers

– Acknowledgment of ethics, conflict of interest, and whistleblower policies and corporate governance practices

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VI. Corporate Governance and Federal Requirement

• Role, Functions, and Duties of the Board

• Role, Functions, and Duties of Management and Other Employees

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Role, Function and Duties of the Board

• Role of the Board

• Directors function only as a board

• Standard functions of directors

• Basic duties of directors

• Duty of loyalty: Whose interest?

• Importance of a vote of disinterested directors

• Directors’ right of reliance

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Role of the Board

• All authority for– Decision making as to matters of policy, direction,

strategy and governance; and– Oversight as to matters critical to the health of the

organization for its various stakeholders

is to be exercised under the direction of the organization’s board

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Directors function only as a board

• Directors function only as a board as determined by a majority of its members at meetings in which a quorum is present.

• An individual director has no authority to take any action except as authorized by a majority vote of directors at a meeting at which a quorum is present

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Standard functions of directors

• Decision making as to matters of policy, direction, strategy and governance;

• Oversight as to matters critical to the health of the organization for its various stakeholders; and

• Mentorship of the CEO and senior management

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Basic duties of directors

• Duty of care – to exercise the care that an ordinarily prudent person in a like position would use under similar circumstances

• Duty of loyalty – to act in good faith, in a manner he or she reasonably believes to be in or not opposed to the best interests of the corporation [may be broader duty than for officers] i.e. Conflicts of Interest

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Conflicts of Interest: Whose interest?

• The mission and the constituencies served by the mission of JobsOhio

• Others:

– Employees, suppliers, creditors, and customers

– Economy of the state and nation

– Community and societal considerations

• Unless within the zone of insolvency and then it may be creditors

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Importance of a vote of disinterested directors

• Matters in which directors or officers have a personal or economic interest should, to the extent possible, be approved by directors disinterested in the matters

• “Disinterest” is a subjective test based upon facts and circumstances of each matter requiring an affirmative vote on any such matter by those directors who do not have a personal or economic interest in the matter that could conflict with the person’s duty of loyalty to the organization with respect to the matter

• Failure to have matters approved by disinterested directors requires proof that the transaction is “fair” from both an economic view and procedural view

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Directors’ right of reliance

• State corporation law expects, and gives protection for, directors’ reliance on –

– Officers or employees of the organization as to matters for which they are reasonably believed to be reliable and competent

– Legal counsel, public accountants, consultants or other professionals as to matters reasonably believed to be within their professional competence, and

– Committees of directors as to matters within their designated authority, and that the director reasonably believes to merit confidence

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Role, Function and Duties of Management and other Employees

• Expectation of reliance by directors

• Role of management

• Basic duties of management

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Expectation of reliance by directors

• State corporation law expects, and gives protection for, directors’ reliance on officers or employees of the organization as to matters for which they are reasonably believed to be reliable and competent

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Role of management

• While the role of the board is to give direction by granting authority and setting limits

• Management

– Provides input to help the board give direction

– Executes that direction by exercising that authority, observing the set limits

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Basic duties of management

• Duty of care – to exercise the care that an ordinarily prudent person in a like position would use under similar circumstances

• Duty of loyalty – to act in good faith, in a manner he or she reasonably believes to be in the best interests of the corporation [higher duty than that of directors]

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VII. The Appearance of Impropriety

The appearance of impropriety can kill a deal

If you don’t want to read about it in the newspaper, don’t do it!

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Reminders

• As JobsOhio becomes more active and receives additional funding sources, constant diligence will become even more important.

• Policies are in place to protect you and JobsOhio from reputational risk and even criminal liability

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Summary:What can I accept?

See JobsOhio Gift Policy

• Can never solicit a gift

• Under $35 generally ok if:

– No strings attached

– No appearance of impropriety

– No cash

– No attempt to circumvent law or policy

• Over $35 or travel:

– Only with prior approval

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Summary:What can I give?

To anyone doing business with JobsOhio?– Follow the JobsOhio Expense Policy

To public officials and public employees?– Follow the JobsOhio Expense Policy AND follow the ethics

laws– Never spend money on a public employee or public official

unless coordinated beforehand with General Counsel AND the Governor's Office

To anyone not included above?– If using personal funds– no restrictions.– If using JobsOhio funds- follow the JobsOhio Expense Policy

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What to do if in doubt

• Consult your employee manual; and/or

• Talk to the General Counsel or Compliance Officer

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VIII. Questions and Answers

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Questions?

Maria J. Armstrong(614) 227-8821

marmstrong@bricker.comBricker & Eckler LLP

(614) 227-2300100 South Third StreetColumbus, OH 43215

www.bricker.com

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