Combining Web-based Technology With Other Media To Organize And Manage An Effective Compliance Program At PepsiAmericas - Part I

Saturday, January 1, 2005 - 01:00

The Editor interviews W. Scott Nehs, Vice President Legal and Chief Compliance Officer for PepsiAmericas, Inc. In November 2004, Mr. Nehs was named one of the "Top 40 Lawyers Under 40" in Illinois by the Chicago Daily Law Bulletin.

Part II of this interviews appears in the February 2005 issue of The Metropolitan Corporate Counsel.

Editor: Please give our readers a brief overview of your company's operations.

Nehs: PepsiAmericas is the second largest Pepsi bottler in the world with operations in eighteen states, Central Europe including Poland, Hungary, the Czech Republic and Republic of Slovakia, and the Caribbean including Puerto Rico, Jamaica, the Bahamas, Barbados, and Trinidad and Tobago. In total, PepsiAmericas serves geographic areas with a population of more than 118 million people. PepsiAmericas manufactures, distributes and markets a broad portfolio of Pepsi-Cola, and other national and regional brands.

Editor: Please describe the PepsiAmericas ethics and compliance program and your role in driving it.

Nehs: I am the Vice President of Legal and Chief Compliance Officer for PepsiAmericas. That means that I am the head of our compliance program and I chair our compliance committee, which is charged with reporting directly to the board and supervising four subcommittees in our organization. Those subcommittees are organized around the four primary areas of risk that PepsiAmericas encounters in its daily business:

  • "antitrust" - focusing on the sales side of the organization;

  • "safety & environment" - focusing on operations, our fleet, our plants and the personnel that staff them;

  • "human resources" - which relates primarily to employment and labor concerns; and

  • "finance" - which encompasses all financial integrity items as well as the recent overlay of Sarbanes-Oxley and the requirements that it has placed on our organization and other public companies.

The compliance committee and the subcommittees are charged with both managing the compliance program from an issue resolution standpoint, and from the standpoint of making recommendations when those issues indicate that personnel or policy changes are appropriate.

Editor: How are you administering your compliance training?

Nehs: Our training is a combination of media, although we rely heavily on the Web-based training provided by Integrity Interactive, and we have used their system thus far to train our senior management team, as well as what I would call the first and second level of managers in our organization. Our plans for 2005 are to continue to roll out the Integrity Interactive training, but move deeper into the organization particularly in the area of finance. This is in an effort to broaden the base of trained employees in the areas of the highest risk, so that by the end of 2005 we will have trained more than 10 percent of our workforce, and almost 20 percent of our domestic employee base.

We also deploy training in the form of our code of conduct and the policies that are embedded in the code of conduct. These are either straightforward policies or standard operating procedures, or a combination of the two, which includes print materials available to our employees to complement the course training that they receive through the Web.

Editor: Do you supplement your Web-based and paper training with any live training?

Nehs: We do use live training from time to time as a supplement to those materials. Sometimes it's at the specific request of a manager or it may be related to following up on a topic that is uncovered or identified as a result of investigation. We will, in those instances, resort to the more traditional means of delivering the information in a lecture or classroom style format. The legal department is always available to this form of training, even if there isn't a crisis, as a proactive measure to spread the word about the various policies that we consider most important in our business.

Editor: What are the key elements to an effective program?

Nehs: Certainly, I think the hallmark of an effective program is one that is well communicated. By that I mean that people understand why it's there, understand its component parts and are able to access it easily. It's one thing to have a pretty booklet, and it's quite another to have it in active use and just a little bit weathered and tattered because people have actually referred to it and used it in their daily business.

Stories abound of investigators coming in and asking someone about their code of conduct and the employee proudly pulls it out of a third drawer in his desk, and it's still shrink wrapped from the time that he received it. Our goal at PepsiAmericas is to have the code of conduct be a living document that people can refer to with ease, and that's why we've posted it on our intranet, and on our Web page, linking to the various policies and standard operating procedures that are embedded in the code itself.

I think the second hallmark is recognizing and rewarding behavior that may not be classic whistle-blowing, but is in the form of people bringing issues to our attention so that they can be resolved. We strive for a culture that encourages open communication with supervisors, but sometimes that's not practical or comfortable and so a compliance program provides employees with another outlet for their views.

An effective compliance program provides people with a mechanism to point out issues and concerns in a way that protects their anonymity and preserves the integrity of the process. That way, the problem can be resolved without anyone fearing that there are going to be reprisals or that even the relationship will suffer. We have ways that make sure that that type of impact is minimized.

The third category that is really important in order to make the program effective is to drive home process improvement. It's important to recognize that we are not perfect, that sometimes changes in policies need to be made and that these things evolve. We are willing to make those changes where appropriate, and the members of the compliance committee are empowered, as am I, as the Federal Sentencing Guidelines require, to make those types of changes. We are all in position to effect those changes without going through six more hoops in order to get them done.

Editor: Let's go back to the second point you made about empowering employees. Do you have a specific mechanism in place, or is it more of trying to build a culture where the employees can simply go to their managers when and if they see something that concerns them?

Nehs: It's really both. It's fostering the culture that already exists and making sure that it continues within our company, where people are generally comfortable bringing issues to their supervisor. But we've layered into the modern version of our compliance program the ability for them to report in newer and arguably more anonymous ways by establishing an employee compliance hotline and email inbox. These are for reporting purposes where employees can anonymously dial a toll free number or send an email in order to report a concern that they may not feel comfortable reporting in person.