AEP’s Ethics & Compliance (E&C) program is designed to promote ethical behavior and ensure compliance with all laws and regulations that affect our business. Underpinning the program are AEP’s values, which are communicated broadly to employees across the enterprise: safety, justice and fairness, trustworthiness, responsibility, citizenship, respect, and caring. The program has evolved and grown over several decades. AEP’s first Code of Ethics dates to 1977 and was succeeded by a more formal and comprehensive Code of Conduct in 1994, the same year that the company’s Office of the Chief Compliance Officer was established by our Board of Directors.

The Ethics and Compliance department is tasked with designing, implementing and administering AEP’s E&C program under the leadership of Sandy Williams, vice president – Ethics & Compliance and chief compliance officer. She reports directly to Mike Morris, chairman and chief executive officer, and to the Board of Directors. Here, she discusses the progress that has been made in AEP’s E&C program – mainly from an employee engagement perspective – and the challenges we continue to face. She also talks about why ethics and compliance matter from a business standpoint.

How do we measure the ways in which we're making progress in the area of ethics/compliance?

We have to be careful when we start talking about applying measurements and metrics to ethics. Unlike in other parts of the business, I can’t produce numbers associated with widgets produced or dollars collected. And I truly believe that trying to do so can endanger an ethics program, since the focus of the program can easily become attaining certain numbers rather than being a positive force in the corporate culture. Certainly we measure things like the number of calls coming into the Concerns Line year over year, the percentage of callers who choose to remain anonymous when they contact E&C, and the number of concerns that result in corrective action. We are currently conducting an ethics risk assessment that will help us identify those areas where employees believe we are doing well and where we may be at risk for ethical lapses. This type of trending information does provide insight into certain aspects of our efforts’ effectiveness. However, I believe a truer measure of our progress is found in the response we receive to our various communication efforts and, more generally, how the ethics program is received at all levels of the organization. I’m on record as saying that my goal is to make ethics as ubiquitous as safety at AEP. While we’ll never be able to measure whether we’ve reached that goal by numbers as we can with safety, I’ll know we’ve succeeded when I hear talk from all levels of the company about the critical role ethics plays in AEP’s culture, or when I attend a meeting and before a decision is finalized, someone routinely asks, “But is that the right thing to do”?

What are the biggest issues facing us? Where is the most improvement needed? Where has the most improvement already occurred?

In a word, trust. The progress we’ve made on this count since Mike Morris arrived at AEP is staggering. Mike has introduced a level of transparency into interactions with employees at all levels that is critical to achieving the open culture that we are working toward. But we’ve got more work to do. This fact is probably reflected best in the number of anonymous calls we receive on the Concerns Line. While we’ve made some progress in bringing that number down, it hasn’t budged for the last couple of years – it remains consistent at around 60 percent. I ask myself repeatedly what more we can do to build that level of trust with employees that would give them the comfort to call E&C and identify themselves. I believe the answer lies in creating an environment in which retaliation -- either real or perceived – is not a factor in the employee’s decision to call the Concerns Line. And that, of course, goes back to trust.

While we are not yet where we want to be, we have made progress. The first step we took toward building trust within the organization was to humanize the ethics and compliance function. We recognized that, if we are perceived as the “ethics cops,” very few employees were going to look to us as a resource. Consequently, we developed a brand for the Ethics & Compliance program, and -- for better or worse -- it was my name and face! We started with publishing an ethics advice column entitled Ask Sandy in the company newsletter and, over the years, continued to put that brand on everything we could. We branched out into an online blog and periodically host live instant messaging “chats.” We recently released company-wide training on AEP's Principles of Business Conduct with an animated version of me as the “tour guide” through the content. Wherever I go throughout the AEP system, I am seen not as the ethics officer, I am simply known as “Sandy.” To me, this is a sign of success. Instead of viewing E&C as a place to avoid, employees now associate a face with ethics, which, I believe, has provided a certain level of comfort in their interactions with us.

What are the most effective tools for ensuring ethical behavior of employees in the workplace?

Communication is the key; constant, consistent communication. We communicate with employees about ethical issues through multiple media sources, including Web-based articles, training videos and blogs, web chats, face-to-face meetings with workgroups to talk about our program, and regular interactive conference calls with a panel of employees to report local issues and concerns. We publish an annual "state of the program" letter that is sent to every employee. The letter includes a wallet card with E&C’s contact information so employees have easy access to us to report concerns or ask questions, as well as an ethics test with questions that help lead the employee to making the right decision.

Even with all of these tools, our program would not be effective without the right “tone at the top.” AEP is fortunate to have an executive team who truly walks the talk on ethics. Having Mike Morris, Nick Akins and others set the right tone regarding their expectations of ethical behavior is critical to how all employees conduct themselves while carrying out their work at AEP.

How do adherence to ethical standards and compliance with required regulations and laws help AEP from a business standpoint?

I have to go back to trust. Many people place trust in AEP as a supplier of a fundamental requirement of modern living, and that’s true whether we are talking about customers, shareholders, stakeholders, or regulators. People want to work for and with a company they trust. In order to maintain that trust, everyone at AEP has the responsibility to make good decisions. At its heart, that's what ethics is all about -- making the right decision at the right time, every time. The same is true of compliance activities. Complying with laws and regulations is simply the right thing to do, so that is what we do. The obvious harm caused by failing to meet compliance obligations comes in the form of financial penalties, but perhaps the greater harm is the damage to a company’s reputation. It is important, therefore, that all employees understand their role in maintaining the trust others have placed in AEP. It is for this reason that Ethics & Compliance puts so much effort into communicating to employees a seemingly simple but critical message – do the right thing at the right time, every time.

Is the impact of our focus on ethics and compliance measurable in terms of its effect on corporate earnings? How?

I can’t point to a number or formula to prove that our commitment to ethics and compliance impacts corporate earnings But I do believe strongly that failing to maintain that commitment would negatively impact earnings. All you have to do is look at those companies that didn’t have a strong ethical foundation, which ignored laws and regulations they found inconvenient, and see what happened to their earnings or, in some cases, their ability to stay afloat. I’d say that the value of our focus on ethics and compliance is immeasurable as well as invaluable.

Do we benchmark our activities in this area, and our progress, against other utilities or companies in other sectors? Why or why not?

At regular intervals we arrange for an independent audit of the Ethics & Compliance program to ensure that we are meeting or exceeding best practices not only in the utilities sector but generally among other companies of our size. In addition, we are members of two professional ethics and compliance organizations and regularly participate in conferences, seminars and conference calls with other ethics and compliance professionals through those organizations. These activities allow us to learn about and share best practices and emerging trends in the ethics and compliance space, as well as to continually evaluate our own program to discover ways to improve. We are also active in a utilities subgroup of one of these organizations, allowing us to discuss ethics and compliance topics specific to our industry. One interesting thing I’ve discovered about ethics and compliance professionals is their generosity in sharing what they’ve learned along the way to help their peers. Consequently, relationships we’ve formed with our peers in other companies allow us to informally share information that we also use to benchmark our program and our progress.

What more can AEP do to ensure that its employees act ethically and are compliant?

No matter how effective or successful we’ve been in the past, we can never say our job is done. While it’s always a delicate balance between just enough and too much exposure, I believe it is imperative that we continually communicate with employees in a variety of ways about the importance of behaving in an ethical manner and complying with regulations and laws. I tell my team that our communications should be a constant drip rather than occasional waves – enough so they can’t forget us, but not so annoying that employees turn us off!

Ultimately, I don’t think it’s a matter of doing more; it’s a matter of being consistent and transparent. Employees need to be sure of us; they need to know that E&C is a safe place to turn if they need to express a concern or ask for advice. Beyond that, however, they need to trust that AEP is truly committed to doing the right thing no matter who or what is involved. So we’ll keep doing what we’re doing, making certain that ethics and compliance are indelibly imprinted on AEP’s culture.