What you'll learn on this podcast episode
Building an effective ethics and compliance program from scratch, or after a restructuring or merger, is not an easy task. How do you structure the program and empower people throughout to do the right thing? In this episode of LRN’s Principled Podcast, host Susan Divers talks with Luz María Zea Cabrera, the chief compliance officer at Frontera Energy, about how to build an E&C program from the ground up. Listen in as Luz María shares her approach to creating an ethical and sustainable culture and getting buy-in from the wider organization.
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Guest: Luz María Zea Cabrera
Luz María Zea Cabrera is a lawyer and Commercial Law specialist from the Pontificia Universidad Javeriana of Colombia, LLM from Georgetown University. She is married and has two children.
Luz María has extensive and diverse experience in ethics, compliance, and management. For more than 20 years, she has led legal teams in Colombia, the Andean region, and Europe in multinational companies. For more than 10 years, she has structured and executed business integrity programs with local, regional, and global scope.
As a compliance officer in oil and gas companies, she has led the design and implementation of the Corporate Integrity System, a risk prevention system for money laundering, financing of terrorism, financing of the proliferation of weapons of mass destruction, corruption, and privacy protection.
For Luz María, the most important thing about an entity's compliance program is that it is understood and owned by everybody in the organization, that it is lived by all as a reflection of the corporation’s culture and as an exercise of their own personal values, and that individuals proudly act as Integrity Influencers at all times and before all stakeholders.
Susan Divers is the director of thought leadership and best practices with LRN Corporation. She brings 30+ years’ accomplishments and experience in the ethics and compliance arena to LRN clients and colleagues. This expertise includes building state-of-the-art compliance programs infused with values, designing user-friendly means of engaging and informing employees, fostering an embedded culture of compliance, and sharing substantial subject matter expertise in anti-corruption, export controls, sanctions, and other key areas of compliance.
Prior to joining LRN, Mrs. Divers served as AECOM’s Assistant General for Global Ethics & Compliance and Chief Ethics & Compliance Officer. Under her leadership, AECOM’s ethics and compliance program garnered six external awards in recognition of its effectiveness and Mrs. Divers’ thought leadership in the ethics field. In 2011, Mrs. Divers received the AECOM CEO Award of Excellence, which recognized her work in advancing the company’s ethics and compliance program.
Before joining AECOM, she worked at SAIC and Lockheed Martin in the international compliance area. Prior to that, she was a partner with the DC office of Sonnenschein, Nath & Rosenthal. She also spent four years in London and is qualified as a Solicitor to the High Court of England and Wales, practicing in the international arena with the law firms of Theodore Goddard & Co. and Herbert Smith & Co. She also served as an attorney in the Office of the Legal Advisor at the Department of State and was a member of the U.S. delegation to the UN working on the first anti-corruption multilateral treaty initiative.
Mrs. Divers is a member of the DC Bar and a graduate of Trinity College, Washington D.C. and of the National Law Center of George Washington University. In 2011, 2012, 2013 and 2014 Ethisphere Magazine listed her as one the “Attorneys Who Matter” in the ethics & compliance area. She is a member of the Advisory Boards of the Rutgers University Center for Ethical Behavior and served as a member of the Board of Directors for the Institute for Practical Training from 2005-2008. She resides in Northern Virginia and is a frequent speaker, writer and commentator on ethics and compliance topics.
Principled Podcast transcription
Intro: Welcome to the Principled Podcast, brought to you by LRN. The Principled Podcast brings together the collective wisdom on ethics, business and compliance, transformative stories of leadership and inspiring workplace culture. Listen in to discover valuable strategies from our community of business leaders and workplace change-makers.
Susan Divers: Building an effective ethics and compliance program from scratch or after a restructuring or after a merger is not an easy task. How do you structure the program? How do you get buy-in from the organization? How do you actually empower people to do the right thing? Hello, and welcome to another episode of LRN's Principled Podcast. I'm your host, Susan Dive, director of thought leadership and best practices at LRN.
Today, I'm delighted to be joined by Luz Maria Zea Cabrera, the director of ethics and compliance, and chief compliance officer at Frontera Energy, headquartered in Colombia. Luz is a real expert in the area of ethics and compliance. She is a Colombian lawyer and has an LLM from Georgetown University and experience with multinationals in Colombia, the Andean region, and Europe. She has worked extensively in the pharmaceutical area and in the oil and gas sector, both highly regulated and where compliance has evolved in recent years.
At Frontera Energy, Luz has accomplished some remarkable things in a short space of time, including reducing anonymous reporting by more than half, which is a true sign of trust in the organization. Today, we're going to be talking about her approach to creating an ethical and sustainable culture and the role of Frontera's integrity influencers at the company and in wider society. Luz Maria, thank you so much for joining me on the Principled Podcast.
Luz Maria: Thank you, Susan. It's great to be here to share Frontera's story. Happy to be here.
Susan Divers: Luz Maria, I'm so delighted to speak with you today. Your work at Frontera is really pivotal and congratulations on your recognition by Ethisphere as one of the world's most ethical companies in 2022 and 2021. But let's start by you're telling us a bit about Frontera, its scope, and your path to the role that you stepped into.
Luz Maria: Thank you, Susan. Frontera Energy is a Canadian oil and gas publicly-listed company with operations in Latin America, currently in Colombia and Ecuador, and with very relevant interests in Guyana, one of the hotspots in oil and gas today. Frontera's predecessor company came close to a bankruptcy by the end of 2016 and underwent a restructuring process both in Colombia and Canada. Shareholders at that time were diluted. We had a recapitalization of the company by a white knight and a new board of directors was elected and the top executives were newly appointed.
As you can understand, everything needed to be made from start. I joined the company in 2017 as the new chief compliance officer in June 2017, and reporting directly to the board of directors to determine of the audit committee in order to set an effective and sound ethics and compliance system for Frontera, because for the new shareholders and the new board, it was evident that saving the company and making it successful and sustainable required a sound ethics and compliance system.
I'm a lawyer with over 20 years of experience as legal director in different multinational companies in different countries, always in very regulated industries, pharma or oil and gas. And I have been working over 10 years in setting up and leading compliance programs. I think, nowadays, I would say more than anything in establishing a culture of integrity.
Susan Divers: Well, I look forward to talking about that in depth in this podcast. Going back to starting your program, clearly the restructuring gave you an opportunity to build from the ground up. That can be a bit daunting and challenging. Tell us more about that and how you approached defining the task.
Luz Maria: It was, it was a bit challenging, but it was also a great opportunity, because everything was open for a new perspective. I was conscious that we needed to tackle at least two main pillars, the legal and regulatory compliance that was necessary to have a company fully operating, but also the people, the culture and the way they do things.
So, we worked in parallel both aspects, and the first thing that we did after the restructuring was determining the status quo and the level of risks. Once we detected where our main risks were, where the gaps from an ethical and a legal perspective were, we defined priorities to ensure the company was compliant in the short-term and, of course, with that, sustainable.
Then we started also working a lot on making everybody understand the benefit of having a serious, effective and real ethics and compliance system. I worked a lot with colleagues and executives always with the support of the board of directors and their guidance, and having my colleagues work with me and have them buy in was a very important aspect of having the whole organization get what was behind having ethics and compliance as a tool to support the business obtaining the business goals in the correct way.
We redefined our values, we redefined the company's strategic purpose, and as in any oil and gas company, our main goal was to be successful in exploration and production of oil and gas, but it was clear from the definition of the strategic purpose that it had to be done the right way, not in any way. It had to be always done ethically. When a company establishes from the top, from the purpose, I think it's clear for the whole organization how things are going to be done from then on.
We were then into very operational matters, but that are extremely essential, which were establishing a code of conduct. The code of conduct when I arrived existed, but was a bit old and not known by everybody. No training had taken place in more than four years. So, we established a new code of conduct. We trained and informed everybody. I mean, I did not want to sanction people for things they did not understand, that they did not know that were wrong. Some things are very evident, fraud is evident that it's wrong, but many other things in a compliance environment need to be really explained and taught to people. So, we worked a lot in sensibilization and awareness and, of course, training as well.
The big message was compliance is simple. Let's not buy into this idea that compliance is only something that lawyers can understand and that auditors revise. No, compliance is simply doing your task, your job in the correct way. We also, from the operational perspective, established a reliable whistle-blowing line with concrete protocol on how to handle investigations and launched a speak up campaign. When I arrived, there were more than a hundred complaints in an old ethics line. They were never investigated and where people never saw consequences.
Most of them were given anonymously. At the beginning, in our new whistle-blowing line, it was also a high number of complaints were presented anonymously. But we had that change over time when people started understanding that we were serious about it, that we were respectful about it, that we prevented retaliation, and that we took it really serious to improve the company. This speak up culture, not only for compliance matters, but in general, the raise your hand when something is not working was very important in really starting with our new program.
Of course, we had some difficult cases at the beginning, some investigations meant consequences that we would've loved to prevent, but that were necessary and we took them, and we took them with the participation of an ethics committee, which is also very important, so people understand that this is not one person's decision or is not subjective, that this is something very serious and well thought through. And always also informing the audit committee from the board of directors.
The processes started and people, even though many of the investigations or most of them are highly confidential, people start seeing the consequences and really believing in the process. I think that was very, very important. People, as I told you, really started trusting the system, understanding that it was for the benefit of the company and the sustainability of the company. People understood that we had been almost broke at a given point by end of 2016, and the fortune of having a white knight coming was probably not going to be repeated on a second occasion. This was the chance to do things right and everybody really, really bought into the benefit of doing things ethically and improving our integrity culture.
Then, we were with some time recognized by third parties, we were recognized by Ethisphere as one of the world's most ethical companies in 2021, and in a second occasion in 2022, and locally, in our industry, people also started seeing Frontera as a company that always did or try to do the things in the correct way. I think that it's a bit of a Pygmalion effect, when, I mean, the organization really believes that this is an ethical company, people believe they are ethical and compliant, and therefore act accordingly, and expect such conduct from their supervisors, their peers, and their reports. This is really not something that is handled by a small group of lawyers in the compliance department, or other people from the compliance department, but it's something handled by everybody in the company.
Susan Divers: That's a very inspiring story and your focus on and success in building an ethical culture in which people feel motivated to behave ethically, not just because they're being told to do so, I think really is just outstanding. I know that a key element of that was your recognition, that it's not just tone at the top, it's also working with middle management to build an ethical culture. Can you tell us a bit more about that?
Luz Maria: Yes. When we were... Actually, it was coincidental with the start of the pandemic, at the beginning of 2020, we had messaged a lot tone from the top. Our leaders were very expressed in messaging the importance of compliance. But I perceived that in general it was a bit distant, it was sometimes a bit technical. Now that we were not seeing each other physically, personally, it was even a bit worse. So, we designed a program focused on the middle management for us as leaders and managers, approximately 150 people in our organization, and we didn't forget the C-suite, the executives. We worked in establishing a different way of communicating compliance from the tone of the top to the tone of the middle. So, we established a new way of communicating, a compliance coffee, it was virtual, but everybody connected, the ambassadors with the sponsors, we had a scripted session with the sponsors.
But the nice part of this is that the sponsors, which were the CEO, the CFO, the vice president of operations, the vice president of commercialization, they all spoke from their business perspective about compliance. So, it was not only the compliance officer speaking about compliance, it was, for instance, the CEO and the CFO talking about the importance of ethics and compliance to define the strategy of the company, the importance of ethics and compliance to lead a company and obtain its goals. It was also the cases of non-compliance found in the operation by our VP of operation, not only in our company, but in his prior experience. So it was a very down-to-earth, based-on-lessons-learned approach, conversation between the sponsors and the ambassadors.
We did this kind of conversations every six weeks. We had, prior to the compliance coffees, we had tools for the ambassadors, which were teaching on train-the-trainer methodology. We had a newsletter written by any of the sponsors. We had a special site with materials for them to cascade down the message into their teams with small videos, with exercises, quick and short, about compliance, different compliance topics that our ambassadors were supposed to replicate, and that they, during the compliance coffee, told us how they were replicating.
So, it was a very different way of talking to them. It was very effective. We have done it already two years. We're going into the third year now. It was very, very useful for this group of 150 leaders to own compliance, fully understand it. Some of them that were a bit resistant at the beginning, after being really told what this was about, were the best ambassadors afterwards. They became translators into their teams. The benefit of having them owning compliance is that they can be better, quote, unquote, "compliance officers" than me. They are close to the operation. They are always timely in their advice, in their risk prevention efforts or in their detection efforts. So, I am very happy to say that they are really the ones pushing forward our current integrity culture.
Susan Divers: That, again, is a very impressive aspect of your program, and it's a perfect illustration of something we talk about at LRN, which is, it's important to get it into the gears of the company. Compliance shouldn't be something that the legal department does or the compliance team does. It should be something that everybody does. That's a great example of how you made that happen. Let's talk about some of the other really innovative and interesting things that you've done. Everybody knows that employee surveys are helpful if you're looking to get some feedback on ethics and compliance or other topics, but you've gone further and you've done polling of a whole range of third-party partners on your ethical performance. So, you're actually going outside the company. Can you tell us more about these surveys and how you administer them and what you uncover when you do them?
Luz Maria: Sure, Susan. It was a bit challenging at the beginning. We were a bit scared of the results, I have to confess. Happily, the results have always been positive, and it took us some time to get into grabbing the courage of doing an external survey for our stakeholder groups. We had worked very much in establishing the internal culture. We had already measured our internal culture and knew perhaps where we needed to work strongly. But we also wanted to see if this was working outside, in the real world. How are people conducting themselves before our suppliers, our partners in joint venture agreements, before the authorities, before the local communities?
So, we set a group of relevant stakeholders and send them an anonymous survey, which of course is 100% voluntary. We were positively surprised, because we got a response rate close to 70%. The acceptance or the positive response has been evolving along the three years that we have done this survey. But this year, in 2022, we get an almost 87% positive response, which I think it's very positive. We ask about everything from where we can see if people are really living our values and our code of conduct, and our integrity system. We talk about how do we handle contractors, how do we handle permit acquisitions, licenses, how do we handle our environmental responsibilities before the community, et cetera. The response has been extremely positive and that this is very useful for us. So, we ensure we don't have blind spots. You can always not be very objective when you judge your program. Also, it's a way to help us plan where to concentrate our efforts next year and to continuously improve.
Susan Divers: That's a great example of using the critical principle of transparency to really drive ethics and compliance. There's a saying in the United States, I'm sure you've heard, "Sunshine is the best disinfectant." Asking your stakeholders on questions like how the company gets permits and how it conducts itself with third parties, it takes a lot of courage, but it also clearly has really helped strengthen your ethical culture and your program and allowed you, as you said, to see what's there.
Luz Maria: Yes, it has really been a tool to communicate, Susan. I mean, we have to obtain our goals also working as teams with our third parties in many occasions. So, really this is a communication tool as well.
Susan Divers: Outstanding. And it certainly builds trust. Let's talk about another innovation, Luz Maria, and that's your integrity influencers approach. Can you tell us about that and why do you think it resonates so much with your colleagues in your organization?
Luz Maria: We came up with the integrity influencers slogan or motto, because today's a world, we have a lot of influencers in the world and they're very relevant in society, especially with young groups of society. We wanted to send the correct message first internally, we worked very hard on really improving our practices, our processes, and assessing that they were really followed by, and we worked on our leaders to be coherent all the time, not only having rules and processes, but that they live them.
After we reached a level where we think that everybody internally was well aware and living our compliance program, we decided that that was not enough, that we wanted to be somehow the Kardashians of integrity in Colombia and in oil and gas. We became more vocal and express about how we want to do business and how we choose not to do business with people that do not share ethical principles like Frontera.
That has been extremely important for the advancement of our cultural system, for the prevention of risks, for the deterring of risks, because people know how to handle Frontera, how Frontera will act. This has also been important for us to resonate in the community. I think we should go away from known paradigms that, I don't know, everybody in Latin America is corrupt, or everybody in Colombia, or everybody in the oil and gas industry. That's a very wrong paradigm, and we can definitely have an influence in making society better, and we have a responsibility. Being a company that has a big number of third-party contractors and that impacts and touches a lot of local communities, we have a possibility of doing it, and I think we are day-by-day doing it a bit more.
Susan Divers: Well, and as we'll talk about a little bit later, that's a great example of in ESG, the G in action, where you're using good governance and hopefully using that as a catalyst for society at large. But before we go there, when we were preparing for the podcast, you mentioned that Frontera is going into some new regional markets. How do you plan to maintain and sustain your ethical culture as you go into new areas and ones with perhaps less sophisticated systems of governance and law?
Luz Maria: So, we're very careful when we do M&As and when we do acquisitions and when we plan new business endeavors in different regions that, of course, the business has a very important role, the business probabilities of the acquisition. But we also take into account the ethical and compliance risks. When we have defined that we want to go into a new endeavor, we always onboard employees and managers on our ethical system. Very soon when they start working with our people, it's our people, the one showing them, "This is how we do things in Frontera." When we reach a new country, specifically, we understand that there are things that we can transfer easily and effectively, and there are new things that we have to carefully revise as per the local regulations and as per the local culture. So, we can also adapt to the as specific needs and risks that each country may have.
Some of the things can be transferred and let's say, let's be effective, I had a former boss that said, "Copy with pride whenever you can." But many other things need to be defined specifically for the new company, in the new country, or whenever. For instance, this is not exactly oil and gas, we have a few connected business areas, like having a port, but having a port is not the same as having an oil and gas operation. So, you have to share the values, you have to share the priority of doing business with integrity, but you have to adapt for their specific regulation and their specific risks. This is how we do it. Everybody in the world of Frontera, in the different affiliates, and in the different businesses, understands that the culture of integrity has to be shared. But of course, there might be some adaptations whenever necessary, as long as it makes sense for the business operation.
Susan Divers: Well, that's also a great example of tailoring your efforts to your risks. As you point out, they change depending on where you're operating or depending on what you're doing as well.
Luz Maria: And as time passes as well.
Susan Divers: Yes.
Luz Maria: I mean, sometimes the regulators are becoming more demanding, correctly so, and the characteristics of the business have changed and keep changing very quickly. So, you have to really be mindful of that and adapt.
Susan Divers: Yes. It's interesting, the Department of Justice, in its 2020 guidance, sums it up by saying your compliance program shouldn't be a snapshot frozen in time dealing with those risks. It should be today's risks and the risks that are coming around the corner tomorrow. Let's touch on your ESG efforts, because I know part of Frontera's ethical culture is a real commitment to ESG, and as an oil and gas company, and involved in extraction, I know that has to be top of the list. Can you tell us about that?
Luz Maria: Yes, this is very important for us. I think it should be very important for any company, but as you correctly point out, for an extractive company, much more so. We are very much aware that we have an impact on the environment. Our clear strategic plan is to have the less impact possible to do our extractive operation, in a sustainable way, with the less consumption of resources, and with the remediation and compensation that we need to do. So we are very careful in how we handle the environment and how we improve the environment after we have completed our exploration and production activities.
Just to cite you a bit of these. We were in 2021 among the five companies with more reforestation efforts in the country, reforested over 700 hectares in Colombia. And in '22, we were the first company with over 900 hectares reforested in close by to our areas of operation, always in cooperation with the authorities, so that it makes sense from, let's say, an ecological perspective, and from a recuperation of resources perspective, always to take into account the native species and to not only compensate or mitigate, but sometimes in many cases even improve the environment.
As to that, we're also mindful not only in the environmental aspects that we have an impact, where we operate. We're very, very, very mindful with regards to people as well, also, with regards to how we impact the community when we arrive. In many occasions and in many countries, the oil and gas activities are not nearby the big cities or, I don't know, let's say, the most industrial areas of a country. But on the contrary, somehow they are far away, where infrastructure is less, where resources for good employment are not necessarily high. So, we work very much into supporting the local communities, into improving and being stronger in many ways from their education perspective, their health perspective, and their industry and economic perspective, so that when the oil and gas company leaves, when Frontera leaves, they are left better than when we arrived.
So, for us, it's very important from the sustainability of our operations that the impact that we have is positive. People tend to only think on negative impacts, and of course, those exist, but we also have to be mindful of the possibility, the opportunity to have a very positive impact, and we try to contribute to progress and higher quality of life in the regions where we live, where we arrive. Also, with regards to our employees and the employees of our contractors, that they have a very good quality of employment. Diversity is very important.
Oil and gas is not an industry normally with many women working here, but we have many programs to support the improvement of working conditions and working opportunities for women. We have women operators, which is in the field, many, many not only engineers, but also operation in the line, where we have women working and a lot of support programs for them. So, yes, this is super important for us.
I also want to share something that I really value about my company, about Frontera, on the S, but it's on the S of safety. This is a technically risky industry. Our operation involves a lot of protocols that need to be followed closely and correctly in order to save lives. For us, this is a huge priority, no matter how much it costs, no matter if it involves stopping the operation, the priority is the health and safety of our people and our contractors' people.
Also working on these speak up culture and the accountability culture, we ask everybody in the organization, no matter the level they're in, to raise their hand if any operation is not safe. And everybody's allowed to stop the operation, no matter if it's going to cost some barrels, that's not relevant. What's really relevant is that we're very mindful of following safety protocols, and whenever we find a less-than-perfect safety condition, that we are able to raise our hand and stop it.
So, I think this is also important for people to see consistency in everything that we are telling them. This is ethics, integrity, ESG, everything a bit more, it's a bit of the same. Everybody works here with integrity, accountability, and transparency. And they see it in their day-to-day operations. That's why they, I think, believe. The benefit of this, Susan, I think, is that because we're so serious with this, our contractors also raise their standards. This is something, again, where we have influence over others, in general, where we operate, and those that work with us start to understand the importance of the E, the S, and the G, in all the activities that we do. So, this is how we, I think, are doing what our stakeholders expect us to do.
Susan Divers: Well, I'd say you're going well beyond that, too, Luz Maria. I mean, looking at the companies we operate, interact with a lot of great companies, but your story is very, very impressive and inspiring, because you're not only talking the talk, but you're walking the walk. Then you're seeking to inspire others and to influence both the society and the companies and people you operate with to also have a strong ethics and compliance culture. So, it's been a pleasure speaking with you today. I know we could both continue doing this for longer, but I hope you'll come back and speak with us another time on Principled Podcast.
Luz Maria: Thank you very much, Susan. I mean, it was a great pleasure. I think this is a great effort to also share practices and aiming to do things better in our company. So, thank you very much for the opportunity, Susan.
Susan Divers: Well, thank you, Luz Maria, and thank you for the inspiring examples. My name is Susan Divers, and I want to thank you all for tuning into the Principle Podcast by LRN.
Outro: We hope you enjoyed this episode. The Principled podcast is brought to you by LRN. At LRN, our mission is to inspire principled performance and global organizations by helping them foster winning ethical cultures rooted in sustainable values. Please visit us at lrn.com to learn more. And if you enjoyed this episode, subscribe to our podcast on Apple Podcasts, Stitcher, Google Podcasts, or wherever you listen. And don't forget to leave us a review.
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