EXHIBIT 14
Code of Conduct
Ethical, Legal and Business Conduct Policies
September 30, 2004
Dear Employee:
We are the beneficiaries of a proud tradition established by
DeWitt and Lila Wallace and built by many other people who have
devoted their talents and loyalty to Reader's Digest over the
years.
I take great pride in our Company, and the ethics and values
demonstrated by its employees and directors. The Company's
success in conducting business in many countries around the world
depends on our ability to adapt to diverse economic, political
and social environments in a manner consistent with our values.
Many of these values are contained in the Company's Ethical,
Legal and Business Conduct Policies (also known as the Code of
Conduct). These policies guide us in all aspects of our business
lives.
We took a new look at our Code of Conduct in light of the issues
and events that have rocked the corporate world in the past year
and the new regulatory environment in which we operate. I'm
proud to say that our existing Code anticipated many of these
concerns. Nonetheless, we believe the Code (1) could be even
clearer, (2) should include additional examples of conduct to be
avoided, and (3) should explicitly provide that, in certain
circumstances, any waivers of the Code must be approved by the
Board of Directors or its Audit Committee. Therefore, this new
version of the Ethical, Legal and Business Conduct Policies
replaces the version that was issued in 1999.
These policies are designed to allow business units to implement
them in a manner suitable to the geographical areas in which they
operate. These policies are in addition to (and not in
substitution of) other policies of the Company (including but not
limited to our Human Resources Policies, Practices, and
Procedures and Proprietary Information Policy).
Our goal of increasing the financial return to our stockholders
is acceptable only with the observance of high ethical
standards. In fact, I strongly believe that we cannot sustain
our success without maintaining such standards. We all must
clearly understand that engaging in illegal or unethical
practices in an effort to meet a perceived business objective is
never justified. Such practices jeopardize the Company's
hard-earned reputation and future well-being, and will not be
condoned or tolerated.
Situations are likely to arise that may require interpretation of
these policies. In such cases, you should seek the guidance of
your immediate manager or supervisor, or the General Counsel,
Chief Financial Officer, Chief Human Resources Officer or me.
Although this Code contains standards, and includes specific
examples, you should always err on the side of seeking advice or
avoiding circumstances or activities that could reflect poorly on
you or the Company.
I entrust these principles and policies to you. Please give them
your thoughtful and frequent attention.
Sincerely,
Thomas O. Ryder
Chairman and Chief Executive Officer
BUSINESS ETHICS
We must maintain the kind of corporate conduct and achievement
that will keep us and our successors proud to be Reader's Digest
employees and will continue to give us a competitive advantage.
It is the policy of the Company that the Company and its
directors, officers and employees shall observe the highest
standards of business and personal conduct in their activities
that relate to the Company's business, including:
(a) honesty and candor in their activities;
(b) compliance with the spirit, as well as the letter, of all
applicable laws, rules, and regulations (notwithstanding
the discussion in this Code of certain specific applicable
laws);
(c) avoidance of conflicts between personal interests and the
interests of the Company, or even the appearance of such
conflicts;
(d) maintenance of the Company's reputation; and
(e) avoidance of activities that might reflect adversely on the
Company.
Some examples follow:
(1) Conflicts of Interest
Members of the Board of Directors ("Directors") and employees
must avoid conflicts between their personal interests and the
interests of the Company. A conflict situation can arise when a
Director or employee takes actions or has interests that make it
difficult to perform his or her Company work objectively and
effectively. The following examples are illustrative of the
kinds of conflicts that must be avoided:
(a) No Director or employee may hold an interest -- proprietary,
financial or otherwise -- in any supplier, customer or
competitor of the Company. It is not a violation of this
policy if (i) a Director or employee beneficially owns an
interest of less than one percent of a company whose stock
is publicly traded or (ii) the ownership of the interest
would not disqualify the Director under any standards that
are adopted by the Board of Directors regarding
independence from management or conflicts of interest.
(b) Directors and employees may not seek to profit from
confidential information or business opportunities that
become known to them as a result of their position.
(c) Employees who perform specialized services for the Company
(such as marketing, data processing and editorial services)
may not perform similar services for a competitor.
(d) Directors and employees may not conduct business on behalf
of the Company with any relative or member of their
household, or with any company of which such person is an
officer, director or substantial owner or in which such
person holds a position of influence or under circumstances
in which such person is likely to benefit directly from the
arrangement.
(e) If a Director or employee becomes aware that a relative or
member of his or her household has sold, licensed, or
otherwise provided, or has offered to sell, license or
otherwise provide, goods or services (including editorial
material) to the Company, the director or employee must
disclose such as follows:
(1) an employee must disclose such to the Chief
Executive Officer, General Counsel, Chief Human
Resources Officer or Chief Financial Officer;
(2) any Executive Officer, including the Chief
Executive Officer, and any direct report of the
Chief Executive Officer level 15 or higher,
must disclose such to the Audit Committee of
the Board of Directors; and
(3) a Director must disclose such to the Board of
Directors.
Further, the Director or employee may not be involved
in evaluating, approving, negotiating, or managing
the sale, license, or provision to the Company of the
goods or services.
(f) No employee may serve as a member of a board of directors
of any other company (except a not-for profit organization)
without the permission of the Chief Executive Officer (or,
in the case of the Chief Executive Officer, without the
permission of the Corporate Governance Committee of the
Board of Directors or the Board of Directors).
(g) No employee may act as director, officer, partner,
employee, agent or consultant for a supplier, customer or
competitor.
(h) Directors and employees and their relatives and members of
their household may not receive gifts, contributions,
gratuities, loans, discounts, or favors from customers,
suppliers or others with whom the Company does (or seeks to
do) business that would not otherwise be available to them,
except (i) casual entertainment or gifts of small value
consistent with accepted business practice in the country
and industry involved, and (ii) loans from financial
institutions on prevailing terms and conditions. The terms
"gift", "loan", "favor", and "contribution" are used herein
in the broadest sense. They apply to any expressed or
implied promise to provide anything of value, regardless of
form, whether in money, property or services, including the
use of facilities or personnel.
(i) Directors and employees may not use Company property,
funds, facilities, personnel, information, or other
resources, for personal benefit.
(j) For purposes of this Code, the term "relative" includes,
but is not limited to, children, parents, siblings,
spouses, in-law, adoptive, and "step" relationships, and
relationships through marriage.
(2) Appearance of Conflict of Interest
Even the appearance of a conflict between personal gain and the
interest of the Company damages the trust and confidence on which
the Company's reputation rests. Appearance of such a conflict may
be just as damaging to the reputation of the Company as a real
conflict. From time to time, all Directors and employees must
take an objective look at their actions and inquire whether or
not a reasonable, disinterested observer -- a customer, a
supplier, a stockholder, an acquaintance, an examiner or a
government representative -- would have grounds to believe either
that business is conducted with the Company on the basis of
favoritism, friendship, family ties, or the giving and receiving
of gifts, rather than being conducted on the basis of merit and
business judgment, or that the resources of the Company are
available to support the personal activities of a Director or an
employee.
(3) Commercial and Government Relations
Relationships with customers, suppliers, competitors, employees
and government officials must be based on fair dealing and
competition in quality, price and service and on compliance with
applicable laws and regulations. The giving of gifts, loans or
favors in an effort to sell products or services or to influence
business, labor or governmental decisions is prohibited.
Similarly, a payment that is not permitted to be made by the
Company must not be made indirectly through an officer, employee,
relative, agent, broker, trade association, consultant or other
third party who is provided or reimbursed with funds for that
purpose by the Company, or who receives funds from the Company
under circumstances giving rise to concern that the individual or
entity may be diverting some part of them to such purpose. The
following are illustrative of prohibited gifts, loans, or favors:
(a) to any foreign or domestic government official or employee
for any purpose, including to influence the enactment or
the interpretation of any law or regulation affecting the
Company;
(b) to any third party intended for ultimate payment to any
government official;
(c) to any agent or intermediary representing the Company in
communicating with government officials or agencies, unless
the purpose of the representation and the amount of the
payment are approved in writing by the Chief Executive
Officer or Chief Financial Officer and by the General
Counsel;
(d) to any employee of another company who can directly or
indirectly influence the making of a decision by the other
company concerning any business transaction with the
Company;
(e) to any third party not providing goods or performing
services for or on behalf of the Company; or
(f) in contravention of any law.
This principle is not intended to preclude inexpensive
entertainment, gifts or gratuities that: (a) are consistent with
applicable law, accepted business practices and ethical standards
in the country where made, (b) if known publicly would not
embarrass the Company, (c) are accurately recorded in the
Company's books and records, and (d) are made for one of the
following purposes:
(i) sales and marketing programs approved by management
and consistent with these policies; or
(ii) the facilitating or expediting of routine government
action by government officials outside the United
States, consistent with accepted business practice in
the country where made. Routine government action is
that which is ordinarily and commonly performed by
government employees in granting permits or licenses,
processing governmental papers, such as visas and
work orders, providing police protection, mail
pick-up and delivery, providing telephone service,
power and water supply or providing other services of
a routine nature associated with the conduct of
business operations, but does not include
entertainment, gifts or gratuities in connection with
award of new business or the continuation of existing
business or to obtain favorable treatment with
respect to governmental taxes, fees or refunds.
(4) Employment of Relatives
The Company hires and promotes individuals on a
non-discriminatory basis, taking into account many factors, such
as the skills and experience of the individual and the business
needs of the Company. No employee may directly or indirectly
supervise, manage or provide counsel with respect to a relative
or an employee living in the same household or other employee in
whom such individual has a personal interest. No employee may
permit a personal relationship with another employee, whether as
a result of being a relative or otherwise, to affect the
discharge by such employee of his or her responsibilities.
Relatives of, and individuals living in the same household as,
members of employees who are in salary levels Grade 10 and above
(or the local company equivalent) are not eligible for employment
with the Company. In addition, relatives of, or individuals
living in the same household as, employees of the Human
Resources, Legal or Finance Departments are not eligible for
employment.
If two employees marry, both may continue their employment only
if the Chief Human Resources Officer and General Counsel
determine that the employees' positions present no conflict or
potential conflict with these principles.
(5) Corporate Opportunity
No Director or employee may, for his or her own benefit or for
the benefit of any other person or entity (a) take advantage of
an opportunity to acquire another business enterprise, to
purchase property, or (b) seize any other business opportunity
that comes to the attention of such person as a result of his or
her relationship to the Company, if such opportunity is relevant
to the Company's present or prospective business activities,
without first offering the opportunity to the Company. In this
connection, no editor may publish with or offer for publication
to an outside publisher, an original article, book or other work
of the type that may be published by the Company without first
offering such article, book or other work to the Company for
publication.
Except with the prior approval of the Chief Human Resources
Officer and General Counsel (or, in the case of the Chief
Executive Officer, other Executive Officers, or direct reports
of the Chief Executive Officer level 15 or higher, with the prior
approval of the Compensation and Nominating Committee of the
Board of Directors), no employee may be paid for any special
services performed for the Company other than the regular
salaries and/or bonuses for which such employee would be eligible
in the normal course of business.
(6) Accuracy of Records
It is essential that the integrity, accuracy and reliability of
the Company's books, records and financial statements be
maintained. No transaction may be entered into with the intent to
document or record it in a deceptive manner, and no false or
artificial documentation or book entry is to be made for any
transaction. Similarly, all funds, assets and transactions must
be accurately recorded on the appropriate books.
(7) Political Contributions
Employees may participate in political activities of their
individual choice. Such activities, however, may not occur on
behalf of the Company or otherwise compromise or appear to
compromise the independence or integrity of the Company or the
employee in the performance of the employee's duties.
It is illegal for the Company to make any contribution to
candidates for U.S. federal elective office. Similar prohibitions
or regulation of political contributions may exist in other
jurisdictions. No employee may make any political contribution on
behalf, or for the benefit, of the Company without the permission
of the Chief Executive Officer and the General Counsel.
(8) Fair Dealing
Each Director and employee must endeavor to deal fairly with the
Company's customers, suppliers, competitors, and employees. It
is unacceptable to take unfair advantage of anyone through
misrepresentation of material facts or otherwise.
(9) Protection and Use of Company Assets
All Directors and employees must protect the Company's assets and
ensure their efficient use. Theft, carelessness and waste have a
direct impact on the Company's profitability. All Company assets
must be used for legitimate business purposes.
COMPLIANCE WITH COMPETITION OR ANTITRUST LAWS
Antitrust or competition laws exist in many countries. While
varying in scope, they are directed primarily against collusive
market behavior among competitors and collective or individual
abuses of market power. Adherence to these laws promotes the
Company's determination to compete aggressively and fairly and
prevents potentially severe penalties against the Company and
individual employees.
It is the policy of the Company to comply with all antitrust and
competition laws applicable to its operations, and to avoid joint
anticompetitive practices and abuses of market power. Any
questions regarding the antitrust or competition laws should be
referred to the Legal Department.
CUSTOMER AND CONSUMER RELATIONS
The protection of our worldwide reputation and the maintenance
and improvement of relationships with customers and potential
customers is of vital importance to the Company. The quality and
safety of the Company's products and their fair and accurate
representation to customers and potential customers are key
elements in these relationships.
It is the policy of the Company to assure the continuity of its
customer and consumer relationships by:
(1) offering products that meet applicable government
standards, or such higher standards as may be adopted by
the Company; and
(2) assuring the accuracy and propriety of any representations
made by the Company concerning the quality and other
characteristics of our products and services.
DISCLOSURE AND CONFIDENTIALITY OF COMPANY
INFORMATION AND INSIDER TRADING
It is in the Company's interest to communicate in a forthright
and accurate manner with its stockholders, employees and other
interested public and private groups and institutions, and to
respond to valid requests for public disclosure of information
about its business and affairs. However, unauthorized disclosure
or use of Company information for personal gain or advantage,
including any improper trading in the Company's stock, is not in
the interests of the Company, its stockholders or its employees,
and is, therefore, prohibited.
(1) Disclosure by the Company
The Company conducts a program of public disclosure of
appropriate information through communications such as annual
reports to stockholders, proxy statements, press releases,
presentations to securities analysts, and reports filed with the
United States Securities and Exchange Commission (SEC). The laws
of other governmental jurisdictions in which the Company operates
may require disclosure of additional or different financial or
other information. Such requests should be referred to the Chief
Financial Officer and/or General Counsel.
Only spokespersons authorized by the Global Communications
Department may communicate on behalf of the Company with the news
media, and only spokespersons authorized by the Investor
Relations Department may communicate on behalf of the Company
with investors and members of the financial community.
As a public company, the Company is required to file various
periodic reports and documents with the Securities and Exchange
Commission. It is the policy of the Company to:
(a) make full, fair, accurate, timely and understandable
disclosure in reports and documents that the Company files with,
or submits to, the Commission and in other public communications
that the Company makes; and
(b) prevent unauthorized disclosure or use of Company
information that is confidential or proprietary, including
any non-public information that might be of use to
competitors or harmful to the Company or its customers, if
disclosed. "Proprietary" information is any information
developed or compiled by the Company that gives the Company
an advantage over its competitors. Proprietary information
includes, but is not limited to, all business, financial,
marketing, planning or technical information, common
knowledge or data that have not been released, published or
otherwise become knowledge in the industry. The Company's
Proprietary Information Policy provides additional guidance
regarding this issue.
(2) Insider Trading Compliance
Company policy and the law forbid any director or employee from
trading in securities of the Company on the basis of "material
nonpublic" information or from disclosing that information to
others ("tipping"). Company policy and the law also forbid any
employee who acquires knowledge of material nonpublic information
about any other company in the course of carrying out his or her
Company responsibilities from trading in that company's
securities and from disclosing that information to others. Any
questions regarding this policy should be referred to the General
Counsel or the Corporate Secretary.
(a) Elements of Insider Trading
Insider trading involves trading or helping others to trade in
securities on the basis of information that is both "material"
and "nonpublic."
(i) "Material" information is information that could
reasonably be expected to affect the judgment of a
reasonable investor as to whether to buy, sell or
hold stock. It is impossible to list all the types of
information that might be considered "material."
Examples include information about Company earnings
and other financial results and forecasts, dividends,
important operational developments, mergers,
acquisitions and divestitures, public or private
securities offerings, threatened or pending
litigation and extraordinary management developments.
(ii) Information is "nonpublic" until it has been
effectively communicated to the marketplace.
Information may be considered to be "nonpublic" until
it has been reported by the Company to the SEC or has
been the subject of a Company news release.
(b) Penalties for Insider Trading
Penalties for insider trading are severe, both for individuals
involved in this type of unlawful conduct and for the Company.
Penalties include loss of profits; fines up to $1 million; and/or
criminal penalties, including jail sentences.
In addition, any violation of this policy by an employee may
result in disciplinary action by the Company, which may include
termination of employment.
(c) Avoiding Insider Trading
Before trading in securities when you may have inside
information, ask yourself the following questions:
1. Is the information material?
2. Has the information been made public?
If you believe that the information is material and nonpublic,
you should:
1. not purchase or sell the securities on behalf
of yourself or others;
2. not communicate the information to other
employees except those who need to know the
information in connection with their job
responsibilities;
3. not communicate the information to
non-employees; and
4. take care to safeguard and restrict access to
the information to prevent inadvertent
disclosure.
If you have questions, contact the General Counsel or the
Corporate Secretary.
EMPLOYEE RELATIONS
The profitable growth of the Company's businesses depends on the
development and effective use of the full range of our employees'
abilities. The Company's Human Resources Policies, Practices and
Procedures contain many of the employee relations policies of the
Company. Several significant policies are summarized below.
(1) Employment Policies
It is the policy of the Company to provide for its employees:
(a) terms and conditions of employment (such as compensation,
benefits and development and career opportunities) free from
bias, discrimination or harassment; and
(b) a working environment conducive to their health, safety and
security, by meeting applicable government standards or such
higher standards as may be adopted by the Company.
(2) Employment Terms
The Company employs all employees "at will" except in certain
non-U.S. locations where the "employment at will" status is not
recognized.
PROTECTION OF ENVIRONMENT
It is the policy of the Company to protect the environment by
satisfying applicable legislative and regulatory requirements, or
such higher standards as may be adopted by the Company, and to
prevent or correct conditions that may pose a threat to the
environment. Violations of prescribed standards for protecting
the environment may involve severe penalties for both the Company
and individual employees.
ADMINISTRATION OF THESE POLICIES
(1) Compliance With Policies
(a) Directors and employees are expected to act fairly
and honestly in all transactions with the Company and
to maintain and support the demanding ethical
standards of the Company. Although laws and
regulations may be ambiguous and difficult to
interpret, all employees must make a good faith
attempt to follow not only the letter of the law, but
also the spirit and intent of the law. Questions
regarding any law or regulation should be directed to
the Legal Department.
(b) Adherence to these policies can best be achieved by
resolving any doubts in favor of full and prompt
disclosure to appropriate persons at the Company. If
a situation arises where an employee is unsure
whether he or she or another employee has violated a
policy, or becomes aware of a situation that may be
prohibited by a policy, or is unsure about the best
course of action in a particular situation, the
employee must speak with his or her immediate
supervisor or manager, the Chief Executive Officer,
the General Counsel, the Chief Financial Officer or
the Chief Human Resources Officer.
(c) Each Director and employee will be required to sign
an annual certification representing that he or she
understands all of these policies, agrees to be bound
by them, has not engaged in conduct prohibited by
these policies and has no knowledge of any violation
of these policies.
(2) Disciplinary Action
A violation of any one of these policies may result in
disciplinary action, the severity of which may range up to and
including termination of employment.
(3) Supervisor's Responsibilities
Each employee in a supervisory position is responsible for
maintaining his or her subordinates' awareness of these policies
and the importance of complying with them.
(4) Employee's Responsibility
Adherence to these policies is the responsibility of each
Director and employee. Employees having knowledge of facts that
constitute a violation of any of these policies, or a violation
by the Company of any law, rule or regulation, must report the
matter to the Chief Executive Officer, the General Counsel, the
Chief Financial Officer or the Senior Vice President, Human
Resources. No improper or illegal behavior will be justified by a
claim that the behavior was ordered, ignored or tacitly approved
by someone in higher authority. No one, regardless of position,
is authorized to direct an employee to commit an act in violation
of these policies, other Company policies or any law or
regulation. Retaliation by any employee against another employee
for reporting in good faith a potential violation is prohibited.
Employees may submit concerns regarding questionable accounting
or auditing matters by using the contact information contained on
the Company's Intranet websites. Employees may request that such
submissions be handled in a confidential, anonymous manner.
(5) Application, Implementation, and Compliance
These policies apply to all Directors and employees of the
Company, including all subsidiaries, operating divisions, and
affiliated legal entities. To the extent local law in a
jurisdiction in which the Company operates may be inconsistent
with any of these policies, requirements of law take precedence.
Any changes to these policies that may be required to comply with
requirements of law may be made only with the advance approval of
the General Counsel. These policies are in addition to, and not
in substitution of, any other policies and procedures of the
Company and its subsidiaries.
Copies of these policies are to be distributed to all Directors
and employees upon their joining the Company. To promote
awareness and understanding, corporate officers, department
heads, and managing directors will assure that the contents of
these policies are the subject of periodic discussion among their
subordinates, no less frequently than on an annual basis.
(6) Interpretation/Exceptions
Questions of interpretation of these policies should be referred
to the General Counsel, the Chief Human Resources Officer, or the
Chief Financial Officer. Exceptions to these policies must be
approved in writing by the General Counsel, the Chief Human
Resources Officer, and the Chief Financial Officer. At their
discretion, they may refer a matter to the Audit Committee of the
Board of Directors. Exceptions involving the Chief Executive
Officer, his or her direct reports level 15 or higher, or any
Executive Officer of the Company must be approved by the Audit
Committee of the Board of Directors, and exceptions involving a
Director must be approved by the Board of Directors). To the
extent required by law or regulation, exceptions involving
Directors or Executive Officers must be promptly disclosed to
shareholders.