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2011 Corporate Social Responsibility Report

TRANSPARENCY AND ETHICS

ETHICAL BUSINESS PRACTICES

We believe that ethical behavior is critical to Lexmark's vision, “Customers For Life.” All Lexmark business units are regularly analyzed for risks related to corruption. The Company has designed and adopted employee and supplier codes of conduct that help to mitigate these risks. A formal risk assessment focused on corruption is included in Lexmark’s audit plan. The audit plan is reviewed and approved by the Finance and Audit Committee of Lexmark’s Board of Directors on an annual basis.

All allegations of employee corruption/fraud are thoroughly investigated by the appropriate business unit, in collaboration with Human Resources, Internal Audit and Lexmark’s Legal Department. Results of such investigations determine disciplinary action and whether the incident requires investigation by outside agencies and formal charges.

While incidents of corruption are infrequent, they do occur. In accordance with Lexmark’s zero tolerance policy toward bribery and corruption, Lexmark decided to dismiss certain employees during the reporting period based on non-systemic, personal-level incidents of fraud or dishonesty.

Lexmark’s zero tolerance policy towards bribery and corruption also applies to Lexmark business partners. Lexmark will terminate business relationships with business partners that operate in an unethical manner. Lexmark recently terminated its relationship with an electronic component manufacturer after discovering that the company violated an environmental regulation and refused to take the required corrective actions. Incidents of corruption involving Lexmark employees are reported to Lexmark’s Ethics Committee and to the Finance and Audit Committee of Lexmark’s Board of Directors. No legal cases regarding corrupt practices were brought against the company or its employees during 2011.

All Lexmark business units are regularly analyzed for risks related to corruption. Corruption risk factors are considered in the formation of Lexmark’s Internal Audit plan which is reviewed by the Finance and Audit Committee of Lexmark’s Board of Directors on an annual basis. Lexmark has designed and adopted employee and supplier codes of conduct that help to mitigate the risk of corruption.

All Lexmark employees are expected to adhere to the policies set forth in Lexmark’s Code of Business Conduct. The code addresses a variety of business ethics issues including anti-corruption and bribery. All Lexmark International Inc. employees - including executive management - are required to annually review and certify understanding of Lexmark’s Code of Conduct. In the interest of further mitigating such risks, Lexmark is developing targeted training courses to educate select employee groups about risks of corruption specific to their job function. These targeted anti-corruption and anti-bribery training courses will be rolled out to employees worldwide in 2012. All suppliers are expected to adhere to the Lexmark supplier code of conduct. Lexmark has adopted the Electronic Industry Code of Conduct as its supplier code of conduct. This code addresses a variety of issues including corruption. For more information on Lexmark’s adoption of the Electronics Industry Code of Conduct, please visit the supplier section of this report.

All Lexmark employees are expected to adhere to the policies set forth in our Code of Business Conduct that addresses a variety of business ethics issues including anti-corruption and bribery policies. All Lexmark regular (both full-time and part-time) employees are required to annually review and certify understanding of Lexmark’s Code of Conduct. The Code covers the following topics: personal conduct, conflicts of interest, accounting records, internal controls and audits, complying with laws and regulations, supplier relationships, customer relationships, information concerning others and corporate social responsibility. All employees are required to verify compliance on an annual basis. In 2011, 100 percent of Lexmark International Inc. regular employees worldwide (including managers and non-management employees) reviewed the Code of Conduct and verified the receipt and understanding of the code.

The status of this annual review process is tracked by Lexmark’s Human Resources Department on an annual basis and is reported to the Lexmark Ethics Committee and the Corporate Governance Committee of the Board of Directors. All modifications to the Code of Business Conduct are reviewed by the Ethics Committee prior to any updates.

Lexmark has established programs, policies and procedures that ensure the effective implementation of Lexmark’s Code of Business Conduct.

  • Education Program: All Lexmark employees are required to reaffirm their understanding of the Business Code of Conduct through an annual online training module.
  • Gift and Gratuity Policy: Lexmark’s gift and gratuity policy states that no Lexmark employee or member of his or her family may accept a gift or gratuity from a supplier or prospective supplier unless it is of nominal value (no more than $25 U.S. dollars). Cash gifts of any kind are prohibited.
  • Ethics Hotline: Lexmark’s Ethics Line is a 24-hour, international toll-free telephone number established to assist Lexmark employees with questions about the Code of Business Conduct or concerns that something improper has occurred or may be occurring. A third-party provider operates the Ethics Line. The third-party providers of the telephone lines are prohibited from providing a caller’s identity to Lexmark without the caller’s permission. Calls are reported to Lexmark for investigation and review by Lexmark senior management.
  • Contact Line for the Finance and Audit Committee of the Board of Directors: Lexmark’s Contact Line for the Finance and Audit Committee of the Board of Directors (Contact Line) is a 24-hour, international toll-free telephone number that allows employees to anonymously raise concerns such as questionable accounting or auditing matters or possible unethical or illegal conduct to the Finance and Audit Committee of the Board of Directors. A third-party provider operates the Contact Line. The third-party providers of the telephone lines are prohibited from providing a caller’s identity to Lexmark without the caller’s permission. Call information is forwarded to the Finance and Audit Committee for review and further investigation.
  • Enforcement Policy: Any officer, director, employee, agent or stockholder acting on behalf of Lexmark who violates the code may be subject to substantial government fines and/or imprisonment in addition to Lexmark disciplinary action including termination.
  • Transparency: Lexmark publicly reports on breaches of the Business Code of Conduct that impact investors.

Lexmark and our suppliers also adhere to the Electronics Industry Code of Conduct, an industry specific code that addresses a variety of ethical issues including corruption, bribery, transparency, intellectual property, fair business practices and whistleblower protection.

Anti-Competitive Behavior

Lexmark supports efforts to preserve and foster fair and honest competition within a competitive market system. We take care to ensure that our business practices do not violate competition laws (also known as antitrust, monopoly, fair trade or cartel laws) that prohibit business practices that unreasonably restrict the functioning of the competitive system. Lexmark was not a defendant in any anti-competitive behavior lawsuit during the reporting period. Please refer to Lexmark's 10-K for additional information on this topic.

Monetary Fines

As a result of Lexmark’s commitment to ethical business practices, Lexmark has not been subject to any significant fines or non-monetary sanctions for non-compliance with laws and regulations related to accounting fraud, workplace discrimination or corruption during this reporting period.