How the Tennessee Valley Authority Draws Strength from Ethics and Compliance
by Bill Coffin
In August, the Tennessee Valley Authority—a self-funding corporate agency of the United States that provides electricity for nearly 10 million people across seven southeastern states—became the first federal agency to earn the Compliance Leader Verification recognition from Ethisphere, validating TVA’s government-leading efforts to build a transparent organization with a best-in-class ethics and compliance program. TVA’s CEO Jeff Lyash sat down with Ethisphere to discuss why TVA sought this recognition, how ethics and compliance are integral parts of TVA’s identity, how TVA stands as “the original ESG company,” and more.
Congratulations on being the first federal agency in the United States to earn Ethisphere’s Compliance Leader Verification. What prompted you to seek this recognition?
This whole area of ethics and compliance is so important to us. As a technical organization, we want to make sure that we have all the right benchmarking and all the right best practices, and benefit from the lessons of others. That’s what really set us down the path with Ethisphere and Compliance Leader Verification.
For me, this is really about three things. One is in gaining the recognition, you are basically having to lay out your progress, look honestly at the effectiveness of your implementation, and have others gauge you on that. It’s great feedback
as to whether you’re hitting the mark or not. You either get the recognition or you don’t. If you don’t, you understand the gaps. You go close the gaps, so you get the recognition next time. So, it is first about making sure we’re doing all the right things and we don’t have gaps.
The second is we’re an organization that is free with critical and constructive feedback, but positive feedback helps move the effort forward too. Being able to say to the organization, “The effort you’ve been putting in, the focus on integrity that we’ve applied is producing results for the organization, and look, you’re being recognized for it,” furthers the effort. It strengthens the program.
The third reason is because we’re public power and because we have this broad set of external stakeholders—local power companies, direct serve customers, environmental groups, local communities, state governments, the federal government—their confidence in our effectiveness, our integrity, and our ethics program is important. Their view of that and their trust puts us in a better position to execute on our mission. So externally, it sends the message to them that we think this is important. We’re doing a good job and others agree with us.
As a federal agency, TVA is in a unique position with its stakeholders in relation to its historic mission of service. How does your ethics and compliance program inform the way in which TDA serves its customers and its stakeholders?
Integrity is one of the four core values that we’ve established. And what we’ve really been focused on here is: how do you operationalize that core value? Another of our core values is safety. We have decades of practice operationalizing what safety as a core value looks like in execution. We know exactly what that looks like. I think for most corporations, how you operationalize integrity is not quite where safety is. We work hard to get our employees to understand what ethics and compliance looks like in action, what the value of that is to the organization, and then to be able to build off that base to engage and positively influence customers and stakeholders along those same lines.
As an example, we serve 153 local power companies. A big part of the public power model is that at scale, TVA is as big as any power company in the U.S., but it maintains local control through a local power company that understands the needs of the communities. One of the issues you can have with 153 local power companies is 153 different approaches to the business. But as partners in public power, we really want some things to be the same, no matter where you’re standing. Safety’s one of them. Ethics and compliance are another. If TVA can demonstrate and operationalize that, it stands as an example for those 153 local power companies to think about their own operation and whether they’re standing in the same place.
As a matter of fact, we have a public power leadership academy that we’re just starting, and it had a cross-section of leaders from across those local power companies yesterday This issue of ethics and compliance was one of my topics to talk about with that class.
During the compliance leadership verification process, TVA was evaluated on six key areas: program resources and structure; perceptions of ethical culture; written standards; training and communications; risk assessment; monitoring and auditing; and enforcement, discipline, and incentives. In which of these areas has TVA advanced the most in over the last few years? And can you walk us through what that process looked like?
I think where we’ve made the most progress is taking a holistic approach to this. The elements that you cite individually are each very important, but the key for us is how all of those elements knit together in a holistic approach that is accepted and understood, from the board of directors through the executive management team, mid-level management, first line supervisor, individual contributor, and then outward in our reactions with our stakeholders. The thing I feel we’ve made the most progress in, as an organization, is moving each one of the component parts forward at the right pace and in the right sequence, to build that holistic framework.
You can see this in the organization. For example, we had the board of directors adopt a definitive benchmark code of conduct for themselves. Part of this was for the directors themselves to exercise as a group. So just developing that code of conduct and having the directors involved in those discussions and agreeing on that code of conduct, just the exercise is invaluable. Now the code of conduct exists, and it’s at the forefront of every board meeting. The whole organization sees that. And that has a ripple.
Another example I’d cite would be that we’ve always had follow-up and investigation processes here in the organization when people raise concerns, whether that’s a quality concern, a nuclear safety concern, or a conflict-of-interest concern. But we noticed we had about eight or nine of these things. They’re all focused slightly differently, but they should all have the same fundamental approach to following up on a concern that’s done. The topic may be different, but the approach shouldn’t be. And we should be able to take the output of all that and use it to look at our organization holistically and say, “Is there a trend here? Is there a generic concern? Is there a culture issue? Is there an overarching thing that’s driving this, because we see it in multiple processes?” So, we spent the time with a dedicated team to harmonize that whole investigation process and make sure we’re mining it for all the right data and that it’s sending the right signal.
With sustainability becoming such a prominent issue for the world’s corporations, especially when it comes to environmental stewardship, what are your thoughts on environmental, social and governance (ESG), and the role it plays in guiding an organization’s strategic behavior?
I’m going to try to say this with the most humility that I can as the TVA CEO: we are the original ESG company. TVA was founded 90 years ago to serve 10 million people in the Tennessee Valley. No other reason. And our mission 90 years ago, was three things. The first was energy: affordable, reliable, and resilient, to support the lives of 10 million people. The second was the environment: harnessing the Tennessee River, stopping the annual destruction of people’s homes by flooding, preventing malaria in the valley, reversing deforestation, and promoting sustainable farming. (TVA is one of the earlier developers of, and had most of the patents on, fertilizer.) The third was economic development: attracting and building jobs on a sustainable basis to raise people’s standard of living. Energy, the environment, and economic development, and how those go together. That was our mission 90 years ago, and that’s actually still the business we’re in. Those are still the three missions.
So, the focus here on ESG is 90 years old for us. Now, that changes with the times, exactly what that means shifts with what the population and policymakers think, but this is our roots. As an example, you could take a look at our Strategic and Intent and Guiding Principles document that lays out how TVA pursues these three objectives. Or you could look at our sustainability report and how sustainability factors into that. I think the shift of corporate thinking toward ESG is a very comfortable shift for us.
A lot of corporations talk about giving back to their communities, but few can actually engage on this level. So how do you see TVA’s role as a member of the larger community it serves?
TVA is unique in the utility industry in this role, in that those three parts of our mission I mentioned—energy, the environment, and economic development. When it comes to those last two, the environment and economic development, those aren’t incidental to TVA’s mission. Those are core to our mission, so they give us a little different focus. Most investor-owned utilities have economic development organizations. Their focus really is to attract [energy] load that’s accretive to shareholder earnings. Our economic development focus is unrelated to TVA’s performance. It’s related to raising the standard of living of people in the valley. It’s immaterial whether it brings profitable load to TVA. What’s material is, does it bring durable capital investment that creates job opportunities for the population? From the outset, that gives us a little different focus.
I think in the last five years, we’ve recruited more than 350,000 jobs and more than $45 billion worth of capital investment to the valley, at a macro level. But the macro level’s not enough. TVA needs to understand the regional and the local needs of communities and make sure that we’re aligning our objectives and resources with those needs. Because every community is slightly different. Memphis is not Knoxville, right? Knoxville is not Huntsville. And then if I go rural, Huntsville is not Bessemer. It’s not Paris, Tennessee. So, we formed this regional organization in order to put a team on the ground in each of these regions, which has matrix access to the full resources of the enterprise, but has local understanding and engagement, so you can match up the two. That way, you can take TVA’s huge capability and link it to the local need. That’s the point of the regional organization. And it links to ESG because it gives us the ability to make sure we’re not leaving any community behind. We are addressing not just the needs of the many, but making sure that those who could be left behind are not, that they stay front of mind.
People’s faith in the large social institutions around them continues to dwindle, yet they consistently look to business to lead with values. TVA straddles all of that as a corporation, but also as a government identity. How do you think organizations can help rebuild people’s trust in things that are bigger than themselves?
I think this is one of the big problems of our era. As I think about what we can do about it, I consider it on two levels. First, there is a very personal thing to be done here. And that is, leaders of these organizations—that means me as the CEO and my executive team, right down through the organization—have got to take on a transparent, open, honest, straightforward posture on the opportunities we have and the problems we have to solve. It doesn’t help to posture in a way that advantages your organization when you’re trying to solve a societal or industry problem. You have to come at it as an individual leader and be very transparent and eager to engage.
Then, as a corporation, we have to do the same. And then as we get constructively involved, we have to lay out clearly what we’re going to do and do it. For me, it comes down to something that simple. Do not shy away from the hard problems. Don’t go to the talking points when you’re trying to solve a problem, go to the solution. Don’t be hesitant to commit to do the right thing, and then do it. And I think if people see that pattern in leaders and in companies, their faith is restored.
I can tell you, TVA is in a much different place today there than it was five years ago. Our local power companies and our elected officials have substantially higher confidence in TVA today than they did five years ago. And it is simply because we don’t ignore the difficult problems. We don’t sugarcoat them. We talk openly about them. We try to get through to constructive steps that we can take. We commit to them and then we deliver on them. And it doesn’t always solve the whole problem, but we did what we said.
I’ll give you an example of that. It is one of our controversial issues. A decade ago, TVA had a coal ash impoundment fail and inundate some areas around the facility with coal ash in an environmental issue of significant proportion. The company pretty quickly accepted responsibility for that and didn’t just clean that spill up, but it put that facility in a better environmental position than it was in the day before the impoundment failure. But beyond that, we established what is now the industry standard for how to manage coal ash, and we are systematically doing it facility by facility, across our entire footprint. And, not without controversy. There are varying views. There are people who are consistently concerned, who express, “How do we know you’re doing the right thing?” Maybe they don’t think we’re doing the right thing. Maybe they have concerns or questions. We don’t shy away from that. We engage them. We listen to them. We act on their input if it’s valid, but we keep doing what we said we’d do, and we’re building public confidence in that.
This is still a journey. We’re not where we’d like to be. The level of confidence in our ability to accomplish, is not where we’d like it to be, but it’s better every day because of the approach we’re taking.
What issues five or ten years down the line are you capturing your attention?
In the next 10 years, we’re going to see a generational transition in the workforce. And at the same time, we’re seeing a wave of technology that influences how we work, and it’s accelerated by the recent COVID pandemic and the move to remote work and hybrid work. Pre COVID, we would’ve been having this conversation this face-to-face, I’ll wager, and today, we’re not. So, one of the areas I’m focused on is thinking through how you build culture, inclusion, safety and integrity—as you transition a generation of workforce and as you move to dramatically different ways to work—so that the progress we’ve made is not slowed, stopped or reversed, but accelerated? I don’t think I have the answer to that question yet, but I think I have the question right.
For organizations out there that are considering seeking compliance leader verification themselves, what words of advice you can share with them?
Don’t do it for the recognition or the headline. Do it because it helps you take the organization, the workforce and your stakeholders, to the place you want to go. I encourage people who are thinking about this to pursue it, but pursue it for all the right reasons.
ABOUT THE EXPERT
Jeff Lyash is the president and CEO of the Tennessee Valley Authority and leads the nation’s largest public utility and one of the top producers of electricity in its mission of serving the people of the Tennessee Valley. Under his vision and leadership, TVA has significantly lowered operating and maintenance costs, improving both productivity and efficiency. These savings are passed on to customers in terms of lower energy costs – 70 percent of the nation pays more for energy than those served by TVA. In 2019, he announced a 10-year financial plan proposing a decade of stable rates – making TVA and the Valley even more competitive. Prior to joining the TVA in 2019, Jeff served as president and CEO of Ontario Power Generation Inc., one of the largest electric generating companies in Canada with a diverse fleet of nuclear, hydroelectric, gas, biomass and renewable generating stations.
This article is from the Fall 2022 issue of Ethisphere Magazine. To read the full issue, click here.
