Business & Ethical Performance

At American Water we pride ourselves in having a strong culture of integrity underpinned by our principles and values, and guided by our policies. The American Water Code of Ethics sets out clear and practical guidance for ethical conduct throughout our organization.

The Code of Ethics ensures that all American Water employees understand how our core principles and values relate to a range of issues. With clear language and easy-to-understand examples, the document aims to provide our employees with support in judgments related to ethical business at the individual, team and company-wide level. In short, it is a guide to help employees understand what is expected of them and how to make good decisions.

Business issues and situations covered by the Code include:

• Avoiding conflicts of interest
• Fair dealing with customers, vendors and others
• Handling sensitive information and safeguarding confidentiality
• Honest, ethical and open dealings with government officials
• Workplace conduct

All employees are trained on the contents of the Code, beginning with an initial orientation when employees join American Water. A Revised Code of Ethics was distributed to all employees in January 2010 with a new introduction from the Chairman of the Board, George MacKenzie and CEO Jeff Sterba.

Trainings are offered on-line and in-person. Our training incorporates real-life situations in which there are not necessarily right or wrong answers. The idea behind this approach is to stimulate candid discussions among employees.

Through the Code, our trainings and ongoing communication and guidance, we make it clear that it is the responsibility of all our employees to make ethical conduct an essential part of the daily fabric of our business. We also emphasize that it is the responsibility of every employee to report any violations or suspected violations through our Confidential Ethics Hotline, or to Divisional Presidents, Human Resource representatives or members of American Water’s legal department. Our violations reporting system or procedure maintains confidentiality to the greatest extent possible throughout the process.

All calls to the Confidential Ethics Hotline are reviewed by members of our Ethics Committee which consists of representatives from Human Resources, Legal, Finance, and Operations. The Ethics Committee reports to the Audit Committee of the Board of Directors.

Through our hotline, employees raised 217 cases. Of these, 57 percent resulted in corrective action. In 2010, approximately 97 percent of our employees completed ethics training either live or via webinar.

Percentage of Employee Code of Ethics Certifications in 2010:

• 100 percent from ML1-ML4 and L5 – L8*
• 92 percent from remaining non-union employees
• 29 percent from union employees

*ML1 - ML4 represent the levels assigned to Executive Management team members, L5 - L8 represent levels assigned to non-union employees at the minimum level of manager.

Perspective

“Our Code of Ethics training provides a framework of the type of behavior we expect of all American Water employees. Quite simply, we expect our employees to act ethically and respectfully toward each other, our customers, our vendors, and all others with whom we work.

“We want to be known for conducting our business with honesty and integrity, so the training covers such areas as avoiding conflicts of interest, fair dealing, and safeguarding sensitive information. It’s also imperative that our employees have a safe and professional atmosphere in which to work, so we address respect for privacy, harassment and illegal substances, as well.

“When designing the training, we wanted to make it interactive to help employees identify potential issues and – perhaps more importantly – teach them how to address them. Rather than running through a list of rules, we try to present real-life situations that employees could find themselves in, and encourage the groups to discuss how they would handle them. We also stress the resources available to them, including a variety of avenues to direct any questions or concerns.

“We use internal resources – our Human Resources team – to present the information because they can gain a unique perspective on how employees think by hearing them work through the situations and remain engaged to follow up on any issues discussed during the training.

“We believe that conducting our training this way provides employees with an increased ability to recognize potential issues through practical examples and provides them with the knowledge of what to do if they are faced with these issues.”

Kellye Walker, Chief Administrative Officer and General Counsel