FCPA Compliance and Ethics Blog

October 21, 2011

Around the World for Your Compliance Program

In the October issue of the Harvard Business Journal, in an article entitled “How ‘Mystery Shopping’ Helped Spark a Turnaround”, Office Depot’s President Kevin Miller wrote about his experiences as a ‘mystery shopper’. He began this tour to determine if the high customer satisfaction scores the Office Depot was achieving were correct. To do so Miller toured 70 Office Depot stores in over 15 states as a ‘mystery shopper’. It turned out that customers did have high satisfaction over the products and services that they were asked to rate, however, this high satisfaction did not drive sales. It turned out that Office Depot was measuring the wrong things. Miller then began to assess what customers needed and turned that information into sales.

The recent Watts Water Technologies settlement with the Securities and Exchange Commission (SEC) regarding internal controls violation of the Foreign Corrupt Practices Act (FCPA) of a subsidiary in China was a reaction to the background facts. One of the things that struck me was how the allegations of FCPA violations initially came to the attention of the General Counsel during the course of FCPA training for senior members of the Chinese subsidiary. Watts’ “corporate counsel became aware of potential FCPA violations at [the Chinese subsidiary] through conversations with…sales personnel who were participating in the training.” This point reinforced to me one of the most important things that a compliance practitioner can do, which is get out into the field.

I have often heard my colleague Mary Shaddock Jones, former Assistant General Counsel and Director of Compliance for Global Industries (GI), speak about her experiences in traveling across the world to train the third party business representatives of GI. She often talks about the personal relationships she was able to build with both the people and companies because she took the time, effort and money to come to their area of the world and put on training. But she also speaks of the questions, observations and ideas that these parties would give to her. It also allowed her to have an ‘ear on the ground’ as a front line member of GI’s compliance department.

The same holds true for employees who receive compliance training. When I was in the Halliburton Legal Department, one of my assignments was to travel overseas to put on contract training. At every training session, which was announced well in advance, employees would bring to me questions, comments or concerns that they had been saving up and did not ask over the phone or via email, for whatever reason. Such queries might be asked over lunch, dinner, or some other more relaxed social setting before or after the formal training. This taught, and continues to drive home to, me that lawyers and compliance department members need to get out of the office and out into the field.

While web-based compliance training certainly has its function in a multi-national corporation with thousands of employees, it cannot and does not take the place of live, in-person training. The Legal Department of Watts Water Technologies learned the value of this lesson first hand. If certain of the employees who received the compliance training had not spoken to the Legal representative of their concerns, the company might not have started down the path which led to a civil penalty only for FCPA violations.

Near the end of his article, the President of Office Depot stated, “I still try to visit stores as frequently as possible. It’s really the only way to know how your business is doing.” The same is true for the Compliance Department. You can take all the metrics you like, but you have to get out into the field to understand what is truly going on in your company. You need not traverse the world in 80 days but you do need to get out and meet folks. An additional point might be [with apologies to Tip O’Neill] “All compliance is (mostly) local.”

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I have been honored to be nominated as one of the Top 25 Business Blogs of 2011 by LexisNexis. If you would like to support my nomination, please comment on the announcement post on our Corporate & Securities Community

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2011

1 Comment »

  1. You got my vote – great job.

    Comment by roblevey11 — October 21, 2011 @ 5:55 am | Reply


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