Compliance Self-Assessment: The Good, The Bad and The Ugly

Today we channel Sergio Leone and Clint Eastwood in the context of the compliance assessment, which has been something that has evolved into a key component of a minimum best practices Foreign Corrupt Practices Act (FCPA) compliance program over the past few years. Item No. 13 on the Department of Justice’s (DOJ’s) 13 steps for a minimum best practice compliance program reads:

13. Ongoing Assessment. A Company should conduct periodic review and testing of its anti-corruption compliance code, standards, and procedures designed to evaluate and improve their effectiveness in preventing and detecting violations of anti-corruption laws and the Company’s anti-corruption code, standards and procedures, taking into account relevant developments in the field and evolving international and industry standards.

While many commentators have argued that this item requires a professional, independent third party to perform this Ongoing Assessment, I recently came across an article which gave me pause to think that another avenue may be open to the compliance professional to follow this guidance.

The article published in the Sunday, April 1, New York Times Business Section, Corner Office Column, entitled “The Best Scorecard Is the One That You Keep for Yourself”, writer Adam Bryant interviewed Charlotte Beers, the former Chief Executive Officer (CEO) of Ogilvy & Mather Worldwide. Her thesis was that “it’s vital to make self-assessments, and to include the good, the bad and the ugly.”

Beers talked about her use of self-assessment in her rise up the corporate ladder until she became a CEO. She believes that continual self-assessment can provide self-knowledge which is the key for an employee to transcend up to become a superior employee and then a corporate leader. It will also improve your team relationships and enhance your ability to handle complex relationships. She says that you must reach for the “intangible and the invisible… but find out if they have confidence about the things that matter, their own ability to think and to get to the true center of things.”

I thought that the concepts discussed by Beers would be very useful in the compliance context. Many compliance practitioners have struggled with the assessment theory. When, how often, and who should perform it, are questions I am often asked. While having an outside third party perform an assessment at a one or two year basis may certainly be a good start, a compliance self-assessment should be integrated into your compliance program. It provides the benefits of a continual model which would allow you to test and assess various portions of your compliance program on an ongoing basis. Also the cost would not be great as you would not be required to bring an outside consultant.

You could begin by trying to determine your company employee’s real attitudes towards compliance. If they observed something amiss, would they have the “interior tensile strength” to report the matter? Has your company made reporting as easy and straightforward as possible? One former compliance officer told me that in auditing the company’s hotline in a Far East country it was determined that the toll free line did not ring through and the only way to call the home office in the US was by using a special cell phone provided only to senior managers of the company. How many calls do you think came through that hotline?

The more I have listened to ex-DOJ lawyers, like my former speaking partner Stephen Martin and his current law firm partner, Paul McNulty, the more I hear things like “move the ball forward” and “how did you use the resources you did have” to enhance your compliance program. Charlotte Beers observation that the “best scorecard is the one that you keep for yourself” clearly is a mechanism suggested by Martin and McNulty’s words of wisdom.

So how about Leone and Eastwood? For my money, the best movie of the first phase of the Spaghetti Western genre was their classic “The Good, The Bad and The Ugly.” That is the final word from Beers. In your self-assessment you must be prepared to look at all aspects, the good, the bad and the ugly. Learn and grow from each and all.

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, 2012