FCPA Compliance and Ethics Blog

April 16, 2013

In the Limelight-the Theater, Lady Gaga and Compliance

What is your favorite Canadian group? For my money it is the band Rush. My favorite Rush song is probably “Limelight”. How many times have you heard about ‘being in the limelight’? The phrase comes from the British theater where lights in the theater used quicklime. Although long since replaced, lighting in the British theater is still called ‘limes’.

I thought about Rush and their hit song when I recently read a couple of articles on leadership in the theater. I found that some of the insights in these articles could be applied in a compliance program for a multi-national company. In an article in the New York Times (NYT) Corner Office Section, entitled “First, Make Sure Your Idea Works On a Small Stage”, reporter Adam Bryant interviewed Francesca Zambello who is both the general and artistic director of the Glimmerglass Festival and the artistic director of the Washington National Opera.

Think Small

Zambello had a very interesting point that I do not consider often. She said that one of the most memorable lessons that she ever learned from a mentor was to make sure that your creative idea will work on the small stage. By this she did not mean that you cannot have a big idea or large concept. Instead “The most important thing he ever taught me was that if you don’t make sure the show is right in a small room, it will never be right in a big space, on a big stage.”

I found this comment particularly insightful in the context of the Department of Justice (DOJ)/Securities and Exchange Commission (SEC) FCPA Guidance. The FCPA Guidance makes clear that a company should design a compliance program which is appropriate for its size, markets and risks. There is no one standard and the FCPA Guidance states: “DOJ and SEC have no formulaic requirements regarding compliance programs. Rather, they employ a common-sense and pragmatic approach to evaluating compliance programs, making inquiries related to three basic questions: • Is the company’s compliance program well designed? • Is it being applied in good faith? • Does it work?”

I have seen many instances where a company will try and implement a compliance regime which is appropriate for a company many times its size. It becomes a top down exercise but as noted in the Zambello interview, it does not work well in the smaller setting because it is not assessing and managing the risks appropriate to a small company. Here a bottom up approach can be much more effective. Certainly this could be accomplished through a formal risk assessment but it may also come through talking and meeting with your internal business units or partners. Such informal assessments can provide valuable information which may work on a ‘smaller stage’ than a compliance program designed for a multi-billion, multi-national company.

Learn How to Fail

Another insight I garnered from the Zambello interview for the compliance practitioner was what she termed “You have to learn how to fail.” She believes that in any position you are in, that you are going to fail. But the real key is that “if you don’t fail, you are probably not that good.” Lastly, if you fail you have to learn to pick yourself up, “The more you get knocked down, the more you learn to pick yourself up.”

In the context of the FCPA Guidance, “DOJ and SEC understand that “no compliance program can ever prevent all criminal activity by a corporation’s employees,” and they do not hold companies to a standard of perfection. An assessment of a company’s compliance program, including its design and good faith implementation and enforcement, is an important part of the government’s assessment of whether a violation occurred, and if so, what action should be taken.” Clearly how a company handles any Foreign Corrupt Practices Act (FCPA) violation is an important key to any DOJ or SEC analysis regarding enforcement.

However, the other point for the compliance practitioner is that not everything should always go right under your compliance regime. Not every third party business representative you look at should pass muster under your process for approval. If everyone does, your process may not be robust enough. Not all of your employees do everything right all the time. If you have never disciplined an employee for a violation of your company’s Code of Conduct or compliance program, you should look to determine if this area needs to be explored as not every expense report is always correct. Lastly, if there has never been a substantial tip to your anonymous reporting line, this is an area which should also be explored. You may need to conduct more, or better, training so that employees understand that they can report incidents in confidence, without fear of retribution.

Be Courteous

Another interesting topic that Zambello discussed was the following, “I think that good manners matter a lot…Some of those are old fashioned things, but manners don’t cost anything.” Think about it – when was the last time you had a discussion of manners or even courtesy? This point is not something which is discussed much in the compliance arena but I think that courtesy is something that compliance practitioners need to be aware of when involved in a multi-national compliance program. Be sensitive to cultural norms in other countries and be respectful of them. As my very southern grandmother used to say, you are never wrong being courteous. Lastly, do not forget the cost for being courteous, nothing. But the benefits can be quite great.

From Lady Gaga to Compliance

For a different type of theater and how it relates to your compliance program, I recently came across an article in the Financial Times (FT), entitled “In need management tips? Try Lady Gagahttp://www.ft.com/intl/cms/s/2/da6559ce-a289-11e2-9b70-00144feabdc0.html#axzz2Qcpc6zzT”, by reporter Miles Johnson. (While some might suggest that Lady Gaga is a musician, I certainly think she is all about theater so it ties in with the above, really.) Johnson’s article reviews the work of Salvador Lopéz, a marketing and research professor at Spain’s ESADE business school. Lopéz believes that the world of business can learn quite a bit from the Lady Gaga’s of the world and I found that a couple of them apply to the compliance arena.

The first is that Lady Gaga generates emotions in her fans. Lopéz likened this to Steve Jobs who created “an entire style at Apple and made people feel things through his products.” Here I think that this applies to compliance because most employees want to do the right thing and will feel better about themselves if they conduct business in an ethical manner. The key for the compliance professional is not only to provide the processes and procedures for them to do so but to also acknowledge those employees who follow a company’s ethical business values. This can occur through financial incentives such as part of an employee’s discretionary bonus awards; promotion of employees who conduct business in accord with a company’s ethical practices or even something as simple as a companywide acknowledgement. The point is to make people feel that something positive for doing compliance the right way.

The second point that Lopéz gleans from performance artists like Lady Gaga is that they are much better in the use of technology than most companies. There are now a plethora of technological tools available to assist the compliance practitioner. I firmly believe that the DOJ and SEC have communicated that transaction monitoring will become a standard best practice quite soon, but certainly within the next 18 months. There are companies, such as Oversight Systems to name but one, which have technological tools to help move to this standard. But that is only one of many tools available to assist in your compliance program. So take a clue from Lady Gaga and ‘keep it fresh’.

These two articles demonstrate that the compliance practitioner can draw from a wide variety of sources and disciplines for inspiration to incorporate into a FCPA or UK Bribery Act compliance program. Further, the tools are out there to help you. I hope that this article has given you some ideas while drumming your fingers along to Rush or Lady Gaga for that matter.

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, 2013

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