SCCE Guidance on Compliance Program Incentives

Next week the Society of Corporate Compliance and Ethics (SCCE) will hold its annual conference in Washington DC. It is one of the top national conferences in compliance and ethics around. Together with K&L Gates LLP partner Amy Sommers I will be speaking on the recent GlaskoSmithKline PLC (GSK) corruption enforcement action in China and its implication for the compliance practitioner. I hope that you are planning to attend and if you are going to be in attendance that you will drop by the session Amy and I are leading.

Last week I interviewed Roy Snell, SCCE Chief Executive Officer (CEO), for my FCPA Compliance and Ethics Report podcast, which can be found here or on iTunes. One of the things that we discussed was membership in the SCCE and some of the benefits that it brings. I believe one of the best items that the SCCE offer is the Complete Compliance and Ethics Manual (the Manual). This is a one volume compendium of all things that the compliance practitioner might need in his or her practice. It is updated quarterly with CD supplements mailed to you.

One of the questions that I am regularly asked is how a company can create incentives to do business in compliance with the Foreign Corrupt Practices Act (FCPA) juxtaposed with the discipline that the FCPA Guidance suggests that every effective compliance program should maintain. An article in the Manual, entitled “Ideas for Using Incentives in Compliance and Ethics Programs”, presents some of the SCCE’s best ideas related to incentives, evaluations and rewards for compliance programs, they are as follows:

• Departments would nominate people who exemplify the integrity program; a board level committee would select the best and give the winner free, preferential parking for a year.
• Provide as a reward a pin or other visible emblem. When the employee accumulates enough points, they can turn in the emblem for gifts or time off.
• Rewards could include two season basketball tickets or free lunch passes.
• Have a “dinner with the CEO” as recognition.
• Have the annual compliance and ethics award winner flown in to the shareholders’ annual meeting with the award presented there.
• Audit findings should include positive findings regarding compliance & ethics activities; these could be shared in a newsletter.
• The compliance committee could select the department or work group that best exemplifies compliance & ethics. Measures could include such things as completing training on time, code of conduct attestations done on time, best personnel evaluations, etc. The reward could be a lunch for the department.
• Managers with the best compliance & ethics records could be awarded free tuition and expenses to attend a compliance academy and/or to get certified in compliance & ethics.
• Make compliance & ethics certification (CHC, CCEP) a condition for promotion to senior management positions.
• Reward employees for making recommendations and suggestions to improve the company’s compliance & ethics program.
• Provide rewards and recognition for those who conduct self-audits and share the findings and lessons learned.
• Require a compliance comprehension test as an adjunct to regular annual evaluations. A 100% score would be an added 1% pay increase on top of the usual incentives. 80% =.8, 70% = .7, less would equal zero.
• Provide an incentive for reports to the helpline or otherwise to the compliance and ethics office that help avoid noncompliance or identify actual problems that are system errors. This would only be for reports about systems, but not about people, to avoid a bounty-hunter environment.
• Make attendance at compliance training a mandatory condition for being in any responsible position.
• Award organization-wide recognition if the compliance & ethics program overall gets a high score, e.g., time off for all employees.
• Provide an incentive for all division and unit compliance and ethics officers to get training and certification (CHC, CCEP).
• Performance indicators could be linked to a compliance plan. This could include timely submissions of required regulatory filings, on-time completion of compliance training, etc.
• Provide on-the-spot recognition by peers/supervisors with certificates (“compliance bucks”) for behavior promoting compliance and ethics that can be redeemed for company merchandise.
• Give $50 for any submissions to the company newsletter relating to compliance and ethics that are published.
• Have a compliance and ethics courage award, e.g., for turning down a choice vacation trip from a vendor.
• Have a system for compliance & ethics points or “president’s points” in small incremental amounts awarded based on performance during the month, quarter or year. The points would be totaled for each time period, with recognition for those receiving a certain number of reward points.

• Senior leaders ask employees compliance and ethics questions on the spot; those who answer correctly get free movie tickets.

At the end of the day, not only are incentives necessary in a program, but they also help a company put a more positive face on its compliance program. Compliance and ethics should not simply be about enforcing laws, rules and regulations. Recognition of employees in companies who do well and conduct business ethically is an important step and employees should be recognized for showing ethical leadership, this means not just rewarding those at the top but anyone in the organization. I hope that these suggestions from the SCCE Manual will help to generate some ideas of your own.

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