FCPA Compliance and Ethics Blog

October 1, 2014

Creation of Yosemite and Putting Compliance at the Center of Strategy

YosemiteOn this day in 1890, an act of Congress created Yosemite National Park, home of such natural wonders as Half Dome and the giant sequoia trees. Environmental trailblazer John Muir (1838-1914) and his colleagues campaigned for the congressional action, which was signed into law by President Benjamin Harrison.

In 1889, John Muir discovered that the vast meadows surrounding Yosemite Valley, which lacked government protection, were being overrun and destroyed by domestic sheep grazing. Muir and Robert Underwood Johnson, a fellow environmentalist and influential magazine editor, lobbied for national park status for the large wilderness area around Yosemite Valley. With this persuasion, Congress set aside over 1,500 square miles of land for what would become Yosemite National Park, America’s third national park. In 1906, the state-controlled Yosemite Valley and Mariposa Grove came under federal jurisdiction with the rest of the park to create the Yosemite that we know today. It clearly was a triumph for Muir and Johnson but more so for the American people.

I recently read an article in the Harvard Business Review (HBR) that seemed to draw inspiration from the actions of Muir and Johnson. The article by Frank Cespedes, entitled “Putting Sales at the Center of Strategy”, discussed how to connect up management’s new sales plans with the “field realities your salespeople face.” Referencing the well-known Sam Waltonism that “There ain’t many customers at headquarters”; Cespedes believes that “If you and your team can’t make the crucial connections between strategy and sales, then no matter how much you invest in social media or worry about disruptive innovations, you may end up pressing for better execution when you actually need a better strategy or changing strategic direction when you should be focusing on the basics in the field.”

The problem is usually clear. Senior management and the C-Suite make clear their commitment to doing business ethically and in compliance with anti-corruption laws such as the Foreign Corrupt Practices Act (FCPA). The company even has a best practices compliance. But the problem is that the installation or enhancement of a compliance regime is usually perceived as a ‘top-down’ exercise. The reality of the employee base that must execute the compliance strategy is not considered. Even when there are comments, it is derisively characterized as ‘push-back’ and not taken into account in moving the compliance effort forward. I thought Cespedes piece had some great insights for the compliance practitioner so borrowing from his four-point process, I will rework it for a compliance professional.

Communicate the Strategy

It can be difficult for an employee base to implement a strategy that they do not understand. Even with a company wide training rollout, followed by “a string of e-mails from headquarters and periodic reports back on results. There are too few communications, and most are one-way; the root causes of underperformance are often hidden from both groups.” Here Cespedes’ insight is that clarification is a leadership responsibility and in the compliance function that means the Chief Compliance Officer (CCO) or other senior compliance practitioner. Moreover, if the problem is that employees do not understand how to function within the parameters of the compliance program, then there is a training problem and that is the fault of the compliance department. I once was subjected to a PowerPoint of 268 slides, which lasted 7.5 hours, about my company’s compliance regime. To say this was worse than useless was accurate. The business guys were all generally asleep one hour into the presentation as we went through the intricacies of the books and records citations to the FCPA. The training was a failure but it was not the fault of the attendees. If your own employees do not understand your compliance program that is your fault.

Continually improve your compliance productivity

I thought this point was insightful. Cespedes talked about incentivizing your sales force. Why not do the same concepts around compliance? You can work with your Human Resources (HR) department to come up with appropriate financial incentives. Many companies have ad hoc financial awards, which they present to employees to celebrate and honor outstanding efforts. Why not give out something like that around doing business in compliance? Does your company have, as a component of its bonus compensation plan, a part dedicated to FCPA compliance and ethics? If so, how is this component measured and then administered? There is very little in the corporate world that an employee notices more than what goes into the calculation of their bonuses. HR can, and should, facilitate this process by setting expectations early in the year and then following through when annual bonuses are released. With the assistance of HR, such a bonus can send a powerful message to employees regarding the seriousness with which compliance is taken at the company. There is nothing like putting your money where your mouth is for people to stand up and take notice.

Improve the human element in your compliance program

This is another area where HR can help the compliance program. More than ongoing assessment of employees for promotion into leadership positions, here HR can assist on the ground floor. HR can take the lead in asking questions around compliance and ethics in the interview process. Studies have suggested that certainly Gen Y & Xers appreciate such inquiries and want to work for companies that make such business ethics a part of the discussion. By having the discussion during the interview process, you can not only set expectations but you can also begin the training process on compliance.

However, this approach should not end when an employee is hired. HR can also assist your compliance efforts by tracking employees through their company career to identify those who perform high in any compliance metric. This can also facilitate the delivery on more focused compliance training to those who may need it because of changes on FCPA risk during their careers.

Make your compliance strategy relevant

Cespedes notes, “Most C-suite executives know these value-creation levers, but too few understand and operationalize the sales factors that affect them.” In the sales world this can translate into a reduction in assets to underperforming activities. This is all well and good but such actions must be coupled with an understanding of why sales might be underperforming in certain areas. In the compliance realm, I think this translates into two concepts, ongoing monitoring and risk assessment. Ongoing monitoring can allow you to move from a simple prevent mode to a more prescriptive mode; where you can uncover violations of your company’s compliance program before they become full blown FCPA violations. By using a risk assessment, you can take the temperature of where and how your company is doing business and determine if new products or service offerings increase your compliance risks.

Above all, you need to get out and tell the compliance story. Louis D’Amrosio was quoted for the following, “You have to repeat something at least 10 times for an organization to fully internalize it.” If there is a disconnect between your compliance strategy and how your employee base is implementing or even interpreting that strategy, get out of the office and go out to the field. But you need to do more that simply talk you also need to listen. By doing so, can help to align your company’s compliance strategy with both the delivery and in the field.

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, 2014

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