FCPA Compliance and Ethics Blog

July 30, 2015

The Trait of Empathy in Compliance

EmpathyCan you empathize with those who work for you, around you and those you report to? While many leaders, particularly those who might be labeled the ‘command and control’ type seem to think that empathy is a negative; I think that it is an important habit for any Chief Compliance Officer (CCO) or compliance practitioner to not only practice but also master. Recently there were a couple of articles in the New York Times (NYT) that discussed this character trait and I found them useful to consider for the leadership toolkit of the CCO or compliance profession.

The first was by Daryl Cameron, Michael Inzlicht and William A. Cunningham, entitled “Empathy is Actually a Choice” and the second was in the Corner Office section by Adam Bryant, entitled “Is Empathy on Your Résumé?”, in which Bryant profiled Stewart Butterfield, the co-founder and chief executive of Slack, a communication service for businesses. The first piece focused on research by the authors and the second was Bryant’s weekly piece on business leadership.

The researchers noted, “While we concede the exercise of empathy is, in practice, often far too limited in scope, we dispute the idea that this shortcoming is inherent, a permanent flaw in the emotion itself…we believe that empathy is a choice that we make to extend ourselves to others. The “limits” to our empathy are merely apparent, and can change, sometimes drastically, depending on what we want to feel.” The authors ended by stating, “Arguments against empathy rely on an outdated view of emotion as a capricious beast that needs to yield to sober reason. Yes, there are many situations in which empathy appears to be limited in its scope, but this is not a deficiency in the emotion itself. In our view, empathy is only as limited as we choose it to be.”

Bryant’s article on Butterfield and his leadership style brought these concepts home. Most interestingly, Butterfield began by self-disclosing, “I’m good at the leadership part. But I’ve always said that I’m a terrible manager. I’m not good at giving feedback. People are like horses — they can smell fear. If you have a lot of apprehension going into a difficult conversation, they’ll pick up on that. And that’s going to make them nervous, and then the whole conversation is more difficult.”

Another insight on leadership was something as simple as meetings. Butterfield said that “if you’re going to call a meeting, you’re responsible for it, and you have to be clear what you want out of it. Have a synopsis and present well. At the same time, if you’re going to attend a meeting, then you owe it your full attention. And if it’s not worth your attention, then say so — but don’t be a jerk about it — and leave the meeting.” So more than simply taking responsibility for one’s own time, he put out the empathy to allow you to consider how your agenda (or lack thereof) may have negative repercussions on others on your team or in your organization.

Another interesting insight from Butterfield were his thoughts on empathy as it related to leadership. This is a sought out trait for employees, as early as in the interview process. He said, “When we talk about the qualities we want in people, empathy is a big one. If you can empathize with people, then you can do a good job. If you have no ability to empathize, then it’s difficult to give people feedback, and it’s difficult to help people improve. Everything becomes harder.”

Similarly to his examples around meetings, Butterfield believes that empathy can express itself as courtesy. He said, “One way that empathy manifests itself is courtesy. Respecting people’s time is important. Don’t let your colleagues down; if you say you’re going to do something, do it. A lot of the standard traits that you would look for in any kind of organization come down to courteousness. It’s not just about having a veneer of politeness, but actually trying to anticipate someone else’s needs and meeting them in advance.”

I found it interesting that on the same day in the same newspaper, theory not only met practice but the practice had a business application. For those out there who feel leadership skills are ingrained into your DNA, the authors pointed out “Likewise, in another recent study, the psychologists Karina Schumann, Jamil Zaki and Carol S. Dweck found that when people learned that empathy was a skill that could be improved — as opposed to a fixed personality trait — they engaged in more effort to experience empathy for racial groups other than their own. Empathy for people unlike us can be expanded, it seems, just by modifying our views about empathy.”

Yet for the CCO or compliance practitioner, Butterfield pointed out specific areas where the trait of empathy can yield great respect for you and your position in any corporation. People rarely think of courtesy and respect as leadership skills but if you can bring these to bear in your compliance practice, you can garner greater influence as not only someone who cares but someone who cares and gets things accomplished. For any corporate disciple which relies on influence to succeed these simple tools can go a long way to providing to you a wider manner to impact corporate culture, become a trusted partner and be a part of any significant business conversation earlier rather than later in the game.

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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, 2015

July 21, 2015

Hemingway and Trust and Respect for Compliance Leadership

HemingwayOn this day in 1899, Ernest Hemingway was born. To me, he was the greatest Man of Letters the US has produced. Probably like most of you all, I was introduced to Hemingway in high school through The Son Also Rises. It remains my favorite of his works but I have enjoyed many more of his novels, short stories and non-fiction work. I particularly enjoyed his Nick Adams short stories as I found them crisply written and with a conciseness of language that is not often found today, or perhaps in any other time. Hemingway was awarded the Pulitzer Prize in 1953 and the Nobel Prize for Literature in 1954. He died via suicide in 1962.

I thought about Hemingway and his writing style when reading the most recent Corner Office column by Adam Bryant in the New York Times (NYT), entitled “To Work Here, Win the ‘Nice’ Vote”, where he profiled Peter Miller, the Chief Executive Officer (CEO) of Optinose, a pharmaceutical company. Miller has some interesting leadership concepts that are applicable to the position of Chief Compliance Officer (CCO) 2.0 and how a CCO 2.0 could use influence to lead, not only in the compliance function but also across an organization.

Miller talked about one thing you rarely hear in the corporate world, which is to be nice. He garnered this concept because as a “young sales manager at Procter & Gamble. I had five salespeople working for me, and one of the guys was 55 and another guy was 48. They were really successful salespeople, so I realized that I couldn’t teach these guys anything about selling. Since I couldn’t teach them anything, I tried to cultivate trust and respect by working really hard at figuring out how I could help them in a meaningful way.”

Yet this apparent inability to lead in precisely the area he was tasked in leading led Miller to formulate “a very important core value of mine, which is that you can and should try to create friends at your company.” But more than simply becoming friends, Miller came to the understanding that underlying the friendship “is this concept of trust and respect. When you get that as a team, that’s when great things happen. And that comes from creating a culture of openness, of authenticity, of being willing to have fearless conversations. It’s about being yourself, not being afraid to say what’s on your mind.”

As a CCO, you need to be able to have that type of conversation with those both up and down your chain of command. Certainly it is always beneficial to have type of relationship with your team that allows the full flow of communication. Miller said, “Think about how people are with their best friends. You want them to succeed. And sometimes that means having really hard conversations. If that’s what’s motivating you — and you’re really trying to help everybody around you in a company as if they were great friends of yours — that’s really powerful.”

I was interested in using some of Miller’s insights in the managing up role for any CCO. You have to be able to have some very frank conversations with your CEO and Board members about your compliance program and any issues that may arise under it. As CCO if you “cultivate trust and respect by working really hard at figuring out how I could help them in a meaningful way” as Miller used with his more senior sales team members, it should certainly help you going forward when you have to manage up your chain.

I also thought about this somewhat enlightened approach as contrasted with another style that I read about in a recent On Work column by Lucy Kellaway in the Financial Times (FT) entitled, “Wrong skillset excuse masks coup at the top of Barclays, where she discussed the recent termination of Antony Jenkins from Barclays Bank. The newly installed chairman of the company’s Board, John McFarlane, who simultaneously promoted himself to CEO, Jenkins former position, fired Jenkins. The reason Jenkins was fired; he no longer had the right “set of skills” for the organization. Chairman McFarlane explained to Kellaway that there were four skills going forward which (apparently) were lacking in Jenkins: “a) strategic vision; b) charisma; c) the ability to put plans in place that deliver shareholder value; and d) ability to ensure results were delivered.” Ironically, Kellaway noted that lawyers for Kleiner Perkins had said that Ellen Pao “was an employee who never had a skillset.”

Kellaway noted the obvious when she wrote “To invoke skillsets in hiring is not only ugly, but dangerous. Find the right person to run a very big bank is very hard, and having a list of skills that you are matching an applicant against is not necessarily the best way of going about it.” More ominously, she noted that the head of such bank would have to be able to reign in the traders and investment banker types who brought Barclays its unwanted regulatory scrutiny. More critically from the compliance perspective, I think it says much more about Chairman McFarlane that he did not say anything about a new CEO running the business ethically, in compliance or in any other manner which could help to prevent Barclays from another very large fine or penalty from the regulators.

McFarlane’s dictum is one that will certainly be noted by regulators on both sides of the Atlantic going forward. After the disastrous run by former Barclays’ head Bob Diamond, the bank was moving in the direction of regulatory compliance while securing the profits demanded by shareholders. However, McFarlane’s sacking of Jenkins could well derail the bank’s focus on ethics and compliance and engender the former attitude which led to the bank’s fine in the LIBOR scandal.

Unlike Peter Miller at Optinose, it does not appear that Chairman McFarlane appreciates the trust and respect style of leadership. I fear things may well turn out badly for Barclay’s yet again with the newly found emphasis on profits, profits and profits.TexasBarToday_TopTen_Badge_Large

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, 2015

July 9, 2015

The Third Man and the Authority of Chief Compliance Officers

ThirdManHarry Lime is back, although he really never left us. As reported by Kristin M. Jones in a Wall Street Journal (WSJ) article, entitled “Harry Lime Reborn”, the glorious British film noir The Third Man, written by Gra ham Greene and directed by Carol Reed, has been restored in a new digital version. It opens this week at select theaters and will tour the country this summer. The screenplay was adapted from the book of the same name by the author, Greene. It is the rare movie that is at least as good as the book. Greene himself noted that the story “was never written to be read but only to be seen.”

The story revolves around protagonist Holly Martin (played by Joseph Cotton) who goes to post-war Vienna at the behest of his college buddy Harry Lime (played with aplomb by Orson Welles). Martin arrives after a funeral for Lime and finds out that Lime was dealing in the black market. Martin searches for Lime, meeting his girlfriend and assorted shady characters along the way. He ends up leading the Military Police occupying the city to Lime and there is a final noir-classic chase through the sewers of Vienna.

What’s my favorite scene? There are way too many to name but the clown’s head shadow is one of the great cinematic visions of undulated terror. The final chase through the sewers of Vienna is a classic. The dialogue is both chilling and funny. Chilling when Lime asks Martin, while they are atop the apex of a Ferris wheel, whether he would refuse money to make the dotlike figures of humans below stop moving; Funny when Lime say that in 200 years of warfare between the Borgias, the Medicis and continual conflict in Italy it produced the flowering of the Renaissance, while 500 years of peace in Switzerland produced the Cuckoo Clock. Finally, is the haunting musical score of Anton Kara’s use of the Zither . The movie definitely makes my Top 10 greatest movies of all-time.

I thought about this movie in the context of the ongoing debate in the compliance world about whether a company could or should combine or separate the role of the Chief Compliance Officer (CCO) from that of the General Counsel (GC). There has traditionally been a split in companies on whether the CCO should report into a legal function and the GC or report directly to a company’s head officer. Mike Volkov noted that “According to the last PWC Compliance Survey, only 29 percent of CCOs have made it into the C-Suite but that will increase. Only 27 percent of CCOs continue to report to the general counsel while 34 percent report directly to the CEO.” Whichever path your company employs it is imperative that the CCO speak from a position of authority.

A consistent voice for the importance of the role and voice of the CCO in any organization is noted compliance expert, Donna Boehme. She writes and speaks consistently on the characteristics for a successful CCO. Writing in the SCCE magazine, Compliance & Ethics Professional, in an article entitled “Five essential features of the Chief Ethics and Compliance Officer position”, Boehme articulated five essential features required for a CCO to be successful in an organization.

  1. Independence

It is incumbent that any CCO must have “sufficient authority and independence to oversee the integrity of the compliance program.” Some indicia of independence would include a reporting line to the company’s Board of Directors and Audit/Compliance Committee but more importantly “unfiltered” access to the Board. There should also be protection of employment including an employment contract with a “nondiscretionary escalation clause” and a requirement for Board approval for any change in the terms and conditions of employment, including termination. There must also be sufficient resources in the form of an independent budget and adequate staff to manage the overall compliance program.

  1. Empowerment

A CCO must have “the appropriate unambiguous mandate, delegation of authority, senior-level positioning, and empowerment to carry out his/her duties. Such can be accomplished through a “board resolution and a compliance charter, adopted by the board.” Additionally the CCO job description should be another manner in which to clarify the CCO “mandate, and at a minimum should encompass the single point accountability to develop, implement and oversee an effective compliance program.” All of the above should lead in practice to a “close working relationship with an independent board committee.”

  1. Seat at the Table

The CCO must “have formal and informal connections into the business and functions of the organization – a seat at the table at important meetings where all major business matters (e.g., risk, major transactions, business plans) are discussed and decided.” She argues that, at a minimum, the CCO should participate in “budget reviews, strategic planning meetings, disclosure committee meetings, operational reviews, and risk and crisis management meetings.”

  1. Line of Sight 

The CCO should have “unfettered access to relevant information to be able to form independent opinions and manage the [compliance] program effectively.” This does not mean that the CCO should have veto power over functions such as safety or environmental or that such functions must report to the CCO, but unless there is visibility to the CCO for these risk areas, the CCO will not able to adequately assess and manage such risks from the compliance perspective. The correct structuring of the CCO role to allow it visibility into these areas will help the CCO coordinate compliance convergence training.

  1. Resources 

It is absolutely mandatory that the CCO be given both the physical resources in terms of personnel and monetary resources to “get the job done.” I have worked at places where the CCO had neither and the CCOs did not succeed because they never even had the chance to do so. Boehme focuses on both types of resources. Under monetary resources she points, as an indicia, to the independence of the CCO from the GC “rather than a shared budget”. This can also bleed over to ‘headcount’ and shared or dotted line reporting resources. There should be independent resources reporting into the compliance function.

Whichever way a company decides to go on this question, it must meet Requirement No. 6 of the Department of Justice’s (DOJ’s) minimum best practices requirement for a Foreign Corrupt Practices Act (FCPA) based compliance program, which reads:

The company will assign responsibility to one or more senior corporate executives for the implementation and oversight of the company’s anti-corruption policies, standards, and procedures. Such corporate official(s) shall have direct reporting obligations to independent monitoring bodies, including internal audit, Company’s Board of Directors, or any appropriate committee of the Board of Directors, and shall have an adequate level of autonomy from management as well as sufficient resources and authority to maintain such autonomy. 

Additionally this is reiterated in the 2011 Amendments to the US Sentencing Guidelines, §8B2.1 (b)(2)(C), which states:

Specific individual(s) within the organization shall be delegated day-to-day operational responsibility for the compliance and ethics program. Individual(s) with operational responsibility shall report periodically to high-level personnel and, as appropriate, to the governing authority, or an appropriate subgroup of the governing authority, on the effectiveness of the compliance and ethics program. To carry out such operational responsibility, such individual(s) shall be given adequate resources, appropriate authority, and direct access to the governing authority or an appropriate subgroup of the governing authority.

If you have the chance to see The Third Man this summer I urge you to do so. For a schedule of its showings across the country click here.

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, 2015

June 12, 2015

Tribute to Sir Christopher Lee and Release of New Book for CCOs

Lee as DraculaSir Christopher Lee died yesterday. For several generations of horror movie fans, he was simply Dracula, having starred in the role for Hammer Films in the 1950s through the 1980s. Yet for another couple of generations of movie aficionados, he was known for his work in the later Star Wars series as Count Dooku in both Star Wars: Episode II — Attack of the Clones and in Star Wars: Episode III — Revenge of the Sith. He was also the wizard Saruman in Peter Jackson’s Lord of the Rings films.

His characterization of Dracula may have been closer to what Dracula’s creator, Bram Stoker, had envisioned. According to his obituary in The Telegraph, Lee “imbued the character with a dynamic, feral quality that had been lacking in earlier portrayals.” The first Hammer Dracula film was the most successful. The Telegraph stated, “With Cushing cast this time as the vampire hunter, Dracula (retitled Horror of Dracula in America) was a box-office success for Hammer and horror aficionados at the time labelled it “the greatest horror movie ever made”. Lee also regarded it as the best of the series of Dracula films that he made with Hammer. “It’s the only one I’ve done that’s any good,” he recalled. “It’s the only one that remotely resembles the book.””

Lee’s creativeness and greatness in the roles he has played lead-in to my topic today. I am extremely pleased to announce that my latest book CCO 2.0 | Internal Marketer and Soft Skills Required has been published and is now available from Compliance Week. CCO 2.0 provides the Chief Compliance Officer (CCO) and compliance practitioner with some of the most current ideas on the types of skills that a compliance officer might need and how to market the compliance function within the corporate environment.

In the Internal Marketer section, I take on such topics as The Five Golden Rules of Internal Marketing Compliance; Internal Marketing of a Compliance Program; Getting Employees to Care about a Compliance Program; Getting Your Employees to Internally Market Your Compliance Program; Internal Advertising of Your Compliance Program and Funding Your Compliance Program.

In the sections of soft skills I discuss skills the CCO or compliance practitioner can use to move forward the compliance agenda in a company. I discuss such topics as the use of influence by a CCO; Four Keys to Compliance Leadership; the CCO as Chief Persuasion Officer; the CCO as Chief Collaboration Officer; Communications tips for the compliance professional; putting compliance at the center of strategy and why compliance is different than legal function.

The book is available in paperback and eBook formats and you can find both by clicking here.

While you are on the Compliance Week site, I would also suggest that you take at look at my seminal work on creation, implementation and enhancement of an anti-corruption compliance program, Doing Compliance. If there is one book in your library on how to do compliance, this book is it. In this book I discuss the requirements to build, and execute, a modern compliance program. With a focus on anti-bribery and anti-corruption issues, the book first reviews the basic building blocks a compliance officer needs (code of conduct, policies and procedures, internal controls), moves on to address the proper role and autonomy of a CCO, delves into the most important CCO duties (risk assessment, training, investigations), and always offers practical examples and advice for how a compliance program should work.

Best of all, the paperback and eBook both have newly reduced pricing which should make it a ‘must have’ for every member of your compliance team. The book is available by clicking here.

Finally, if you have not yet checked out my podcasts, after you check out my latest two books, published by Compliance Week, you should head over to the FCPA Compliance and Ethics Report or iTunes to check out the latest editions. Some of the highlights are:

Episodes 163 and 166 deal with the FIFA indictments.

Episode 164 – MissionLogPodcast.com co-host John Champion returns to discuss Star Trek – The Next Generation (TNG) and the leadership lessons from Season One of TNG.

Episode 165 – I discuss the BHP FCPA enforcement action and its implications for the compliance practitioner as a strict liability standard because there was no evidence of bribery presented by the Securities and Exchange Commission (SEC).

Episode 167 – Mara Senn returns to share her top ten practices for cross-border investigations. Senn has some important and useful tips to help the CCO or compliance practitioner think through an approach for an international FCPA investigation.

Episode 168 – Noted criminal defense attorney Dan Cogdell discusses criminal procedure and funding your defense costs, in the defense of an individual Foreign Corrupt Practices Act (FCPA) enforcement action. With all the talk coming about the Department of Justice (DOJ) and FCPA commentariat about the need for individual prosecutions, this episode is timely.

Lastly, after you have purchased my two latest books and checked out my podcasts, I would urge you to head on over to Netflix and settle in with Sir Christopher Lee and his great Hammer films. They are the top of 1950s horror movies.

A happy weekend to 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, 2015

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