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 The authors ended by stating, “Arguments against empathy rely on an outdated view of emotion as a capricious beast that needs to yield to sober reason.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 2, 2015

Channeling John Steed in Your Tone in the Middle

Patrick MacneeToday we honor a great English actor from one of the 1960s signature television series. Last week, Patrick Macnee died. He was one-half of the crime-fighting duo on The Avengers. As reported in his New York Times (NYT) obituary, “Macnee, who wielded a lethal umbrella and sharp repartee as the dapper secret agent John Steed.” In The Avengers, Macnee “faced off against an assortment of evildoers, armed with understated wit and a traditionalist British fashion sense that made him look less like a spy in the Bond mold than “a junior cabinet minister,” as he once put it, although his tightly rolled umbrella concealed a sword and other crime-fighting gadgets, and his bowler hat, lined with a steel plate, could stop bullets and, when thrown, fell an opponent.”

His initial partner was the actress Honor Blackman but after she left the series to play Pussy Galore in the James Bond film Goldfinger his more famous sidekick became “Diana Rigg, stylish in a leather cat suit and every bit his equal in the wit and hand-to-hand-combat departments. In many scenes he was content to observe, an eyebrow cocked, as Emma — whom he always referred to as Mrs. Peel — unleashed her martial arts expertise on a hapless foe. He would often summon her to action with the words “Mrs. Peel, we’re needed.” Steed carried no gun. Aplomb and sang-froid were his weapons.” He could communicate what he meant when he meant it.

I thought about Macnee, his role as Steed and, of course, Mrs. Peel when I considered how a company must communicate its message of compliance. A company must have more than simply a good ‘Tone-at-the-Top’; it must move it down through the organization from senior management to middle management and into its lower ranks. This means that one of the tasks of any company, including its compliance organization, is to get middle management to respect the stated ethics and values of a company, because if they do so, this will be communicated down through the organization.

Adam Bryant, in a NYT article, entitled “If Supervisors Respect The Values, So Will Everyone Else”, explored this topic when he interviewed Victoria Ransom, the Chief Executive of Wildfire, a company which provides social media marketing software. Ransom spoke about the role of senior management in communicating ethical values when she was quoted as saying “Another lesson I’ve learned as the company grows is that you’re only as good as the leaders you have underneath you. And that was sometimes a painful lesson. You might think that because you’re projecting our values, then the rest of the company is experiencing the values.” These senior managers communicate what the company’s ethics and values are to middle management. So while tone at the top is certainly important in setting a standard, she came to appreciate that it must move downward through the entire organization. Bryant wrote that Ransom came to realize “that the direct supervisors become the most important influence on people in the company. Therefore, a big part of leading becomes your ability to pick and guide the right people.”

Ransom said that when the company was young and small they tried to codify their company values but they did not get far in the process “because it felt forced.” As the company grew she realized that their values needed to be formalized and stated for a couple of reasons. The first was because they wanted to make it clear what was expected of everyone and “particularly because you want the new people who are also hiring to really know the values.” Another important reason was that they had to terminate “a few people because they didn’t live up to the values. If we’re going to be doing that, it’s really important to be clear about what the values are. I think that some of the biggest ways we showed that we lived up to our values were when we made tough decisions about people, especially when it was a high performer who somehow really violated our values, and we took action.” These actions to terminate had a very large effect on the workforce. Ransom said, “it made employees feel like, “Yeah, this company actually puts its money where its mouth is.””

Ransom sought to ensure that everyone knew what senior management considered when determining whether employees were “living up to the company culture.” The process started when she and her co-founder spent a weekend writing down what they believed the company’s values were. Then they sat down with the employees in small groups to elicit feedback. Her approach was to look for what they wanted in their employees. They came up with six.

  • Passion: Do you really have a thirst and appetite for your work?
  • Humility and Integrity: Treat your co-workers with respect and dignity.
  • Courage: Speak up – if you have a great idea, tell us, and if you disagree with people in the room, speak up.
  • Curiosity: They wanted folks who would constantly question and learn, not only about the company but about the industry.
  • Impact: Are you having an impact at the company?
  • Be outward-looking: Do good and do right by each other.

Ransom had an equally valuable insight when she talked about senior management and ethical values. She believes that “the best way to undermine a company’s values is to put people in leadership positions who are not adhering to the values. Then it completely starts to fall flat until you take action and move those people out, and then everyone gets faith in the values again. It can be restored so quickly. You just see that people are happier.”

What should the tone in the middle be? Put another way, what should middle management’s role be in the company’s compliance program? This role is critical because the majority of company employees work most directly with middle, rather than top management and, consequently, they will take their cues from how middle management will respond to a situation. Moreover, middle management must listen to the concerns of employees. Even if middle management cannot affect a direct change, it is important that employees need to have an outlet to express their concerns. Therefore your organization should train middle managers to enhance listening skills in the overall context of providing training for what she termed their ‘Manager’s Toolkit’. This can be particularly true if there is a compliance violation or other incident that requires some form of employee discipline. Ransom believes that most employees think it important that there be “organizational justice” so that people believe they will be treated fairly. Ransom further explained that without organization justice, employees typically do not understand outcomes but if there is perceived procedural fairness that an employee is more likely accept a decision that they may not like or disagree with.

So think about your lines of communication and your communication skills when conveying your message of compliance down from the top into the middle of your organization. You might even want to channel your inner John Steed, from The Avengers, in doing so.

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

February 17, 2015

Gary Owens, Laugh-In and Accountability in Your Compliance Program

Gary OwensIf you were alive at all during the 1960s, you will recall that one of the cultural phenomenon’s was NBC’s television show Laugh-In. It was brought to you from the NBC studios in beautiful downtown Burbank and featured one very droll player, who always played himself, Gary Owens, as the show’s announcer – Gary Owens. Owens died last week and I was surprised but pleased to learn in reading his obituary in the New York Times (NYT) that he was also the voice for several cartoon characters in the Jay Ward stable (home of Rocky and Bullwinkle) and he was the voice of Space Ghost which had a renaissance during the early years of the Cartoon Network.

I thought about Owens’ role on Laugh-In not only as the straight man but also the character, who in many ways brought accountability to the manic show when I read this week’s article by Adam Bryant in his NYT Corner Office column, entitled “Making a Habit of Accountability”, which featured his interview of Natarajan Chandrasekaran, the Chief Executive Officer (CEO) of Tata Consulting Services. Chandrasekaran was raised on a farm and one of the things that he learned early on from his farmer father was “the value of money and the value of time. So he made us account for things. It wasn’t that there was a right or wrong way, but he wanted us to be accountable for what we did.”

I considered this concept of accountability in your best practices anti-corruption compliance program, whether based upon the Foreign Corrupt Practices Act (FCPA), UK Bribery Act or other program. With the Department of Justice’s (DOJ) recent pronouncements that it will more aggressively prosecute individuals for FCPA violations, perhaps companies should emphasize accountability more in their compliance programs. By doing so, perhaps employees might understand that there really is their personal liberty on the line when they engage in something which might even approach a FCPA violation. Further, by emphasizing personal accountability, companies could demonstrate more pro-active approaches to compliance that the DOJ wants to see going forward.

Chandrasekaran’s remarks went beyond simply emphasizing personal accountability. He also spoke about accountability in the context of a company’s overall culture. In particular I found his thoughts about accountability, learning and culture quite insightful. He said, “Learning cannot be achieved by mandate. It has to be achieved by culture.” He added, “In our executive team meetings, we share experiences and case studies about failures and successes.”

But beyond simply this insight there should also be accountability for helping others achieve the company’s overall goals. While he did not limit it to compliance, I still found it applicable to a best practice compliance regime when he said, “Everybody has to take some accountability for other people, and look for ways to make small contributions to help others. Looking after people has to become everybody’s responsibility. Innovation and caring for people are cultures; they are not departments.” He did admit that such a change would not happen overnight and indeed he has been emphasizing this message for five years at Tata because “It takes time to build that culture.”

Chandrasekaran also had an insight into compliance through his views on company structure. Tata is a flat organization, with multiple business units. He did this so the largest number of employees would feel empowered to make decisions and work collaboratively. While I recognize that such views might be antithetical to US based companies with a more ‘command and control’ approach, Chandrasekaran explained that the leaders of those units are expected “to work together. We said the power of our company will be driven by how well they work together. In some of our bigger monthly meetings, we will start with people presenting examples of their collaborations.”

I considered all of the above in the greater context of a best practices anti-corruption compliance program. One of the things that the FCPA Guidance emphasized was the inter-relatedness of each component of your compliance program. While you might have greater risk in the area of third parties or doing business in certain areas of the world where there are higher perceptions of corruption, you should not pick and choose what prongs of a compliance program you implement. Each step builds upon one another and should all point to accountability for your actions in decision-making calculus for business decisions and their implementations.

However the concept of accountability is not one that is spelled out in the FCPA Guidance or in any formulation of a best practices compliance regime. Yet it is clear that accountability is something that underlies what a compliance program is trying to achieve. Just as Chandrasekaran learned early on there is a value to things; there is a value to time and there is a value to money. So they should be accounted for in the way you do business.

This might best be described as oversight of your compliance program. The issue your company should focus on here is whether employees are accountable within the ambit of your compliance program. Even after all the important ethical messages from management have been communicated to the appropriate audiences and key standards and controls are in place, there should still be a question of whether the company’s employees are accountable to the compliance program.

Two mechanisms to do so are through the techniques of monitoring, which is a commitment to reviewing and detecting compliance programs in real time and then reacting quickly to remediate them. A primary goal of monitoring is to identify and address gaps in your program on a regular and consistent basis. A second tool is auditing, which is generally viewed as a more limited review that targets a specific business component, region or market sector during a particular timeframe in order to uncover and/or evaluate certain risks, particularly as seen in financial records. However, you should not assume that because your company conducts audits that it is effectively monitoring. A robust program should include separate functions for auditing and monitoring. While unique in protocol, however, the two functions are related and can operate in tandem. Monitoring activities can sometimes lead to audits. For instance if you notice a trend of suspicious payments in recent monitoring reports from Indonesia, it may be time to conduct an audit of those operations to further investigate the issue.

Your company should establish a regular monitoring system to hold employees accountable to doing business under your compliance regime and Code of Conduct. Effective monitoring means applying a consistent set of protocols, checks and controls tailored to your company’s risks to detect and remediate compliance problems on an ongoing basis. While it may seem that accountability means looking over every employees shoulder, it should not simply be seen as the workplace equivalent of parental oversight. Chandrasekaran explained that how you conduct yourself at work can have a huge impact on other employees. He said, “it’s sometimes very hard to imagine, early in your career, how much impact you can have. If you’re in a job and in an organization, the impact you can make is huge, because it’s all about being part of a group that’s driving impact. So look for those opportunities.” If you look for ways to demonstrate accountability you can influence a wide variety of others going forward.

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

January 8, 2015

Craig Biggio to the Hall of Fame and Your Compliance Team

Biggio HOFFor those of you who do not believe that global warming is upon us, let me assure you that it is real and unfortunately caused by humans. How do I know this for a certainty? It is because there was an event back in 2005 that caused Hell itself to freeze over. I am of course referring to the first and only appearance of the Houston Astros in the World Series. While it was certainly a positive event for long-suffering Astros fans everywhere, with ownership dedicated to coming in last each year now, I do not think climate change aficionados will have the Astros to blame again anytime soon.

This does not mean that tremors are prevented from occurring in the earth’s fabric from time-to-time. On Monday we had one of those such minor earthquakes in Texas, not attributable to frac-ing, when the earth shook as the first Astro was named to enter the Baseball Hall of Fame (HOF); second baseman, Craig Biggio. Biggio’s statistics were truly Hall-worthy coming in with 3060 hits, 668 doubles (5th on the all-time list) and my personal favorite, he is the all-time leader in Major League Baseball (MLB) for being hit by pitches with 286 bonkings.

While Biggio’s c HOF greatness is singular to him, he was part of greater Astros teams which had sustained success from the late 1990s to the middle of the last decade, culminating in the above climate-changing event of 2005 when the Astros appeared in the World Series, losing to the longer suffering Chicago White Soxs, who had not appeared in the World Series since 1959 (the Astros forerunner, Houston Colt-45s came into existence in 1962.) I thought about the team aspect of Biggio and his Astros teammates when I read an article in the New York Times (NYT) Corner Office column by Adam Bryant, entitled “Even the Best Team Can Be Better”, where Bryant featured an interview with Maynard Webb, a veteran technology executive who is currently serving as the chairman of Yahoo.

One of the things that many Chief Compliance Officers (CCOs) do not often consider is the team aspect to a compliance function. As the compliance function moves to CCO 2.0 and compliance becomes more of an ongoing business process, one of the things a CCO or compliance practitioner needs to be cognizant about is the team function. This means a team within the compliance function itself and for the greater company. Bryant wrote that one of the lessons Webb has learnt as a leader is that “You have to get voted onto the team every day as an employee, and you have to be the employer of choice every day. I would often ask team leaders: “You have seven people working for you. How many of those would you rehire if all the positions were open again?” The point is that you can’t let mediocre performance impede where you can go. Most managers are good-hearted people, and it’s really hard to tell somebody they’re not performing well. I would just encourage people to get after that more quickly because the rest of your team is watching you and waiting for you to do something.”

One of the things that I have heard successful CCO’s talk about is humility. Webb seconded that notion as a leader when he said, “We treat people well. We stay humble. We don’t get ahead of ourselves. We work hard, and we take ownership of what we do. And if you act out or you do anything out of line, you will hear about it. I remember when I made the all-star team in the Babe Ruth League. We had just come together recently as a team. I was playing third base, and when it was my time to hit, I struck out. I went back to third base, and we were doing a bit of practice before the other team’s turn to bat. I was really mad and I was firing the ball as hard as I could over to first base, and my mother yelled out, “Hey, Webb, too bad you can’t hit as hard as you throw.”” Nothing like a mom to bring you back down to earth when needed but still an important lesson to bring forward into the compliance realm.

Webb also had some insights for hiring in the compliance function, which I thought were important to consider. He said, “I’ll probably start by asking you about your first job and what you’ve done outside of school and work. I’ve found that there is a high correlation between work ethic and people’s extracurricular activities that weren’t driven by mom and dad. Then I would ask about other things to look for truth and self-awareness, like: “Six months from now, we’re going to know each other very well. What will your team and what will I say that you do really, really well? And then what will they say that we all wish you did better?” You’d be surprised at the number of times I’ve heard people say: “Oh, nothing. You’ll just love everything about me.” And I’ll say: “Dude, that’s not true. It’s not true for me. Let me give you some examples of the things you’ll wish that I did better.””

The reason he does so is that Webb is “looking for self-awareness and openness. And then I try to probe on value systems and how they work in teams. Tell me about situations that were really tough, and how you got out of them. I like to hear how they tell stories.” I think this is a critical skill for a compliance practitioner because you are required to have the authority and backbone to say No when the situation calls for it. Chuck Duross said we have to be the Alamo at times. I originally thought that meant we had be ready to be slaughtered but it means stand tall for what you believe in and more importantly what your company should believe in, and do business ethically and in compliance with anti-corruption/ anti-bribery laws such as the Foreign Corrupt Practices Act (FCPA) and UK Bribery Act.

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

December 15, 2014

Hiring and Promotion in Compliance – Wait for Great

7K0A0597The role of Human Resources (HR) in anti-corruption programs, based upon the Foreign Corrupt Practices Act (FCPA) or UK Bribery Act, is often underestimated. I come from a HR background and practiced labor law early in my career so I have an understanding of the skills HR can bring to any business system which deals with legal issues; which is not only required of all businesses but certainly is true of FCPA or UK Bribery Act compliance. If your company has a culture where compliance is perceived to be in competition or worse yet antithetical to HR, the company certainly is not hitting on all cylinders and maybe moving towards dysfunction.

One of the Ten Hallmarks of an Effective Compliance program relates to the key role HR plays in incentives and discipline. However, another key area that is not given as much attention is in hiring and promotion. The FCPA Guidance states, “[M]ake integrity, ethics and compliance part of the promotion, compensation and evaluation processes as well. For at the end of the day, the most effective way to communicate that “doing the right thing” is a priority is to reward it. Conversely, if employees are led to believe that, when it comes to compensation and career advancement, all that counts is short-term profitability, and that cu tting ethical corners is an ac­ceptable way of getting there, they’ll perform to that measure. To cite an example from a different walk of life: a college football coach can be told that the graduation rates of his players are what matters, but he’ll know differently if the sole focus of his contract extension talks or the decision to fire him is his win-loss record.” In other words make compliance significant for professional growth in your organization and it will help to drive the message of doing business in compliance.

I thought about these concepts when I read an article in the Corner Office column of the Sunday New York Times (NYT), entitled “Sally Smith of Buffalo Wild Wings, on patience in hiring” where columnist Adam Bryant interviewed Sally Smith, the Chief Executive of Buffalo Wild Wings, the restaurant chain. She had some interesting concepts not only around leadership but thoughts on the hiring and promotion functions, which are useful for any Chief Compliance Officer (CCO) or compliance practitioner striving to drive compliance into the DNA of a company.

Leadership – Get Feedback

One of the early lessons which Smith learned about leadership is to set clear expectations. Bryant wrote that Smith told him, “You have to be really clear about what you want and what your expectations are. When you’re clear and everybody understands them, you have a much better chance of success than if you say, “Just do it.” It’s a great slogan, but you’ve got to know what it is that you’re just doing.” This is a constant battle for the compliance practitioner when senior management also makes clear that you must make your numbers as well. However this dynamic tension can be met and one of the best ways is to require business-types to make their numbers but doing so in a way that is in compliance with a company’s Code of Conduct and compliance regime.

A second leadership lesson that Smith has learned is around feedback. As you might guess from a Chief Executive, Smith has found that obtaining honest critiques about her management style from those who work under her is difficult to acquire. To overcome this reluctance she set up a program where her leadership can give anonymous reviews of her performance annually to the company’s Board of Directors. Bryant said, “My leadership team does a performance review on me each year for the board. It’s anonymous. They can talk about my management style or things I need to work on. If you want to continue growing, you have to be willing to say, “What do I need to get better at?”” This type of insight is absolutely mandatory for any best practices compliance program as anonymous reporting is also one of the Ten Hallmarks of an Effective Compliance program. But more than simply an anonymous reporting line for FCPA violations, how does your company consider feedback to determine how all levels of the company is doing compliance going forward or as the FCPA Guidance states, “From the boardroom to the shop floor.”

Hiring and Promotion – Waiting for Great

Here Smith had some thoughts put in a manner not often articulated. One of her cornerstones when hiring is to search out the best person for any open position, whether through an external hire or internal promotion. Bryant stated that Smith said “We use the phrase “wait for great” in hiring. When you have an open position, don’t settle for someone who doesn’t quite have the cultural match or skill set you want. It’s better to wait for the right person.”

Smith articulated some different skills that she uses to help make such a determination. Once a potential hire or promotion gets to her level for an interview, she will assume that person is technically competent but “I assume that you’re competent, but I’ll probe a bit to make sure you know what you’re talking about. And then I’ll say, “If I asked the person in the office next to you about you, what would they say?””

Passion and curiosity are other areas that Smith believes is important to probe during the hiring or promotion process. In the area of passion, Smith will “Often ask, “What do you do in your free time?” If they’re passionate about something, I know they’re going to bring that passion to the workplace.” Smith believes curiosity is important because it helps to determine whether a prospective hire will fit into the Buffalo Wild Wings culture. Bryant wrote, “I look for curiosity too, because if you’re curious and thinking about how things work, you’ll fit well in our culture. So I’ll ask about the last book they read, or the book that had the greatest impact on them.” Smith also inquires about jobs or assignments that went well and “ones that went off the tracks. You ask enough questions around those and you can determine whether they’re going to need a huge support team.”

I found these insights by Smith very useful for a compliance practitioner and the hiring and promotion functions in a compliance program. By asking questions about compliance you can not only find out the candidates thoughts on compliance but you will also begin to communicate the importance of such precepts to them in this process. Now further imagine how powerful such a technique could be if a Chief Executive asked such questions around compliance when they were involved in the hiring or promotion process. Talk about setting a tone at the top from the start of someone’s career at that company. But the most important single item I gleaned from Bryant’s interview of Smith was the “Wait for great” phrase. If this were a part of the compliance discussion during promotion or hiring that could lead to having a workforce committed to doing business in the right way.

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

August 25, 2014

Trying Something Different – the Desktop Risk Assessment

IMG_0774How many among you out there are sushi fans? Conversely, how many out there consider the idea of eating raw fish right up there with going into to the dentist’s office for some long overdue remedial work? One’s love or distaste for sushi was used as an interesting metaphor for leadership in this week’s Corner Office section of the New York Times (NYT) by Adam Bryant, in an article entitled “Eat Your Sushi, and Expand Your Horizon”, where he profiled Julie Myers Wood, the Chief Executive Officer (CEO) of Guidepost Solutions, a security, compliance and risk management firm. Wood said her sushi experience relates to advice she gives college students now, “One thing I always say is “eat the sushi.” When I had just graduated from college, I went with my mom to Japan. We had a wonderful time, but I refused to eat the sushi. Later, when I moved to New York, I tried some sushi and loved it. The point is to be willing to try things that are unfamiliar.”

I thought about sushi and trying something different in the context of risk assessments recently. I think that most compliance practitioners understand the need for risk assessments. The FCPA Guidance could not have been clearer when it stated, “Assessment of risk is fundamental to developing a strong compliance program, and is another factor DOJ and SEC evaluate when assessing a company’s compliance program.” Many compliance practitioners have difficulty getting their collective arms about what is required for a risk assessment and then how precisely to use it. The FCPA Guidance makes clear there is no ‘one size fits all’ for about anything in an effective compliance program.

One type of risk assessment can consist of a full-blown, worldwide exercise, where teams of lawyers and fiscal consultants travel around the globe, interviewing and auditing. However if there is one thing that I learned as a lawyer, which also applies to the compliance field, is that you are only limited by your imagination. So using the FCPA Guidance that ‘on one size fits all’ proscription, I would submit that is also true for risk assessments.

As with Wood’s admonition that you might want to try sushi even if you think you may not like it. I think that there are several different types of risk assessments that can be used to help to advance your compliance regime going forward. This means that if you do not have the time, resources or support to conduct a worldwide risk assessment annually, you can take a different approach. You might try assessing other areas annually through a more limited focused risk assessment, which a colleague of mine calls the Desktop Risk Assessment.

Some of the areas that such a Desktop Risk Assessment could inquire into might be the following:

  • Are resources adequate to sustain a culture of compliance?
  • How are the risks in the C-Suite and the Boardroom being addressed?
  • What are the FCPA risks related to the supply chain?
  • How is risk being examined and due diligence performed at the vendor/agent level? How is such risk being managed?
  • Is the documentation adequate to support the program for regulatory purposes?
  • Is culture, attitude (tone from the top), and knowledge measured? If yes, can we use the information enhance the program?
  • Disciplinary guidelines – Do they exist and has anyone been terminated or disciplined for a violating policy?
  • Communication of information and findings – Are escalation protocols appropriate?
  • What are the opportunities to improve compliance?

There are a variety of materials that you can review from or at a company that can facilitate such a Desktop Risk Assessment. You can review your company’s policies and written guidelines by reviewing anti-corruption compliance policies, guidelines, and procedures to ensure that compliance programs are tailored to address specific risks such as gifts, hospitality and entertainment, travel, political and charitable donations, and promotional activities.

You could assess your company’s senior management support for your compliance efforts through interviews of high-level personnel such as the Chief Compliance Officer (CCO), Chief Financial Officer (CFO), General Counsel (GC), Head of Sales, CEO and Board Audit or Compliance Committee members to assess “tone from the top”. You can examine resources dedicated to compliance and also seek to understand the compliance expectations that top management is communicating to its employee base. Finally, you can gauge operational responsibilities for compliance.

Such a review would lead to the next level of assessment, which would be generally labeled communications within an organization regarding compliance. You can do this by assessing compliance policy communication to company personnel but even more so by reviewing such materials as compliance training and certifications that employees might have in their files. If you did not yet do so, you should also take a look at statements by senior management regarding compliance, such as actions relating to terminating employees who do business in compliance but do not make their quarterly, semi-annual or annual numbers set in budget projections.

A key element of any best practices compliance program is internal and anonymous reporting. This means that you need to review mechanisms on reporting suspected compliance violations and then actions taken on any internal reports, including follow-ups to the reporting employees. You should also assess whether those employees who are seeking guidance on compliance for their day-to-day business dealings are receiving not only adequate but timely responses.

I do not think there is any dispute that third parties represent the highest risk to most companies under the FCPA, so a review of your due diligence program is certainly something that should be a part of any risk assessment. But more than simply a review of procedures for due diligence on third party intermediaries, you should also consider the compliance procedures in place for your company’s mergers and acquisitions (M&A) team; focusing on the pre-acquisition phase.

One area that I do not think gets enough play, whether in the FCPA Inc. commentary or in day-to-day practice is looking at what might be called employee commitment to your company’s compliance regime. So here you may want to review your compliance policies regarding employee incentives for compliance. But just as you look at the carrots to achieve compliance with your program, you should also look at the stick, in the form of disciplinary procedures for violations. This means you should see if there have been any disciplinary actions for employee compliance violations and then determine if such discipline has been applied uniformly. If you discipline top sales people in Brazil, you have to discipline your top sales folks in the US for the same or similar violations.

This list is not intended to be a complete list of items, you can pick and choose to form some type of Desktop Risk Assessment but hopefully you can see some of the things areas you can assess. In his article on Ms. Woods, Bryant quoted her for the following key trait she observed from successful leaders, “They were able to identify and focus on core things. When you go into an agency or a company, there are a million things you could fix. But you can’t fix everything, so you make a decision about your priorities, and then you act on them.” A Desktop Risk Assessment may well help you to do so.

If you aim to perform an annual Desktop Risk Assessment with a full worldwide risk assessment every two years or so, you should be in a good position to keep abreast of compliance issues that may change and need more or greater risk management. And do not forget the that the FCPA Guidance ends its section on risk with, “When assessing a company’s compliance program, DOJ and SEC take into account whether and to what degree a company analyzes and addresses the particular risks it faces.” Finally, if you never have tried sushi, I urge you to do so as it not only tastes good but its good for you as well.

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On Tuesday, August 26th I will be co-presenting with Marie Patterson VP Marketing for Hiperos on a webinar focusing on GSK in China-One Year Later. I will review the continued saga of the GSK corruption investigation in China, the Humphreys’ and Wu convictions and what it means for your compliance program going forward. The event is free and begins at 1 PM EDT. I hope that you can join us. For details and Registration, click here.

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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, 2014

July 1, 2014

Gettysburg Day 1 – Stepping Back to See the Whole Picture

Shoes at GettysburgLast year I did a three-day series on the Battle of Gettysburg and looked at some lessons that are applicable to a modern day compliance practitioner. As not only did I learn quite a bit about the battle, it seemed to strike a cord with many readers so this year I will continue the tradition. Today I look at Day 1 of this seminal battle of the Civil War.

One of the enduring myths about the battle is that it started over shoes. In the Encyclopedia Virginia, in an entry entitled “Shoes at Gettysburg”, it states, “One of the most persistent legends surrounding battle is that it was fought over shoes… Ten weeks after the battle, Confederate general Henry Heath a Virginian whose troops were the first to engage on July 1, filed a now-famous report in which he explained why he had sent a portion of his division into the small Pennsylvania town. “On the morning of June 30,” Heath wrote, “I ordered Brigadier General [Johnston] Pettigrew to take his brigade to Gettysburg, search the town for army supplies (shoes especially), and return the same day.” That parenthetical phrase “shoes especially” has taken on a life of its own over the years. A 1997 newsletter of the American Podiatric Medical Association is typical — it claimed, perhaps due to its interest in foot health, that footwear was the battle’s causa belli, adding, “There was a warehouse full of boots and shoes in the town.”

Historians have debated this issue ever since. There is no doubt that General Heath “stumbled into this fight” but over some shoes, as he was under orders from General Lee not to enter into a general engagement with Union troops. In the same Encyclopedia Virginia it ends with the following “The Battle of Gettysburg readily lends itself to being read as a three-act tragedy, dominated, as many have argued, by Lee’s hubris. (“The fundamental fault that disfigured his conduct of the campaign,” historian Brian Holden Reid has written, “was that Lee was overly confident and expected too much of his marvelous troops.”) That it started by accident, over something so “pedestrian” as shoes, is too perfect for writers to ignore.”

Whether the battle started over shoes or not, the Confederate Army did ‘stumble into a fight’. I thought about such randomness in the context of a Chief Compliance Officer (CCO) when I read a couple of recent articles in the Corner Officer section of the New York Times (NYT). In the first article, Adam Bryant interviewed Sabine Heller, the Chief Executive Officer (CEO) of A Small World, in an article entitled “Can You See the Whole Picture?” One of the points that Heller raised was that, at times, you need to step back to look at the bigger picture. She provided the following example, “You have to manage people based on results and set clear goals. It sounds like a simple thing, but people don’t do that often. When I was 22 and working at UGO, it didn’t matter that I had no experience and it didn’t matter what my process was as long as I hit my goal. It taught me how empowering it is to be treated like that. I am a great manager for people who are strong thinkers and motivated. I empower people. I promote people. I give them a lot of leeway. At the end of the day, I look at results, and that’s it. I feel very strongly that organizations infantilize employees. You should treat them like adults.”

In another Corner Office article, entitled “Joanne Rohde, on Knowing When to Get In, and to Get Out”, Bryant interviewed Joanne Rohde, CEO of Axial Exchange. Some of her thoughts on leadership would certainly apply to Confederate General Lee at Gettysburg. She talked about stepping back, breathing and re-assessing the situation. Bryant quoted her for the following, “I remember a day when the markets went crazy, and all of us were losing money because the volatility was going against us. The guy I worked for said, “You all need to get out of your positions.” We tried to explain to him that this was a temporary thing. He said: “No. You have to get out. A couple of days later, he said something that has really been an important life lesson: “If you get out, you can get in exactly the same way the next day, but you have a clear head.” It was such good advice, and so few people follow it. And it’s really important for both entrepreneurship and leadership — you’ve got to get in and take risks, but you also have to get out, reassess and modify. That, in my opinion, is how you get ahead. You may have a vision of where you’re headed, but it is never a straight line. You take a step and you reassess. That gives you courage.”

The key is that you step back and take another look, perhaps even put a second set of eyes on the issue. In the business world there is nothing that requires immediate assessment and a decision for a compliance practitioner. If there is, it is because there has not been any communication to the compliance function during the months and months of work by the business unit working on a deal. Any company that has that type of culture means the CCO has not developed relationships with the business unit personnel to foster adequate communication. If the China business unit head has never met the CCO, it is certainly time for the CCO to go to China, put on some training and introduce him or herself to Regional Manager (RM).

Both of the articles also had some very relevant points regarding the hiring function and compliance. Heller said that one thing she detests from a candidate is canned responses in the interview process. She wants people who “understand the larger space of the industry we’re in.” But I found her further comments considerably insightful. She said that “And I want to know if that person has been able to come up with an idea, build consensus for that idea and follow it through. I want to see if they are a leader in one way or another, because building consensus for something is very important in the world of business. You need someone who can manage laterally and who can get people on board with their ideas. So I always ask for a time in someone’s career when they have come up with an idea and were able to get people on board, and then executed the idea.”

Rohde had another approach to hiring and interviews which I found discerning. It involved preparing for an interview and how that preparation could lead to persons understanding the compliance function. She said, “The first thing I want to know is, “Why are you here?” Smart people can get lots of job interviews. So I want to know that there’s something unique about our opportunity. There are two reasons I do that. You quickly sort out people who haven’t even done their homework. I remember one person had not even looked at our website. He was mad that I didn’t hire him, but he didn’t even know what we did.

In a small company like ours — 14 employees — you have to be passionate about what we’re doing. Everybody who’s really done well at our company has had a passion for health care and, sadly, often has had a bad experience in the health care system with a family member and wants to change it. So, I’m really looking for that.”

But her next comments spoke to some of the leadership lessons from Gettysburg – Day 1. She was quoted as saying, “I also ask for examples of when you’ve chased a dream, whether you made it or not. Was there something you went for? If it worked, great, but if it didn’t work, how did you retrench? So I’m really trying to learn if the person has that ability or interest to do something that’s not there.” Imagine what might have happened if the Confederate Army had not gone looking for those shoes or General Heath had obeyed Lee’s orders and had not ‘stumbled into a fight’.

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

June 11, 2014

Semper Fi and Compliance-Leadership Lessons from the Marines

Marines as Devil DogsEver wonder where the US Marine Corp got its nickname of ‘hellhounds’? It came courtesy of the Imperial Germany Army from a battle that took place in the month of June 1918, the Battle of Belleau Wood. According to the Battle’s entry in Wikipedia, the Marines forces marched 10K to reach a site where the German Army had broken through against the French Army. After arriving on the site and turning back the German advance, the Marines were repeatedly urged to turn back by retreating French forces, Marine Captain Lloyd W. Williams of the 2nd Battalion, 5th Marines, uttered the now-famous retort Retreat? Hell, we just got here.” 

After the battle, the French renamed the wood “Bois de la Brigade de Marine” (“Wood of the Marine Brigade”) in honor of the Marines’ tenacity. The French government also later awarded the 4th Brigade the Croix de guerre. An official German report classified the Marines as “vigorous, self-confident, and remarkable marksmen…” General Pershing – Commander of the American Expeditionary Force – even said, “The deadliest weapon in the world is a Marine and his rifle!” Pershing also said “the Battle of Belleau Wood was for the U.S. the biggest battle since Appomattox and the most considerable engagement American troops had ever had with a foreign enemy.” But it was the Germans who gave the Marine Corp its most lasting moniker, when the called them ‘the dogs from hell.’ Tribute indeed.

I thought about this tribute to the Marine Corp when I recently read an article in the Corner Office section of the New York Times (NYT), entitled “Leading By Putting Your Followers First”, by Adam Bryant. In this article, he profiled Don Knauss, the Chief Executive Officer (CEO) of Clorox Company. Knauss joined the Marine Corp after college and this experience gave him some valuable leadership lessons that Bryant detailed in his article. One of the things that influenced Knauss’ philosophy on leadership was the Marine Corp process of thinking through an issue. Bryant wrote, “I learned in the Marine Corps that I really liked strategy. Every operation in the military is based on a five-paragraph order, and the acronym is Smeac — situation, mission, execution, administration and communication. It’s a very logical flow.”

Another key leadership lesson is defined by the age-old acronym KISS or Keep it simple, sir. Bryant wrote that Knauss said, “how are you going to focus the organization? And it had better be simple, and it probably should not be more than three things. You’ve got to communicate it about 100 times and align your incentive structure to it. It’s about distilling the complex to the simple, and I’ve seen leaders fail because they do the reverse, by trying to make things into some intellectual exercise. Whatever business you’re in, there are fundamentals, just like blocking and tackling in football. It always comes back to the fundamentals. You cannot let yourself get bored with the fundamentals.”

But more than simply communicating something about 100 times to get your message across, Knauss believes that you have to make sure that people believe that you care about them. That is certainly something a compliance practitioner needs to take to heart. Knauss reflected, “it’s all about your people. If you’re going to engage the best and the brightest and retain them, they’d better think that you care more about them than you care about yourself. They’re not about making you look good. You’re about making them successful. If you really believe that and act on that, it gains you credibility and trust. You can run an organization based on fear for a short time. But trust is a much more powerful, long-term and sustainable way to drive an organization.”

Knauss had some interesting insights relating to how he evaluates potential hires that I think makes a lot of sense for the compliance professional to consider.

  1. Passion – Knauss looks for energy and considers whether the person will have an impact on the business.
  2. Smarts – Can the candidate think analytically, creatively and strategically?
  3. Develop others – Is there any pattern in the person’s career that shows they can develop people or put inversely, did people move up through an organization because they were mentored by this person?
  4. Communication skills – Knauss considers if he can imagine this person on a stage, inspiring a large group? He also assesses whether the candidate has an easy, informal manner to conversely test if they are too formal and too focused on hierarchy, as Knauss believes formality and rigidity do not work.
  5. Use of power v. use of authority – Here Knauss believes “it is much more powerful to use authority than power. One of the things I’ve learned is that as you move up in an organization, you’re given more power. The less you use the power you’ve been given, the more authority people give you, because they think: “You know what? This guy’s O.K.” Persuading people to do things – come along with me because we’re going in the right direction – is much more powerful over time.”
  6. Values – Knauss said that the final thing he tries to evaluate is the values of a candidate. He considers that it is important that they are honest and will tell the truth. Moreover, “do they also stand up for what they think is right in the company? It starts with integrity, which is really the grease of commerce. You get things done much more quickly when people trust you.”

However, I found one of the most important lessons that Knauss intoned was about how a leader should treat people. He told the story about how he joined a group of Marines who had been in the field for several weeks and had been eating C-rations. When Knauss met them, they were having their first hot meal since going into the field. Knauss related, “I had been up since 5 in the morning, and I was pretty hungry. I started walking over to get in front of the line, and this gunnery sergeant grabbed my shoulder and turned me around. He said: “Lieutenant, in the field the men always eat first. You can have some if there’s any left.” I said, “O.K., I get it.” That was the whole Marine Corps approach – it’s all about your people; it’s not about you. And if you’re going to lead these people, you’d better demonstrate that you care more about them than you care about yourself. I’ve never forgotten that, and that shaped my whole approach to leadership from then on.”

That final lesson is the most important one for any compliance practitioner. Your gold-plated written compliance program is only as strong as the people you have in your company. If you can demonstrate, and lead in compliance, by showing your fellow company employees that you are there to assist them but you will also go the extra mile to make them understand you care about them, you will get much more out of them at the end of the day.

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M&AIf you are interested in learning about mergers and acquisitions under the FCPA I am involved in to upcoming events designed to give you the most up-to-date advice on this area of compliance. Both events are sponsored by The Network. The first event is a webinar entitled appropriately enough, “Mergers and Acquisitions Under the FCPA” and is scheduled for  Tuesday, June 17th, 2014 TIME: 2:00 pm EDT. For registration and additional information click here. On Tuesday, June 24th the always popular Tom Fox/Stephen Martin roadshow returns to Denver where I will speak live on Merger and Acquisitions Under the FCPA and Stephen will talk about risk assessments under the FCPA. For information on the Denver event, click here

 

 

 

World Cup 2014

I am putting on a four part podcast series on the World Cup, detailing issues of bribery and corruption, together with an ongoing discussion of Team USA and this year’s tournament. I am joined by Mike Brown, the Managing Director of Infortal. You can check out Part I by clicking here of the series where we discuss bribery of referees in the lead up to the 2010 World Cup held in South Africa and FIFA’s response. Mike and I then review Team USA and it’s draw in Group g-the Group of Death. I hope that you will check out this series and enjoy it as much as Mike and I enjoy recording the episodes. Also remember, my podcast, the FCPA Compliance and Ethics Report is available for download at no charge on iTunes so you can listen to Part I on your commute to work. So sign up for the podcast from WordPress or iTunes and enjoy our series.

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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, 2014

 

 

 

 

March 10, 2014

Compliance Leadership Lessons from Captain Kirk

Captain KirkAs readers of this blog know, I am an über Star Trek maven. Last week, in Episode 41 of  my podcast, the FCPA Compliance and Ethics Report,  I visited with John Champion, one of the co-hosts of the Mission Log podcast. Mission Log will eventually review all of the Star Trek television episodes and movie franchise entries. John and his co-host Ken Ray began their journey summer of 2012 and have managed to get through all 79 episodes of the original Star Trek television series. They will next turn to the Star Trek movies, the animated television series, then to Star Trek – The Next Generation and on down the line of the world built by Gene Roddenberry.

I met John at the NMX Annual Conference earlier this year. I heard him talking about his podcast and checked it out. I also asked him if I could interview him for my podcast, specifically on the leadership lessons that a compliance practitioner might draw from the original captain of the Enterprise, James T. Kirk. John graciously took time out of busy schedule to visit with me on leadership, Star Trek and his podcast, Mission Log.

Champion views the leadership style of Captain Kirk as one that greatly depends on the inputs from the group that surrounds him; specifically Lt. Commander Spock and the ship’s physician, Dr. Leonard McCoy (Bones). In other words, his senior management team. More insightfully, Champion noted that it is the interplay of these three characters, Kirk, Spock and McCoy that not only makes the television series work so well but it also informs what he termed the “leadership psyche” of ethos, pathos and logos.

In the Greek world, these three were believed to be the key to successful leadership. Ethos is the Greek word for ‘character’. Through ethos, a leader stands as an authority figure, through credibility, competence and/or special expertise. Pathos is the Greek word for both ‘suffering’ and ‘experience’. It is generally recognized as the more compassionate side of humanity. Logos generally refers to the more rational side of humans. The best definition I have found for logos is on the site, PathosEthosLogos.com, which says that “Logos is the Greek word for “word,” however the true definition goes beyond that, and can be most closely described as that by which the inward thought is expressed and the inward thought itself”.

In the original Star Trek all three of these traits are identified in one character. Kirk, the ship’s captain, is the authoritarian figure. Spock, the half-human, half-Vulcan subscribes to the Vulcan ideology of suppressing one’s emotions in favor of logic. Finally, Bones is the romantic of the three and clearly speaks for the Greek concept of pathos. Champion’s dissection of Kirk’s leadership is that he takes all three of these concepts and uses them in his analysis. While clearly, at the end of the day, the decisions are the final responsibility of Kirk, he does actively seek input from his trusted advisors before coming to his final choice.

For the compliance practitioner, this means that you should seek a wide variety of inputs for your decision-making calculus. The Machiavellian trait of seeking trusted advise from experienced advisors, (Subject Matter Experts – SMEs) is certainly in play here. But by incorporating these three very different concepts into the way you might think through an issue can help you to evaluate a greater range of considerations. Monitoring, auditing and similar oversight techniques can bring you the logical examinations through data. But data is, in the final analysis, a product of human actions so the data must be read with some measure of humanity or human character. Values are not numbers but how we assign actions to that raw data? Finally, the ethos must be taken into account. Obviously there must be an ethical component to any decision made, but ethos also speaks to the character of the decision. Was the decision made using all the facts that were, or should have been, available to the decision-maker?

I thought about Champion’s remarks when I read the New York Times (NYT) Corner Office column by Adam Bryant, entitled “When Ideas Collide, Don’t Duck”. In this article, Bryant reported on his interview with Jeff Lawson, Chief Executive Officer (CEO) of Twillio, a cloud communications company. Lawson spoke about all three Greek leadership concepts in both his education in being a company head. From the ethos perspective, he spoke about his grandfather who built and sold a hardware company in Detroit. Then in his 70s, his grandfather took a job as a manufacturer’s representative, selling paint accessories to hardware stores that had previously been his competitors. His grandfather did this for another 20 years and when he died, Lawson said, “The Owner of every hardware store in Detroit came to the funeral. It was amazing.”

Lawson had another insight, which related to pathos and it revolved around feedback. He said, “This is especially important with millennial workers, who really want feedback. They want to always be learning, always be growing, and they’re looking for that constant feedback. It’s not that they’re looking for constant praise, but rather they want to keep score. They want to know how they’re doing.  Part of it is the short cycle of Internet feedback, and people who grew up with the Internet just expect quick feedback on things. That’s just part of the changing ethos, especially with younger workers. If you get into the habit of regular feedback, it’s not confrontational; it’s just the ebb and flow of conversation and a constant tweaking of how you work with somebody.”

Lawson incorporates the logos concept into his leadership set as well. He does this in the context of empowering employees to come up with new ideas but requires these employees to validate them to move forward. He said, “A lot of our values are about empowering employees. “Draw the owl” is a favorite. It’s based on the Internet meme of how to draw an owl. It says: “Step 1, draw some circles. Step 2, draw the rest of the owl.” That’s what it takes to be an entrepreneur — you have to put aside all the reasons you think you can’t do something or figure it out. Our job is to come in every day and take a vague problem that we don’t know how to solve and figure out the solution.”

Does art imitate life or does life imitate art? I am never too sure. But from my chat with John Champion, it is clear that even such a cultural marvel as Captain James T. Kirk can provide leadership lessons for the compliance practitioner.

If you have not yet done so, I hope you will go over and check out my podcasts at the FCPA Compliance and Ethics Report. I am up to Episode 41 and should have a couple more up this week. 

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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