FCPA Compliance and Ethics Blog

October 18, 2012

Put Boots on the Ground to Build Relationships

I have just returned from the Society of Corporate Compliance and Ethics (SCCE) 2012 National Conference. It was certainly an excellent event and kudos to Roy Snell, Adam Turtlebaub, Lizza Catalano and the entire SCCE team and all of the temporary workers they hired in Las Vegas to make the conference such a success. There were over 1200 attendees and numerous vendors that participate in the compliance ethics arena who added a buzz of excitement as they discussed many of their cutting edge products and services to us.

While it was not a formal theme of the Conference, one of the key things that almost every speaker I heard emphasized was that the compliance practitioner had to get out of the office and into the field. Online training is certainly a useful tool for large multi-national organizations but nothing beats in person training. Compliance officers need to get out and develop relationships so that employees will be more open to helping them keep the company running in a compliant manner.

I thought about the messages I heard at the SCCE conference on getting out in the field while reading an article in the Houston Business Journal, entitled “All good businesses are built on personal relationship”, by Bruce Rector. Rector’s thesis is that “All business is, in the final analysis, about people – and therefore about relationships.” At the end of the day, compliance, like business is about people and that means it is about relationships. But perhaps more importantly, is the development of personal relationships. As Rector correctly pointed out, if there are no relationships, there are no people and if there are no people, there exists no business. Rector gave three points to help foster business relationships which I thought might also help the compliance practitioner foster relationships to help move forward compliance within an organization.

I.                   Recognize that if you have a relationship problem in compliance, you might be the problem.

We compliance practitioners sometimes have a difficult time recognizing that we might be part of the problems that we face every day. We usually believe that it is the rest of the company who do not want to do business in a compliant manner or who cannot seem to do so. But being the company leaders in compliance, it is incumbent on us to “take accountability for the situation, stop avoiding it and deal with it.” As Rector points out, if you avoid a problem or do not address it “you are contributing to its perpetuation.” Moreover, you may be allowing conduct to occur which is not  in line with your company’s ethical values, your Code of Conduct or your Foreign Corrupt Practices Act (FCPA) or Bribery Act anti-corruption compliance program.

In other words, as the compliance practitioner, you need to step up and deal with the problem. Rector believes that many times “these issues flow out of relationship issues that need to be addressed.” There is no better way to strengthen a relationship than to get out of your office and get into the field. Go do some training, go meet with the Executive Leadership Team (ELT). One of my favorite activities was to simply visit another region, outside the US, and office there for a week or two. The key is to be proactive to create, repair or maintain the relationship because, as Rector notes, “if you are aware of the [relationship] problem and not dealing with the [relationship] problem, you are a part of the [relationship] problem.”

II.                Be absolutely clear in your communications.

Rector believes that “Difficulty often occurs because of murky communication from management.” The same is true for communication from a Compliance Department. I believe that this all starts with your Code of Conduct and your written FCPA/Bribery Act policy and procedures. Believe it or not there are a good many folks out in the field who are trying to do the right thing. While most Code of Conduct are now written in plain English, which can be understood by the non-lawyer, the same is not always true for compliance policies and procedures. They are often written by lawyers for lawyers. So start with the base line documents that your employees will be trying to follow and make sure that these documents are clear and understandable.

Additionally, Rector makes clear that as a compliance practitioner, when you deal with your employee base, “be crystal clear in stating your goals and expectations.” Rector believes that employees will “step up to meet the challenge that is clearly put before them.” So if you need information or documents for your survey or other purposes, make clear what you need. Do not immediately jump to the conclusion that people are trying to hide things from you if they do not fully respond to your communication because you must remember, how they interpret informs their understanding of the communication.

III.             Manage expectations properly.

The last line of point II leads to Rector’s third point, which is no matter who or what group you are dealing with, you must set “expectations appropriately”. This is true for the compliance practitioner whether you are dealing with third party vendors in the Supply Chain, agents and other foreign business representatives, your employee base, senior management or the Board of Directors. You must set the expectation but if something occurs that materially impacts these expectations, you “must immediately communicate to the person or business affected.” For, as Rector believes, “Nothing will detail a business relationship – or any relationship, actually – more than blindsiding someone with bad news that has been withheld for some time.” By properly managing the expectations of the company’s compliance group with the relationships that you have established in the company, you will make the doing of compliance less stressful for all involved.

The theme that I heard at the SCCE 2012 National Conference about getting out into the field seemed to tie directly into Rector’s advice on building relationships. The compliance practitioner works through the business folks because it is these people who are doing the business of the company. It is these people who are interacting and transacting business with foreign government officials and employees of state owned enterprises. It is the business unit people who make the decisions on who to hire as an agent or representative or which vendor should act as a customs broker or visa processor. We in compliance are there to support, and be subject matter experts, but it’s the business guys who are on the front line. So create and maintain your relationships with them and remember that if you have a relationship problem with someone else and you are not rectifying the problem, you are a part of the problem.

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, 2012

August 27, 2012

How Do You Change an Unhealthy Compliance Culture?

What is a healthy culture and how do you change an unhealthy culture? I have always thought that baseball was a simple game: you throw the ball; you hit the ball; you catch the ball. I had also thought that you could measure whether a baseball team had a healthy culture with a fairly easy-to-understand metric; that being wins and losses. For example: the more wins that your team has the better it should be, conversely the more losses your team has the worse it should be viewed. Based upon this fairly straightforward metric, I would have said that the Houston Astros did not play baseball very well in 2011, when they lost 106 games and won 56 games. I would have also said that they are an even worse team this year as they are on track to have an even shoddier season; their current trajectory is for 109 losses vs. 53 wins. All-in-all a pretty unhealthy baseball culture.

However, it turns out that my straightforward analysis of baseball culture is in fact too simple. As reported in the Houston Chronicle, team owner Jim Crane said “he believes sophisticated baseball fans are in tune with the team’s plans.” I would have thought that having not only the worst record in baseball and indeed the worst record in the history of the Houston franchise showed that the culture of baseball is not particularly good right now in Houston. However, it turns out that I simply have an “unsophisticated” view of how to approach the Astros culture and losing for the past three years and up to the next five years is the team’s culture plan. On a more positive note, in the same interview Crane said that the redesign of the Astros uniform that he has been so diligently working on has been submitted to Major League Baseball (MLB) for approval. So, if a winning baseball culture includes redesigned uniforms, it sounds like the Astros are the team for you.

I thought about the Astros culture of losing, my “unsophisticated” view of baseball and the Astros redesigned uniforms when reading a recent article by Andrew Hill in the Financial Times (FT), entitled “Lofty Aspirations”. Hill quoted Roger Steare, an expert on corporate leadership, values and ethics, who said that culture “describes the way human beings behave together – what they value and what they celebrate.” Hill posed the question of whether it is possible for government policy makers or regulators to shift the behaviors and values of scandal hit sectors of the business and if it is even desirable. Hill looked at the ongoing crisis in the financial services sector and found that it is so deep that regulators in the UK have “explored whether to intervene to influence corporate culture.” Hill cited a speech from 2010 by Hector Sants, then head of the Financial Services Authority (FSA) where he said that regulators can ask a Boards of Directors to provide agencies with “evidence of healthy culture, such as functional whistleblowing regimes, positive customer and employee engagement surveys, and a system for challenging “group think” at board level.” However, Sants also cautioned that “I don’t believe the regulator should be enforcing culture because it’s a contradiction in terms: if you enforce culture, you get a police state with compliance on the surface and subversion underneath.”

Hill argues that the best way to effect culture “is to combine strong leadership with the existing internal elements of a healthy corporate culture.” Further, for businesses which are “assailed by allegations of bad behavior is that, while it may take as long to create a good culture as it does to establish a good reputation, a strong set of values is usually harder to destroy unless the company is itself dismantled or taken over.” Hill went on to cite one example where a company Chief Executive Officer (CEO) had a strong “Lutheran philosophy” and the Chairman of the Board had a more creative tone. They certainly had a tension but this tension played out as constructive discussions at the highest levels of the company and did not allow for a shift too much in one direction or the other.

Hill recognizes that many CEOs want to create the type of company at which they wish to work. However, if they desire to make such changes they must communicate “from the start the values staff were expected to follow.” Nevertheless, Hill continued, “the message needs to be constantly reiterated, in person.” He also noted a “that a strong corporate culture will not on its own protect a company that has a bad strategy, poor governance or a weak business idea, let alone one that takes the wrong operational decisions.” Hill cited from the book “In Search of Excellence” where authors Tom Peters and Robert Waterman pointed out that “poorer-performing companies often have strong cultures, too, but dysfunctional ones. They are usually focused on internal politics rather than on the customer, or they focus on ‘the numbers’ rather than on the product and the people who make and sell it.”

All of this would seem to point, again and again, that a company’s values not only starts with tone-at-the-top but those values must be communicated again and again. Hill closed his article with a quote from Roger Steare, who said that he always asks the Directors that he consults with what is the purpose of their entity. “If they respond ‘To make a profit’, I know we’ve got a problem?” So how about the Astros and their culture? Do they have strong culture but are simply dysfunctional? Or do they need an intervention or structural change? Maybe all three…

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, 2012

July 24, 2012

To The Moon and Back: Company Values from the Ground Up

On May 25, 1961 President John F. Kennedy told a special joint session of Congress: “I believe this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to Earth.” Forty three years ago, today, on July 24 that dream was accomplished when Apollo 11 which had landed Neil Armstrong and Buzz Aldrin on the moon on July 21, returned home safely. Even with the insanity of America in the late 60s, it was an event that we rejoiced in because it seemed to encompass our best values as a nation. New York Times (NYT) columnist Thomas Friedman, in an article on Sunday, July 22 entitled “The Launching Pad”, said that “Cape Canaveral was the launching pad for our one national moon shot. It was a hugely inspiring project that drove scientific research, innovation, education and manufacturing”. In short, the space program was a bold statement of our national values.

I thought about Friedman’s article and more sadly, Sally Ride, the first female astronaut in space, in relation to a recent article in the Corner Office section of the NYT, entitled “It’s Not About Me. It’s About Our Company Values”, where Adam Bryant reported on an interview with Cathy Choi, President of Bulbrite. Ms. Choi came to her current position in a usual manner; however this different route gave her some interesting ideas about her management style. I found her journey in the business world to be an interesting arc in the context of a compliance practitioner seeking to move the compliance program forward in his or her company.

Choi’s educational background is in mathematics and theater. After receiving her undergraduate degree she got an MBA from New York University and went to work for a “big accounting firm”. From there she went to work as a Personal Assistant to a Hollywood movie producer. The company she now runs, Bulbrite, a lighting maker and supply company, was founded by her father who gave her the opportunity to come in and run the company.

Take a Deep Breath

Choi wondered not only if she could ever walk in her father’s shoes but whether the company’s employees would accept her. The hardest thing was “walking into a set culture and trying to adapt to that culture, while still making an impression.” To help accomplish the transition, her father taught her to “take a deep breath” when she had an idea to change the company. By taking that deep breath, it provided an opportunity for thought and reflection. If the idea was good before she took the deep breath, it would still be good after it was more thoroughly considered.

It’s About the Company

One of the more interesting insights that Choi had regarding her transition to leadership from her father was to “build an intentional culture.” By this she made a “concerted effort to make the company the leader, not me or my dad.” She began by asking the employees what their personal values were and why they held them. She catalogued these values on a white board and began to note patterns; such values as integrity, team spirit and commitment to each other stood out. She developed these values into an acronym “BE BRITE” and the company uses this as its touchstone for alignment in company decisions such as hiring.

Start From the Ground Up

Choi said the next step was to come up with a group of accepted behaviors which supported the company’s value systems. Her role was to listen and be a facilitator. Choi did not take a leadership team offsite and come up with these values or behaviors, they all came from the employees, or as Choi put it “from the ground up.” She felt that by doing this it gave the company’s value structure, “a life of its own.” In other words, she made the values about the company and the company the values leader.

For the compliance practitioner sometimes the biggest challenge is not only to get senior management but the troops in the trenches to embrace compliance. That is why I found the message of Cathy Choi so useful. She came into an environment that was totally foreign to her coupled with the fact of being the owner’s daughter. Yet she was able to turn these potential negatives into positives by taking some very basic steps, such as taking a deep breath, engaging others and listening to what they had to say and building a value system from the ground up rather than imposing one from the top down. Her story is a powerful lesson of one way to get those troops in the trenches to buy into what the compliance department is selling.

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, 2012

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