Effective Compliance Training
“Conducting effective training programs” is listed in the 2005 Federal Sentencing Guidelines as one of the factors the Department of Justice will take into account when a company, accused of an FCPA violation, is being evaluated for a sentence reduction. The Sentencing Guidelines mandate states “(4) (A) The organization shall take reasonable steps to communicate periodically and in a practical manner its standards and procedures, and other aspects of the compliance and ethics program, to the individuals referred to in subdivision (B) by conducting effective training programs and otherwise disseminating information appropriate to such individuals’ respective roles and responsibilities.”
But what is an “effective training program”? Andrea Wrage has written in her blog Wragblog and Ethisphere Magazine that she believes there are two general approaches to ethics and compliance training. The first approach focuses on knowledge of the rules “as clear and sharp as barbed wire” so that the cowboys in the company will not run wild. This is the approach most US in-house lawyers feel is required for their company’s operations teams and is generally designed to help avoid criminal liability.
The second is to train on ethical values and is more prevalent in Europe where ethics and compliance are more designed to communicate a company’s underlying corporate values in its operations. This approach anticipates that most employees are decent and law-abiding and will not knowingly engage in bribery and corruption. Additionally, you can never create enough rules to govern every situation and train each employee on every rule so a company must hire trustworthy people and give them sufficient information to make the correct ethical and compliant decision. Ms. Wrage characterizes the two different approaches as “ethics” vs. “values”.
Both approaches have merit but both can catastrophically fail without the other components of an effective compliance program. Although it was not brought down by an FCPA violation, the Enron Code of Ethics was viewed (at least at one time) as one of the strongest in the energy industry. And not to focus on US companies only, Siemens had one of the most robust Codes of Ethics for a European company before its multi-billion dollar (or euro-take your pick) fine and profit disgorgement. So the training on both of these company’s “Gold Standard” codes of ethics did not turn out to be too helpful.
So what should a company’s training focus on to be “effective” under the Sentencing Guidelines? It appears that effective ethics and compliance training should emphasize both approaches. Americans are long taught what the rules are in whatever life they choose. They expect to be told what the rules will be so that they know where the line is drawn that they should not step over. Probably the single comment I have heard the most when putting on ethics and compliance training in the US is “Just tell me what I can and can’t do”. However, really effective training requires that employees be able to apply the rules to the incredibly wide and ever-changing situations which confront them in the real world. This is where communicating a company’s values are important. In other words, how would your conduct look if it was plastered on You Tube the next week?
This is the first of a two-part series on ethics and compliance training.
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.
© Thomas R. Fox, 2010