ExpectationsToday I want to talk about two different techniques that your HR function can use to help the compliance function by honoring two very different yet equally famous baseball players who died on Sunday. The first was Jim O’Toole, who pitched for the Cincinnati Reds in the 1960s and who led their pitching staff when they went to the World Series in 1961. He lost the Opening Game and Game 4 to the Yankees’ great Whitey Ford. Yet, according New York Times (NYT) obituary, O’Toole said one of his proudest moments in his career was when National League Manager selected him to start the 1963 All-Star Game, “over the future Hall of Fame pitchers Sandy Koufax, Don Drysdale, Juan Marichal and Warren Spahn.” The second player was Dave Henderson, who, in 1986, broke the collective hearts of Gene Autry and all California Angels fans when with the Boston Red Sox one strike from elimination in Game 5 of the American League Championship Series (ALCS), Henderson hit a go-ahead two-run homer off Donnie Moore over the left center-field wall in the top of the ninth. Boston went on to win the ALCS. I should note the baseball gods repaid the Red Sox with Bill Buckner boot in Game 6 against the New York Mets in the World Series.

Hiring practices under the Foreign Corrupt Practices Act (FCPA) are not often given much thought or widely discussed. They have come up for discussion more recently because of the issues surrounding the FCPA enforcement action involving BNY Mellon’s hiring of sons and a nephew of foreign government officials but this was around the company’s failure to follow its own hiring procedure in granting an illegal benefit under the FCPA. Other companies’ similar hiring practices are under regulator scrutiny. As far back as 2004, in Opinion Release 04-02, the Department of Justice (DOJ) realized this was an important part of an overall compliance program when it approved a proposed compliance program that had the following requirement:

Clearly articulated procedures which ensure that discretionary authority is not delegated to persons who the company knows have a propensity to engage in illegal or improper activities.

 Why is hiring so important under the FCPA? It is because hiring is important to any company’s health and reputation. Like most areas of FCPA compliance good hiring practices for those employees who will do business in compliance with anti-corruption laws such as the FCPA are simply good business practice. Steven D. Levitt and Stephen J. Dubner writing in a Wall Street Journal (WSJ) article, entitled “How to Trick the Guilty and Gullible into Revealing Themselves”, which was adapted from their most recent book Think Like a Freak, cite the following statistic, “By one industry estimate, it costs an average of roughly $4,000 to replace a single employee, and one survey of 2,500 companies found that a single bad hire can cost more than $25,000 in lost productivity, lower morale and the like.” In one company I worked for this estimate went as high as $400,000 to hire and fully train a new employee. I would add that those costs could go up significantly if a bad hire violates the FCPA.

Brooke Denihan Barrett, Chief Executive Officer (CEO) of the Denihan Hospitality Group, interviewed in a New York Times (NYT) Corner Office column said that by the “time somebody meets me, you can assume that the skills are there. So what I interview for is fit. And I’m always very curious to know, what is it about our company that appeals to that person?” She asks specifically about culture, requesting the candidate define it and how they think that culture is special. She also asks candidates to talk about a failure, what lessons they learned from the experience and how they dealt with the experience. I would suggest that both of those lines of inquiries should be used when evaluating a candidate for hire.

In another Corner Office column, Adam Bryant profiled Carmelyn P. Malalis, Commissioner of the New York City Commission on Human Rights. Malalis believes that asking about community relationships is important for work on the Commission. I would take from this that inquiring about the professional organizations a prospective employee might belong to can be a useful, if under-used tool for compliance. By inquiring into how a prospective hire may work with others in an industry, you can get a sense of how they may work in group settings. Another technique Malalais champions is asking for references from a person the candidate may have supervised. Think about this for a minute; it can be quite enlightening about how a person is to work for and could give you insight into whether they will step over any lines.

In a completely different arena, Brian Ching, the General Manager of Houston’s professional women’s soccer team the Houston Dash, uses another technique in his hiring process, which can help facilitate the compliance function. It involves setting expectations. Ching informs prospective Dash candidates, whether draftees or free agents, about the intentions the club has for the players on the squad. In addition to the obvious requirement for a professional soccer player to be technically proficient in the game of soccer, the team expects each player to have significant community involvement to help develop a fan base for the club. In the player interview process, this is thoroughly explained and each prospective player is asked if they would be willing to take on this additional role. But more than simply using this Q&A as an evaluation technique, it allows the team to communicate its expectations to each potential team member.

This is something that HR and others involved in the hiring process can take to heart. They should have a serious and frank discussion with all potential hires, particularly those going into senior management or FCPA-related high-risk areas. This not only allows an evaluation to determine if a hire will be a cultural fit for a company but it permits a company to directly express its expectations surrounding FCPA compliance and doing business ethically if a person is hired. By starting these discussions during the hiring process you can expand and reinforce it in subsequent interviews and once again when the candidate is hired and on-boarded into the company.

Jim O’Toole pitching to Dave Henderson in the Field of Dreams. That is one match up I would love to see.

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