In this episode I consider the role of the Boards of Directors in having a Compliance Committee and having a compliance expert on the Board itself. When you consider any of the most recent corporate scandals, from industries as wide as pharmaceutical to banking to manufacturing to transportation, one of the key themes in common was they had no compliance expertise on the Board of Directors. This lack of a key resource to the Board is something which has now drawn the attention of regulators and prosecutors.
At the Board of Directors level, a Board Compliance Committee can devote itself exclusively to non-financial compliance, such as FCPA compliance. While many companies have fulfilled these obligations through an Audit Committee, clearly the better practice is to have a separate Compliance Committee. The reason is clear, that compliance has become not only central to any well-run business but it is critical to overseeing a wider variety of risks than the typical Audit Committee has experience with, which is usually only aimed towards financial risks.
Every Board of Directors need a true compliance expert sitting on their Board. Almost every Board has a former Chief Financial Officer, former head of Internal Audit or persons with a similar background and often times these are also the Audit Committee members of the Board. Such a background brings a level of sophistication, training and subject matter expertise that can help all companies with their financial reporting and other finance-based issues. All of these considerations were incorporated into the Justice Department’s thinking when it added the requirement for compliance expertise to a Board of Directors in the 2017 FCPA Corporate Enforcement Policy.
For more information on the role of the Board of Directors and compliance, check out the information on my new book, the Complete Compliance Handbook, which will be published by Compliance Week in April 2018. In it, you will find out how you can more fully incorporate a Board of Directors into your compliance program. It is available for PreSale here.