In addition to a company’s senior management, there is a Board of Directors at the top. Yet the role of the Board is different than that of senior management. For the Board of Directors, the 2020 Update stated:
Oversight – What compliance expertise has been available on the board of directors? Have the board of directors and/or external auditors held executive or private sessions with the compliance and control functions? What types of information have the board of directors and senior management examined in their exercise of oversight in the area in which the misconduct occurred?
Having a Board member with specific compliance expertise or heading a Compliance Committee can provide a level of oversight and commitment to achieving this goal. The DOJ enshrined this requirement in the FCPA Corporate Enforcement Policy. This means that when your company is evaluated by the DOJ, under the factors set out in the 2020 Update and FCPA Corporate Enforcement Policy, to retrospectively determine if your company had a best practices compliance program in place at the time of any violation, you need to have not only the structure of the Board-level Compliance Committee but also the specific subject matter expertise (SME) on the Board and on that committee.
Another arm of the US government has recognized the need for such expertise at the Board level. In 2015, the Office of Inspector General (OIG), in a publication entitled “Practical Guidance for Health Care Governing Boards”, called for greater compliance expertise at the Board level. The OIG said that a Board can raise its level of substantive expertise with respect to regulatory and compliance matters by adding to the Board a compliance member. The presence of a such a compliance professional with SME “on the board sends a strong message about the organization’s commitment to compliance, provides a valuable resource to other board members and helps the board better fulfill its oversight obligations.”
All of this means that every Board of Directors needs a true compliance expert. Almost every Board has a former Chief Financial Officer (CFO), 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 SME that can help all companies with their financial reporting and other finance-based issues. So why is there not such SME at the Board level from the compliance profession?
Three key takeaways:
- The 2020 Update requires active Board of Director engagement and oversight around compliance
- Board communication on compliance is a two-way street; both inbound and outbound
- Does the Board of Directors have a compliance expert?