I am on assignment in Oxford on a two-week study course, focusing on the Tudors. For the first week we focused on Richard III to the end of Henry VIII’s reign. Although Richard III was not a Tudor, we began with him to study the ‘bad rap’ of negative publicity he received from the Tudor court, specifically Sir Thomas Moore and most particularly Shakespeare’s play, Richard III.
In the career of Henry VIII, we discussed the role of Thomas Cromwell and the series of steps leading up to the split from Rome to obtain his divorce from Catherine of Aragon and his dissolution of the Catholic Church in England to create the Church of England. One of the questions initially posed by our tutor, Janet Dickinson, was whether there was an overarching plan to take these steps or if they were made more on an ad hoc basis in response to events on the ground.
The consensus of our group was the steps taken were in response to the changing and evolving circumstances not only in England but also on the Continent, both in Rome and in the wider sphere of European politics. Initially it appeared the Pope was inclined to grant Henry his annulment but that solution was foreclosed when greater European politics intervened. This intervention was the invasion of Italy by the Spanish King Charles V, who was the nephew of Catherine of Aragon. Charles was disinclined to allow the Pope to grant Henry an annulment of the marriage of his aunt to Henry.
Making Henry the head of the Church of England was only one part of the break from Rome. The second part was the dissolution of the Catholic monasteries and passing of Catholic Church land to the English crown, as head of the Church of England. We may never know who initially came up with these ideas, whether it was Cromwell, another advisor or even if Henry himself came up with some or all of the plans. It does seem relatively clear that Cromwell developed the legal arguments supporting the legal claim for Henry to head up the church in England.
Yet, even at this point there was no clear plan to dissolve the Catholic Church’s property in England to the English crown. This move appears to have come in response to an attempt to clarify religious doctrine after the break with Rome. These widespread popular and clerical uprisings found support among the gentry and even the nobility; all culminating in the Pilgrimage of Grace.
If you are a loyal reader of this blog, you know that I am in the midst of a two-week series on the Ten Hallmarks of an Effective Compliance Program, as it was first laid out in the 2012 FCPA Guidance. I find the series of events I outlined above, from our first week of study of the Tudor period of English history, illustrate a key theme of compliance programs. It is that compliance programs must be flexible and have the ability to evolve. Simply put, it is not in the business interest of US companies (or others subject to the Foreign Corrupt Practices Act (FCPA)) to have a static compliance program. Compliance programs must have the flexibility to respond to a wide variety of factors, including changing market conditions both inside a corporation and on the ground.
Moreover, companies need to have the flexibility to design, create and implement a compliance program that manages the risks they face. As companies mature in their compliance function, they can begin to manage more, additional and further sophisticated risks. For instance, audits of third parties should not begin when your compliance program is made operational. It should wait an appropriate period of time so that you have enough information to review and study.
Additionally chronological developments drive more and greater compliance. Transaction monitoring is one clear area that has achieved significant growth in the past few years alone. If a static approach to compliance had been advocated by the Department of Justice (DOJ) this development might have never occurred.
Finally, the times of Henry VIII informs us that companies need to be ready to respond to events on the ground. Not only must companies have a compliance response to new products or service and entry into new markets; they must respond to new and more sophisticated ways to fund bribery and corruption. The sad fact is that the funding of bribery and corruption occurs from internal funds from a company; whether it is mis-labeling marketing expenses or charitable donations, burying commission payments in unauthorized discounts or making subsidiary financial statements so complicated that home office auditors cannot read them; businesses need to respond to the ever changing landscape. The monies to fund bribes come from the company itself, thus there is always a fraud upon the company by its own employees.
The goal of any best practices compliance program is to prevent, detect and remediate. To achieve this the DOJ and Securities and Exchange Commission (SEC) give companies a wide latitude to achieve these goals. The FCPA Guidance says “each compliance program should be tailored to an organization’s specific needs, risks, and challenges, the information provided below should not be considered a substitute for a company’s own assessment of the corporate compliance program most appropriate for that particular business organization. In the end, if designed carefully, implemented earnestly, and enforced fairly, a company’s compliance program—no matter how large or small the organization—will allow the company generally to prevent violations, detect those that do occur, and remediate them promptly and appropriately.”
I have long been drawn to the lessons of history and what they teach us in the present day in the field of compliance. The reason the events of the 1520s and 1530s can and do resonate today are that they are based on the actions of people. I find these lessons build into how companies should think about compliance in the 21st century.
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© Thomas R. Fox, 2016