Show notes for week ending August 19, 2016

  1. Tom Fox posts on Key Energy FCPA enforcement action: Part I, Part II and Part III.
  2. More Och-Ziff FCPA news as its “Fixer” is arrested for FCPA violations. See this FCPA Blog report.
  3. EU’s to Olympic committee arrested and charged with ticket scalping in Rio. See BBC story.
  4. SEC has second enforcement action against company attempting to prevent employees from going to the SEC with complaints of illegal conduct. This time in a post-employment separation agreement. See Dan Marshall story in the FCPA Blog.
  5. Keppel executives alleged to have known about their agent’s bribery to obtain Petrobras business. See Petro Global News story.
  6. Compliance is a business. See blog post.

Maurice GilbertEd. Note-Today I have a guest post from Maurice Gilbert, Managing Partner of Conselium Executive Search.

In today’s regulatory climate, the Chief Compliance Officer faces increased personal liability for corporate wrongdoing. There are ways CCO’s can minimize personal risk on the job — but the process begins before accepting a CCO job offer in the first place.

Just as CCOs perform due diligence with third parties on behalf of their employers, they must perform their own due diligence on any potential employer during a job interview.

As a compliance-focused executive recruiter, I know the Yates Memo isn’t simply changing the way CCO’s do their jobs; it’s changing the way they look for jobs – so I asked compliance professionals around the world this month to share their best due diligence questions.

What follows is an aggregate of questions candidates have recently asked management and Boards when being considered for a CCO role with a new employer. The list is unedited and unfiltered – their words to your ears.

Print and save this list. And so that we can all help one another, I hope you will respond below with questions of your own.

Here we go:

  • Why is the position open?
  • If someone was previously in the position, what were the circumstances of his/her departure?
  • Prior to hiring me, would you permit me to meet privately with the chair of the board or committee responsible for compliance oversight?
  • What keeps you up at night?
  • For any prior government sanctioned infraction, what are the lessons learned? What changes have been made?
  • What do you believe to be the greatest regulatory compliance risks facing the company?
  • What do you believe to be the greatest business risks facing the company?
  • What do you believe to be the greatest geographic risks facing the company?
  • Describe the relationship between the company and the regulators
  • What are the main challenges for a CCO in the coming nine months?
  • Are there any areas where the compliance program is not meeting management or board expectations?
  • Do you believe employees are comfortable in reporting potential ethical/compliance infractions?
  • Have you ever had an outside evaluation of your compliance program?
  • Is there anything you believe management can do to support the compliance program?
  • What is the budget/staffing for the Compliance function?
  • What are the reporting lines for the role?
  • Can the CCO veto a Due Diligence target?
  • At what stage is the compliance department involved in establishing a relationship with a business partner?
  • At what stage is the compliance department involved in the M&A process?
  • Is it customary for the CCO to sit in operations meetings pertaining to new products and market initiatives so as to advise the business on risk?
  • What role do you see Compliance playing in management meetings?
  • What is the formal frequency of reporting to the Board and what is the policy for Board reporting on an as needed basis?
  • Have executives in your organization ever walked away from a business opportunity for ethical and/or compliance concerns?
  • Do you feel ethics/compliance is an essential part of a successful business or something that’s just a reality you have to deal with these days?
  • Do you think that ethical business practices do in fact lead to a more successful business if done the right way?
  • How do you view the compliance officer – as part of the business or an external function?
  • What did or didn’t you like about working with their former CCO?
  • What sort of questions have you raised to the previous Compliance Officer?   Have questions been purely technical or have they extended to broader business practices?
  • What do you and Board leadership think about regulatory compliance risk and whether it is viewed proactive or only reactively?
  • How do you think compliance can be a strategic partner in achieving your goals? Is it more just “keep us out of trouble?”
  • Are there ways you believe the compliance program could be a strategic advantage for the company in terms of its health and growth?
  • How would you describe the values of the leadership team and what does the tone at the top look like?
  • Who has authority to fire me?
  • What are you offering in the way of liability protection?
  • Am I free to engage my own counsel if necessary in a response to a government investigation?
  • Can I go to outside counsel on issues before discussing with General Counsel?

Have you road-tested any due diligence questions in a compliance job interview? The threat of personal liability will drive the importance of the due diligence process, so this list of questions can – and will – grow and change in the coming months and years. Share your input below and be part of the process.

Click here for a downloadable/printable version of the questions.

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Maurice Gilbert is Managing Partner of Conselium Executive Search, which specializes in placing Compliance Officers and Legal Counsel for clients in the U.S., Europe, Latin America and Asia Pacific. Maurice is also CEO of Corporate Compliance Insights, a worldwide publication devoted to governance, risk and compliance issues. Maurice can be reached at maurice@conselium.com 

DentistI had to go to the dentist yesterday. I went for what I thought was filling repair but I had somehow forgotten that it was a wisdom tooth removal and a filling repair. I know you are thinking either (1) why does someone his age still have wisdom teeth and (2) how could he ‘forget’ he was having said wisdom tooth removed? All I can do is channel my inner-Laura Petrolino and say as improbable as it sounds, both can and do occur, at least with me.

While I was letting the anesthesia kick in for the wisdom tooth removal, my dentist, Dr. Shan Batiste, was talking non-stop to the newly hired dental tech. Since I was both under anesthesia or had dental tools in my mouth, I could not stop to ask any follow up questions and simply listened to their dialogue. I am not sure if it was his first day or just the first time that he had worked with my dentist but she was imparting to him what it was in his interview that led her to offer the position to him. Rather amazingly, I found my dentist had some very interesting insights about the compliance function.

Dr. Batiste said the reason she hired the dental tech was more than simply his technical qualifications. I can attest he did know his way around the dental chair. She was interested in whether or not he was a problem-solver. She said the issues her office faces are varied and wide ranging every day. It can be 10 people in the waiting area who ‘dropped in’ without appointment; to more complicated dental and even medical problems; to financial and insurance issues; to tech issues around things from computer signatures to X-Rays machines. In other words, a wide variety of issues far beyond the technical competence of knowing what tool to use in a patient’s mouth or what the condition of a 40 year old filling might be from a visual inspection.

It struck me that the diverse problem solving requirements are very close to what the compliance professional must do and it pointed to the differences between the compliance discipline and the legal discipline in corporate America. Lawyers are there to protect the company. Such a role can include problem solving but it does not move to the types of solutions that a compliance professional must develop in a best practices compliance program.

One of the leading commentators in this area is Roy Snell, the Chief Executive Officer (CEO) of the Society of Corporate Compliance and Ethics (SCCE). Snell advocates for the compliance profession and one of his insights is that he believes it is the role of the compliance professional to be a problem-solver or as Snell says, stop, find and fix problems. An elegant, if not more direct statement than the one found in the FCPA Guidance that says a best practices compliance program should prevent, detect and remediate or you can consider McNulty’s Three Maxims of “What did you do to stay out of trouble?” “What did you do to find out? and, finally, “What did you do when you found out?”

Corporate compliance should exist to do compliance, not be a paper program run by lawyers. Compliance should be there to solve problems. In many ways compliance is the fulcrum corporate discipline because it touches so many aspects of the corporate world. For a corporation to actually do compliance, it must be done in conjunction with the other corporate functions. I used to point people to gifts, travel and entertainment reporting as a key way to explain how compliance works into an organization.

However, the example I use now is in Human Resources (HR). I use this illustration because it is not immediately self-evident how HR folds into compliance. Yet when I explain the Bank of New York Mellon and Qualcomm enforcement actions and relate the reported facts of the JPMorgan sons and daughters hiring program, listeners grasp how compliance relates to an organization in ways separately and differently from legal. This example from HR demonstrates that internal controls can be used in a variety of ways and for a variety of modes; including the compliance function.

A compliance function requires you to not only have technical competence in the discipline but to have a wider knowledge about the business in which you work. One of the more interesting questions I have heard when hiring for a compliance role is ‘Can you read a spreadsheet?’ because when you submit or propose a compliance solution, you will need to be aware of those costs. Most generally lawyers, in a legal department, are never required to read a spreadsheet nor do they generally provide remedies.

This difference between the focus of the compliance discipline from the corporate legal function is reflected in the structural changes that have evolved the profession into Compliance 2.0. In a recent blog post in the FCPA Blog, noted compliance commentator Donna Boehme gave said, “given the prominent rise of Compliance 2.0, so evident at Compliance Week 2016, there is good reason to believe CCOs will be more likely to find themselves in positions that empower them to design and manage robust, effective programs that are less likely to be the topic of troubling scandal headlines. The healthcare and big-bank industries, Siemens, WalMart and VW are already there.”

So are you a problem solver?

 

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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, 2016

IMG_0833One of the things any Chief Compliance Officer (CCO), or indeed any business leader, must manage is team conflict. In a recent Harvard Business Review (HBR) article, entitled “How to Preempt Team Conflict”, Ginka Toegel and Jean-Louis Barsoux reported on their study of team conflict. The article posits that team conflict can erupt not solely from the differences in opinion of disparate corporate disciplines but also from “perceived incompatibility in the way different team members think.” In other words, it is about the process and not about the content. (I am sure about now my process analyst wife is thinking, as I told you many times…) To remedy this problem, the authors promote a five step approach which considers how team members “look, act, speak, think and feel, to immunize the team against unproductive conflict when the pressure is on.”

The authors believe that leaders should allow team members to meet and engage in ‘five conversations’ around these areas. Through these conversations, they believe leaders can identify areas of potential friction, which might arise when the pressure is on the group. By getting these areas out into the open before the pressure hits, they believe the “teams establish a foundation of trust and understanding and are able to set ground rules for effective collaboration.” The five areas can be broken down as follows:

Look: Spotting the Difference

The authors believe that team members often have reactions “triggered by differences in the way people present themselves” so the goal of this discussion is to have “team members reflect on how they intend to come across to others—and how they actually do.” This can be as broad as dressing in a suit where the atmosphere is business casual to a lawyer using literary references in a technical software or engineering meeting.

The authors suggested this conversation could be facilitated with some of the following questions:

In your world…

  • what makes a good first impression? A bad one?
  • what do you notice first about others (dress, speech, demeanor)?
  • what does that make you think about them (rigid, pushy, lazy)?
  • what intangible credentials do you value (education, experience, connections)?
  • how do you perceive status differences?”

Act: Misjudging Behavior

It is almost axiomatic that “on diverse teams, clashing behavioral norms are a common source of trouble.” This prong can include issues as broad as personal space to being punctual and respectful of the group’s time. Equally, it can be such things as keeping the group on a tight schedule or building in flexibility for project direction changes. Here you can simply think of the difference manner in which an American, German, South Korean and Saudi Arabian (and anywhere in between) might act. The authors conclude, “It’s important to establish team norms around all these behaviors up front to avoid unnecessary antagonism.”

The authors suggested this conversation could be facilitated with some of the following questions:

In your world…

  • how important are punctuality and time limits?
  • are there consequences of being late or missing deadlines?
  • what is a comfortable physical distance for interacting in the workplace?
  • should people volunteer for assignments or wait to be nominated?
  • what group behaviors are valued (helping others, not complaining)?”

Speak: Dividing by Language

Unfortunately for Mr. Translations, this section does not mean you need to employ a translation service but it does recognize that different cultures use different communication styles. The authors recognize that even native speakers of the same language can have differences in the way they express themselves. Yet when your team consists of a wide variety of cultures, this effect can be magnified. The authors note that “depending on context, culture, and other factors, “yes” can mean “maybe” or “let’s try it” or even “no way.”” Moreover, “even laudable organizational goals can engender troublesome communication dynamics.”

The authors suggested this conversation could be facilitated with some of the following questions:

In your world…

  • is a promise an aspiration or a guarantee?
  • which is most important: directness or harmony?
  • are irony and sarcasm appreciated?
  • do interruptions signal interest or rudeness?
  • does silence mean reflection or disengagement?
  • should dissenting views be aired in public or discussed off-line?
  • is unsolicited feedback welcome?”

Think: Occupying Different Mindsets

As a recovering lawyer and the son of an engineer, I can certainly appreciate the differences in a legal approach from an engineering perspective. The authors do as well, writing, “Perhaps the biggest source of conflict on teams stems from the way in which members think about the work they’re doing. Their varied personalities and experiences make them alert to varying signals and cause them to take different approaches to problem solving and decision making. This can result in their working at cross-purposes. As one executive with a U.S. apparel company noted: “There is often tension between the ready-fire-aim types on our team and the more analytical colleagues.””

The authors cited to two separate examples of how this gulf was breached. In the first example the leadership of a team was rotated to align with the phase of the project so that “During the more creative and conceptual phases, the free-thinkers would be in charge, while analytical and detail-oriented members would take over evaluation, organization, and implementation activities.” In a second example, involving scientists and executives in a biotech company, “a facilitator used role play to help the two groups better understand each other’s perspective.”

The authors suggested this conversation could be facilitated with some of the following questions:

In your world…

  • is uncertainty viewed as a threat or an opportunity?
  • what’s more important: the big picture or the details?
  • is it better to be reliable or flexible?
  • what is the attitude toward failure?
  • how do people tolerate deviations from the plan?” 

Feel: Charting Emotions

Often there will be a wide variation in the way team members convey emotions and even passion and how they manage these same emotions. This can be true for both positive, including enthusiasm, and negative emotions, such as venting or even keeping thing bottled up for too long. The authors noted, “The tendency to signal irritation or discontent indirectly—through withdrawal, sarcasm, and privately complaining about one another—can be just as destructive as volatile outbursts and intimidation. It’s important to address the causes of disengagement directly, through open inquiry and debate, and come up with ways to disagree productively.”

The authors suggested this conversation could be facilitated with some of the following questions:

In your world…

  • what emotions (positive and negative) are acceptable and unacceptable to display in a business context?
  • how do people express anger or enthusiasm?
  • how would you react if you were annoyed with a teammate (with silence, body language, humor, through a third party)?”

This article provides solid guidance for the CCO or any business leader on not only how to anticipate conflict but concrete steps to head it off. The author’s conclude by noting that a benefit of these five conversations is that, “We’ve found that they include greater participation, improved creativity, and, ultimately, smarter decision making.” If you can achieve this on any project involving any corporate team, you have achieved something significant.

 

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, 2016

ARodAlex Rodriguez announced his retirement from baseball, effective Friday, August 12. In a New York Times (NYT) article he said, “Saying goodbye may be the hardest part of the job,” “But that’s what I’m doing today. As far as 700 [home runs], or any of those type of milestones, I would have had an unbelievable, fun time going after them, those are not the cards I was dealt.” So, in other words, the Yankees released a player, who at one time had the richest contract in baseball.

One of the cards with which Rodriguez was dealt was to be one of the greatest natural talents to hit a baseball in the past 50 years. The card he personally added to the mix was the use of performance enhancing drugs, usually claiming that he did not take them but occasionally admitting so on the public stage as well. The real problem for Rodriguez is that at 41 he is washed up as a major league baseball player. He will end his career with 656 home runs and I for one am glad that such a public cheater did not become the fourth person to slam 700 home runs. Not even the New York Yankees, who still owe him $21MM through the end of next season, could put up with his lack of performance any longer. He will be a ‘Special Advisor’ to the club which is the business world equivalent of an unwanted senior executive being moved to ‘Special Projects’. Still on the payroll but released from any real work.

Rodriguez’s sorry exit from baseball forms the basis for today’s blog post and most interestingly the NYT had another article in its Sunday edition from which every Chief Compliance Officer (CCO) and compliance practitioner should draw a valuable lesson. It was found in the Corner Office column where Adam Bryant interviewed Kevin Warren, the Chief Operating Officer (COO) for the Minnesota Vikings, in a piece entitled “Championships Are Won in the Details. In the business (and compliance world) this translates to execution. It does not matter how impressive your paper compliance program might be, if you do not execute the program going forward, you will not be doing compliance. Baker Hughes, Inc. (BHI) CCO puts it more colloquially when he says that execution is where the rubber meets the road.

Yet Warren has some additional insights from his position that I think apply to the CCO or compliance practitioner. When asked about his leadership style, he said that it had evolved. He described this evolution through an interesting analogy saying, “in the first part of my life and my career, I was rolling through stoplights. I was so busy. And now in my position, I stop at a stoplight and really take an opportunity to observe the surroundings. Maybe there’s someone on the side of the road who needs some help. Maybe there’s someone in a rush that needs to go ahead. That’s where I am now. There are more demands on my time, but I’ve become a much better listener. I’ve slowed down my thought process and tried to make sure I’m there for everyone.”

As a compliance leader, you must be available to employees literally from the Boardroom to the shop floor. If a compliance matter comes up, there must be someone there to advise, even if that advise is only to confirm the employee’s understanding of doing business in compliance or that their plan of action is within your company’s anti-corruption risk management parameters. The other observation is that compliance is one of the few corporate disciplines which is literally “there for everyone.” In my podcast series Unfair and Unbalanced, I have debated my co-host Roy Snell on this point but I have come around to Roy’s point of view. In many ways, compliance is becoming the key corporate discipline as it moves into the fabric of an organization. This is because it is the fulcrum by which so many corporate disciplines intersect.

Warren had a couple of additional insights for any compliance practitioner. One was around hiring. As you might expect for someone at his corporate level, by the time a candidate gets to him for an interview, the candidate has been thoroughly vetted in technical competence. So Warren wants to obtain a fuller measure of the candidate. He does so by inquiring into their passion for the position and whether they will give a top effort. These are excellent points for any CCO as well. Most compliance practitioners are passionate about compliance. They view it as more than simply a job. As a leader in compliance, you should inquire into this and if you find it in your employees, not only work to harness that passion but also use it going forward. That is one way to become a great leader.

Conversely, Warren intoned that when it comes to advice for employees “I think the best thing is for people to be really honest with themselves. Step off the treadmill a little bit and be honest with yourself about what you really want to do, what you want your legacy to be, what you want your life to look like. And people should really focus on nirvana. I’ve been blessed to reach nirvana because in my quiet times along this journey, I would sit and dream and write things down that I wanted to do. You most likely can’t reach a goal that you have not already achieved in your head. If, in your mind, the best you focus on is running an eight-minute mile, you will never run a six-minute mile.”

There are many people new to the compliance profession. One of the things that struck me at the recent Compliance Week 2016 was how many first time attendees were present. There are many new faces in compliance. If this is what you want to do, get out there and do it. You can attend conferences and meet others in the compliance profession. You can go the 2016 SCCE Compliance and Ethics Institute this September in Chicago, where there is a specific event designed to provide mentorships. The SCCE has one of, if not the top compliance certification programs going and you can become a certified compliance professional. Not only will such a certification give you personal satisfaction but it also provides a market differentiator when you are interviewing so your own personal brand will profit.

If you remember Rodriguez from the 90s during his tenure with the Mariners, you recall one of the greatest raw talents of all-time. Rodriguez chose to waste all of that by using steroids and ruining his legacy forever. He denied, then admitted, and then denied again that he used performance enhancing drugs. He later filed an appeal for his 2014 season long suspension for such use but when the day came for him to testify in an arbitration proceeding, he literally ran out of the hearing room as he would have been required to testify under oath for the first time in his life about steroid use. That to me will always be his lasting legacy.

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, 2016