The FCPA Guidance states, “In addition to evaluating the design and implementation of a compliance program throughout an organization, enforcement of that program is fundamental to its effectiveness. A compliance program should apply from the board room to the supply room—no one should be beyond its reach. DOJ and SEC will thus consider whether, when enforcing a compliance program, a company has appropriate and clear disciplinary procedures, whether those procedures are applied reliably and promptly, and whether they are commensurate with the violation. Many companies have found that publicizing disciplinary actions internally, where appropriate under local law, can have an important deterrent effect, demonstrating that unethical and unlawful actions have swift and sure consequences.”
This means you need to have recognized incentives for doing business under your Code of Conduct and in fulfillment of your compliance policy and procedures. Incentives can be immediate such as cash bonuses or other awards or more long term, such as promotion within an organization. Conversely, if someone violates your Code of Conduct, there needs to be consequences for such violation.
A key concept to recognize at this juncture is that procedural fairness is one of the things that will bring credibility to your compliance program. It is called the Fair Process Doctrine and this Doctrine generally recognizes that there are fair procedures, not arbitrary ones, in processes involving rights. Considerable research has shown that people are more willing to accept negative, unfavorable, and non-preferred outcomes when they are arrived at by processes and procedures that are perceived as fair. Adhering to the Doctrine in the areas of incentives, promotion and discipline for any compliance function is key to have credibility with the rest of the workforce.
Compliance incentives do not have to be extravagant or groundbreaking. Even rather plain vanilla incentives can work if you deliver it consistently, if you make the rewards visible, as the FCPA Guidance states, “Beyond financial incentives, some companies have highlighted compliance within their organizations by recognizing compliance professionals and internal audit staff. Others have made working in the company’s compliance organization a way to advance an employee’s career.” Lastly, make certain that your compliance incentives can be implemented on all levels within your organization.
For those struggling with some metrics around specific compliance obligations to measure against, you could start with the following examples of compliance obligations that are measured and evaluated.
For Senior Management
- Lead by example in your own conduct and in the decisions you take, to the resources and time you commit to compliance.
- Facilitate and proactively practice in day-to-day activities the key compliance competencies, both internally and externally.
- Support specific initiatives from the Chief Executive Officer (CEO), legal and compliance functions.
For Middle Management
- Demonstrate, facilitate and proactively practice in day-to-day activities the key compliance competencies, both internally and externally.
- Support specific initiatives from the legal and compliance functions.
- Ensure that all employees, agents and contractors directly or indirectly reporting to you fully complete all required training and communications in a timely manner.
- Provide full cooperation with investigations conducted by the compliance or legal functions of any alleged violation of compliance policies.
- Include the Chief Compliance Officer (CCO) or another legal or compliance function representative in your management meetings at least twice per year, per geography.
- Identify instances of non-compliance and support compliance monitoring and reporting systems.
- Partner with compliance in resolving compliance issues.
For Business Development or Company Sales Representatives
- Certify that all employees, agents and contractors directly or indirectly reporting to you have fully reported all sales and marketing interactions with all government officials in a timely manner.
- Certify that all employees, agents and contractors directly or indirectly reporting to you have fully, promptly and accurately reported all expenses with third party sales representatives have occurred.
Another important part is around promotion of employees up to senior management. Human Resources (HR) could help you in compliance to lead the effort to promote only employees who demonstrate a commitment to doing business in compliance. Once again the Fair Process Doctrine is critical here as a part of ongoing employee evaluations and promotions. If your company is seen to advance and only reward employees who achieve their numbers by whatever means necessary, other employees will certainly take note and it will be understood what management evaluates, and rewards, employees upon. I have often heard the tale about some Far East Region Manager which goes along the following lines “If I violated the Code of Conduct I may or may not get caught. If I get caught I may or may not be disciplined. If I miss my numbers for two quarters, I will be fired”. If this is what other employees believe about how they are evaluated and the basis for promotion, you have lost the compliance battle.
The types of discipline within a company are fairly standard. Most generally it is any negative consequence, up to and including termination. However, I believe that the key to discipline is procedural fairness and this will help to bring credibility to your compliance program.
Discipline must not only be administered fairly but it must be administered uniformly across the company for the violation of any compliance policy. Simply put if you are going to fire employees in South America for lying on their expense reports, you have to fire them in North America for the same offense. It cannot matter that the North American employee is a friend of yours or worse yet a ‘high producer’. Failure to administer discipline uniformly will destroy any vestige of credibility that you may have developed.
For more information on this Hallmark, check out my book Doing Compliance: Design, Create and Implement an Effective Anti-Corruption Compliance Program, which is available through Compliance Week by clicking here.
For a video podcast on this Hallmark 6, click here.
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© Thomas R. Fox, 2016