Mini CooperThe price of oil hovers near $40 per barrel. There are all manner of responses suggested to this drop from nearly $100 per barrel just a short time ago. Yet the price of oil has long been much more than a political conversation, sometimes it leads to innovation. Today we celebrate the birth of the British Motor Corporation’s (BMC) newest car, with the launch of the small and affordable – at a price tag of less than $800 – Mark I Mini. The diminutive Mini went on to become one of the best-selling British cars in history.

Yet it was an energy crisis that led to the development of the Mini. The story behind the Mini began in August 1956, when President Gamal Abdel Nasser of Egypt nationalized the Suez Canal in response to the American and British decision to withdraw funding for a new dam’s construction due to Egypt’s Communist ties. The international crisis that followed led to fuel shortages and gasoline rationing across Europe. Sir Leonard Lord, head of BMC, wanted to produce a British alternative to the tiny, fuel-efficient German cars that were cornering the market after the Suez Crisis. His response was released on this date in 1959 and it has remained a British classic to this day.

I thought about Lord’s thoughtful response to a political and energy crisis when I read this week’s Corner Office column in the Sunday New York Times (NYT), where reporter Adam Bryant profiled Mark Toro, Managing Partner and Chairman of North American Properties – Atlanta Ltd., in an article entitled “Who Will Do What by When?. Toro had some interesting observations, which I thought would be useful for the Chief Compliance Officer (CCO) and compliance practitioner in working towards a best practices compliance program.

One of the more prescient concepts from Toro was one passed on from his father who was a mechanical engineer. Bryant wrote, “My father had another great saying: “You worry about the wrong things.” It was kind of his version of “Don’t sweat the small stuff.” There are very important things in life, so let’s spend our time on things that are relevant and consequential to the mission, whatever your mission is, as opposed to all the other noise that’s out there, because there’s lots of noise.” As a CCO or compliance practitioner you need to understand not only what is important in terms of resource allocation but also from an anti-corruption risk perspective for your organization.

Equally insightful was an early business lesson on leadership. Once in a moment of machismo, Toro literally pounded a meeting table with his fists to emphasize a point. When the person who was the subject of the tirade left the meeting, Toro said, “my boss looked at me and said, “You didn’t see it, did you?” I said, “What?” He said, “About five minutes into your tirade, he sat back and he was done listening to you.” Toro found this to be an “early lesson in self-awareness and how you impact others. It was not easy to develop, but I worked on it.”

Toro is a very results driven leader. Yet it is not the maniacal devotion to data analytics that he rewards. He believes in allowing his employees to commit to something and then follow through with the commitment. Toro said, “There are only two types of people in the world: people who do what they say they’re going to do when they say they’re going to do it, and people who don’t do what they say they’re going to do when they say they’re going to do it.” The key is that you ask for a commitment to do something, complete a task or an assignment and then there is accountability for that person.

Interestingly Toro suggests that being a creator is a way to get ahead in business. When asked about what he would tell college graduates, one of the things that will set you apart is to create. He stated, “Whether you’re a writer, a painter, a real estate developer, create something from whole cloth and do not be an intermediary. If you create value, you will be rewarded well beyond anything you could do from being in a middleman role, which makes you beholden to those who truly create the value.”

However it does not end at that point. Baker Hughes CCO Jay Martin has said that the difference in mediocre and great is in the execution. Toro obviously agrees when he said, “The process of conception, planning and execution is also hard for most people. And it’s the last part where people typically have trouble, because execution is about doing what you say you’re going to do.” Finally, he noted a key component of any CCO or compliance practitioner position, to manage compliance projects. Any program, policy or procedure implementation or enhancement is a project. It will require conception, planning and execution. Toro observes, “My perspective now is that everybody’s a project manager, no matter what business you’re in, and everybody’s a salesman. The people who can marry those two skill sets will always have an edge.”

Toro’s perspectives and the British Mini are lessons in project management including conception, planning and execution. The development of the Mini began in 1957 and took place under a veil of secrecy; the project was known only as ADO 15. After about two and a half years, a relatively short design period, the new car was ready for the approval of Lord, who immediately signed off on its production. The Mini Cooper followed a few years later, engineered by the racecar builder John Cooper, which became a favorite of Mini enthusiasts worldwide.

How iconic is the Mini? By the year 2000, 5.3 million Minis had been produced. Around that same time, a panel of 130 international journalists voted the Mini “European Car of the Century.” An interesting outcome to an energy issue from the 1950s.

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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, 2015

Water Going Uphill 2Usually the question I am posed is how far down the chain must you go in your due diligence to ensure that your suppliers are in compliance with the Foreign Corrupt Practices Act (FCPA). I would pose that now, after the Petrobras scandal, a company may need to examine the flow in the other direction. I thought about this directional shift when I read an exhaustive report in the Sunday New York Times (NYT) on the Petrobras scandal, entitled “Brazil’s Great Oil Swindle, by David Segal. The article reviews the genesis of and details the ongoing nature of the Petrobras scandal.

While I have previously written about the other Brazilian companies that have been caught up in the scandal, such as Oderbrecht, Camargo Corrêa and UTC Engenharia, Segal’s article detailed a level of immersion in corruption that should concern every US Company subject to the FCPA and catch the eye of Department of Justice (DOJ) prosecutors handling FCPA cases. It appears that the companies that had direct contracts with Petrobras also colluded in the old-fashioned anti-trust sense, so that not only did they control all the subcontract work done on any Petrobras project but they would also demand bribes from the subcontractors which they then passed up the chain to Petrobras executives and eventually Brazilian politicians. If this scheme turns out to be true, it literally could explode potential FCPA exposure for any US Company doing business on any subcontract where Petrobras was the eventual beneficiary.

Segal reported, “according to prosecutors, these companies stopped competing and started to collaborate. They formed a cartel and decided, in advance, which of them would win a particular deal. A charade competition was orchestrated, and the anointed winner could charge vastly more than it would in a free market.” Further, “A document obtained by prosecutors laid out what it called the “rules of the game.” The trumped-up bidding process was labeled a “sports tournament”, with an assortment of rounds and a “trophy.” There was a no-sore-loser codicil, too: “The teams that participate in a round should honor the rules that have been agreed on, even when they are not the winner.”

But the corruption did not stop simply at these non-Petrobras entities. These companies would demand bribes from their subcontractors that they passed up the line to Petrobras. Segal wrote, “From 1 to 5 percent of the value of a given contract was diverted to those on the receiving end of the scheme, a group that included 50 politicians from six parties, according to prosecutors. Money from cartel members took a circuitous route to politicians’ pockets, passing through ghost corporations whose owners made bribes look like consulting fees.”

Think about all of this for a minute. What happens when everyone and every company associated with a National Oil Company (NOC) is in on the corruption? I thought about this question when I read an article in the Financial Times (FT) by Andres Schipani, entitled “We were terrorized by the drop in oil prices, where he discussed how the drop in world oil prices has negatively affected Venezuela more than any other top oil producing company. Part of the country’s trouble is the rampant corruption around its NOC PDVSA. Schipani quoted a former minster for the following, “The design of the political economy here only benefits the corrupt.” Moreover, the country is near the bottom of the Transparency International Corruption Perceptions Index (TI-CPI) coming in at 161st out of 175 countries listed.

Most Chief Compliance Officers (CCOs) and compliance practitioners had focused their third party risk management program around third parties, first on the sales side and then in the Supply Chain (SC). However now companies may well have to look at other relationships, particularly those where the company is a subcontractor involved in a country prone to corruption with a NOC or other key state owned enterprise. Last year the Wall Street Journal (WSJ) in an article entitled “Venezuelan Firm Is Probed In U.S.”, by José De Córdoba and Christopher M. Matthews, reported that a US company ProEnergy Services LLC (ProEnergy), a Missouri based engineering, procurement and construction company, sold turbines to Venezuelan company Derwick Associates de Venezuela SA (Derwick), who provided them to the Venezuelan national power company. The article reported that the DOJ’s “criminal fraud section are reviewing actions of Derwick and ProEnergy for possible violations of the Foreign Corrupt Practices Act”. Derwick was reported to have been “awarded hundreds of millions of dollars in contracts in little more than a year to build power plants in Venezuela, shortly before the country’s power grid began to sputter in 2009”. All of this with a commission rate paid by ProEnergy to Derwick of a reported 5%.

The Brazilian investigation poses far more dire consequences for any US Company that did business with the cartel of Brazilian companies that had locked up the Petrobras work. It means that you need to go back immediately and not only review the underlying due diligence which you did (probably none); then review the contracts with those entities; and, finally, cross-reference to see if there were any contract over-charges which were rebated back to the cartel members. If so, you may well have a serious problem on your hands as any unwarranted rebates, refunds, customer credits or anything else that could have been readily converted into cash to be used to fund a bribe.

This second part is one thing that challenges many compliance officers. The compliance function does not always have visibility into the transactions assigned to specific contracts or projects like your company might be engaged in for Petrobras in Brazil. However it also speaks to the need for transaction monitoring as not simply a cutting edge technique or even best practice but a required financial controls tool that is also applicable to compliance internal controls as well.

As Brazilian prosecutors expand ever outward from Petrobras, US companies subject to the FCPA and UK companies and others subject to the UK Bribery Act would do well to review everything around their Brazilian operations, contracts and dealings. The Petrobras scandal has shown two clear trends to-date. First is that we are far from the end of this scandal. Second, the prosecutors have been fearless so far in following the corruption trail wherever it may go. If they follow it to US companies, they could prosecute them on their own in Brazil for violation of domestic anti-bribery and anti-corruption laws or turn the evidence over to the DOJ. The thing to do now is to get out ahead of this all too certain waterfall.

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, 2015

Social Media 5-IconsTo conclude this week’s posts, I wanted to list some of the more prevalent social media tools, explain what they are and how you might use them in a compliance program. (As usual I got carried away so this series will conclude on Monday of next week.) You need to remember that your compliance customer base are your employees. The younger the work force, the more tech savvy they will be and the more adapted to communicating through social media. According to Social Media Examiner’s 2015 Social Media Marketing Industry Report, the top two social networks for marketing are Facebook and LinkedIn. The three social media tools that hold the top spot for social media planning are LinkedIn, YouTube and Twitter. Marketers report that video streaming is becoming increasingly important tools for markets and that is currently encompassed in Meerkat and Periscope. Finally, I would add that Pinterest is another hot social media app.

Facebook

If you do not know what Facebook is at this point, you may have just transported down from a Borg Cube or perhaps you are a Vulcan looking for First Contact. This is the world’s most ubiquitous social media tool. It combines both personal and business applications. For the compliance practitioner, think about the business uses of Facebook. You can open a Facebook page for your compliance function and share an unlimited amount of information. Equally importantly, you can be responsive when employees comment on your posts, it allows you to interact with them and demonstrate that compliance is listening and responsive. The more regularly you post, the more opportunity you have for connecting with your employee base and building trust.

YouTube 

Much like Facebook, YouTube is one of the most ubiquitous social media tools around. It allows you to upload video and audio recordings for unlimited play. For the compliance practitioner, why not consider creating a YouTube channel for your company’s compliance program. You can put together full training on specific issues or you can create short videos. For an example of short videos, you can check out the training videos I have on my website Advanced Compliance Solutions. If there is any information that you wish to put into a visual format, YouTube is one of the best solutions available to you.

LinkedIn

LinkedIn is almost as ubiquitous as Facebook and YouTube. As with Facebook, you can set up a business site or even a private compliance group for your organization. Your employees are the best place to start adding followers, as they are not only your target audience but they are also your biggest advocates. You can encourage employees to add their compliance profile to their personal profiles. By doing so, they automatically become followers and can like, comment on, and share your company updates to help expand your viral reach. As with Facebook, LinkedIn provides you a platform to communicate with your employee base. It has a chat function that can be used to solicit feedback and comments going forward. You can also tie in with or ‘link to’ other groups and people that can facilitate not only creating but also expanding your culture of compliance.

Twitter

Earlier this week, I wrote about how you can use Twitter to capture information from the marketplace of ideas. However Twitter can also be used for communicating with your employee base. Tweets are publicly visible by default, but senders can restrict message delivery to just their followers. Users can tweet via the Twitter website, compatible external applications or by Short Message Service (SMS) available in certain countries. Retweeting is when users forward a tweet via Twitter. Both tweets and retweets can be tracked to see which ones are most popular. Finally, through the use of hashtags (#) users can group posts to Twitter together by topic.

I believe that Twitter is one of the most powerful tools (and completely underused tools) that is available to the compliance function. If employees follow their company’s name through a hashtag, they can see what trending topics other employees are discussing. Compliance practitioners can help lead that internal discussion through the same technique. Moreover, if the Chief Compliance Officer (CCO) or compliance function regularly monitors Twitter they can keep abreast of any communications and those can be used as a backup communication channel, in case the company hotline or other reporting system is not immediately available or even convenient.

Meerkat and Periscope

Two of the newest and perhaps coolest tools a CCO or compliance practitioner can utilize in the realm of social media are Meerkat and Periscope. Both tools allow you to tell a compliance story in real time, throughout your organization and beyond through the capture and broadcast of video, live through your smartphone. They are both live streaming apps that enable you to create a video and open the portal to anyone who wants to use it. Anybody in your Twitter community can click on that link and watch whatever you’re showing on your phone. The big piece is the mobile aspect. It is as simple as a basic tweet and hitting the “stream” button.

This is one of the more exciting new social media tools I see for the compliance practitioner. You could start a compliance campaign along the lines a campaign that the company Hootsuite initiated called “Follow the Sun” using Periscope. They decided to let their employees showcase what they called #HootsuiteLife. They gave access to different people in every company office around the globe. Throughout the day, it would “Follow the Sun,” and people in different offices would log into the Hootsuite account and walk around and show off their culture, interviewing their friends, etc. They talk about the importance of culture and now they are proving it. The number of inbound applications drastically increased after people got that sneak peek into their company. You could do the same for your worldwide compliance team.

You can live stream video training around the globe. Moreover, if you use either of these tools in conjunction with internal podcasting or other messaging you can create those all important “Compliance Reminders” which were so prominently mentioned in the Morgan Stanley Foreign Corrupt Practices Act (FCPA) Declination. The videos that you create with both of these tools can be saved and stored so a record of what you have created can be documented going forward.

Pinterest

According to Pinterest for Dummies, this tool is an online bulletin board, a visual take on the social bookmarking site, where the content shared is driven entirely by visuals. In fact, you cannot share something on Pinterest unless an image is involved. When you share something on Pinterest, each bookmark is called a pin. When you share someone else’s pin, it’s called a repin. Your group pins together by topic onto various boards, aka pinboards, in your profile. Each board mimics a real-life pinboard. You can share images you find online, or you can directly upload images. Using the “Pin It” button, you can share directly in your browser from any web page. You can also share your pins on Twitter and Facebook.

Although a relatively new social media tool, I find it to be one of the more interesting ones for use by the compliance function as it compliments many of the other tools I discussed above. You can set up your compliance account for your organization and pin items, lists, or other visual information that can be viewed and used by employees. In addition to the enumerated items, you can pin such things as a link, a website, graphics or other forms of information. If you think of it as an online bulletin board, you can consider all of the compliance information that you can post for your customer base and the interactions they can have back with you.

All of these tools can help you as CCO or a compliance practitioner to engage with your customer base. On Monday, I will conclude with some final thoughts on why the compliance function should use social media tools available to them.

Once again please remember that I am compiling a list of questions that you would like to be explored or answered on the use of social media in your compliance program. So if you have any questions email them to me, at tfox@tfoxlaw.com, and I will answer them within the next couple of weeks in my next Mailbag Episode on my podcast, the FCPA Compliance and Ethics Report.

 

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, 2015

Social Media 2I continue my exploration of the use of social media as a tool of doing compliance by looking at some concepts around the sharing of information. In a recent podcast on Social Media Examiner, entitled “Sharing: The Art and Science of Social Sharing”, podcast host Michael Stelzner interviewed Bryan Kramer, a social strategist and author of the book “Shareology: How Sharing is Powering the Human Economy”. Kramer talked about several concepts that I found particularly useful for a Chief Compliance Officer (CCO) or compliance practitioner to think through when considering the use of a social media strategy in a best practices anti-corruption compliance program, under the Foreign Corrupt Practices Act (FCPA), UK Bribery Act or some other compliance regime.

Kramer’s book Shareology is a study of how, what, where, when and why people and brands share. For this book, Kramer conducted more than 250 interviews with executives, marketers and social media people, as well as professors of linguistics, psychology, sociology and so on, with the question “why people share” in mind.

The answer came down to one thing: connection. He found that “People all have the desire to reach out and connect with other people, whether it’s through sharing content and having someone reply back or by sharing other people’s content and helping them out.” From this research, Kramer identified six types of people who share:

  • Altruist: Someone who shares something specific about one topic all the time.
  • Careerist: Someone who wants to become a thought leader in their own industry, so they can see their career grow.
  • Hipster: Someone who likes to try things for the first time and share it faster than everyone else.
  • Boomerang: Someone who asks a question so they can receive a comment only to reply.
  • Connector: Someone who likes to connect one or more persons to each other.
  • Selective: This is the observer.

I find all of these categories to be relevant to a CCO or compliance practitioner in considering the use of social media in their compliance program. All of these can describe not only the reasons to use social media but they can also help you to identify who in your organization might be inclined to use social media and how it can facilitate your compliance program going forward.

The Altruist, Hipster and Careerist speak to how a CCO or compliance practitioner can be seen in getting out the message of compliance throughout your organization. Whichever category you might fall into, it is still about the message or content going forward. I find nothing negative in being seen as one or the other if your message is useful. Even if you are my age, there is nothing wrong with incorporating a little Hipster into your communication skills. As my daughter often reminds me, Dad you are so uncool that you are retro, but that is cool too. Applying that maxim to your compliance regime, if you can communicate in a manner your workforce sees as interesting or even hip, it may well help facilitation incorporation of that message into their corporate DNA.

I found the Boomerang, Connector and Selective categories as good ways to think about how your customer base in compliance (i.e. your employees) might well use social media tools to communicate with the compliance function. The use of social media is certainly a two-way street and you, as the compliance practitioner, need to be ready to accept those communications back to you. Indeed some comments by your customer base could be the most important interactions that you have with employees as their comments or questions could lead you to uncovering issues which may have arisen before they become Code of Conduct or FCPA violations. More importantly, it could allow you to introduce a proscriptive solution which moves your program beyond even the prevent phase.

Kramer also has some insights about the substance of your social media message. Adapting his insights to the compliance field, I found a key message to be that the problem is that companies do not write the way they speak, and don’t speak the language of their employee base. In many ways, compliance is a brand and Kramer believes that “brands and the people representing those brands need to change their language. If they focus on the title and the quality of the content, among other things, it’ll resonate more with their audience.” He also advocates using the social media tools and apps available to you. He specifically mentions Meerkat and Periscope, Snapchat, memes and/or videos to raise the value of the content. He was quoted as saying, “If you have a blog and there are no visuals, you might as well shut it down.”

It would seem the thesis of Kramer’s work is that sharing is a primary method to communicate and connect. In any far-flung international corporation this is always a challenge, particularly for discipline which can be viewed as home office overhead at best; the Land of No populated by Dr. No at worst. Kramer says that you should work to hone your message through social media. Part of this is based on experimenting on what message to send and how to send it. Yet another aspect was based upon the Wave (of all things) where he discussed its development and coming to fruition in the early 1980s. It took some time for it to become popular but once it was communicated to enough disparate communications, it took off, literally. Kramer noted, “It’s the same thing with social media. On social media, we think something will go viral because the art is beautiful or the science is full of deep analytics, but at the end of the day it really takes time to build the community.”

This means that you will need to work to hone your message but also continue to plug away to send that message out. I think the Morgan Stanley Declination will always be instructional as one of the stated reasons the Department of Justice (DOJ) did not prosecute the company as they sent out 35 compliance reminders to its workforce, over 7 years. Social media can be used in the same cost effective way, to not only get the message of compliance out but also to receive information and communications back from your customer base, the company employees.

Once again please remember that I am compiling a list of questions that you would like to be explored or answered on the use of social media in your compliance program. So if you have any questions email them to me, at tfox@tfoxlaw.com, and I will answer them within the next couple of weeks in my next Mailbag Episode on my podcast, The FCPA Compliance and Ethics Report.

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, 2015

Our Lady at ChartresI continue my Great Structures Week with focus on great structural engineering and its innovations in the medieval world – that being the Gothic Cathedral. I am drawing these posts from The Great Courses offering, entitled “Understanding the World’s Greatest Structures: Science and Innovation from Antiquity to Modernity”, taught by Professor Stephen Ressler. When it comes to Gothic Cathedrals, Ressler notes that they are a rich case study in the development of “architecture and the limits of empirical design, literally written into the walls of the buildings.”

The innovation of the Gothic Cathedral was to use elements of the Roman basilica but to add “height and light, featuring ever taller naves, pierced by ever-larger clerestory windows, and delineated by ever-more-slender engaged columns”. The first innovation came with the pointed arch followed by ribbing on the columns to help stiffen and strength them more effectively. However the truly dynamic innovation was the creation of flying buttresses, which were huge additional columns outside the structure yet were designed to become load-bearing members so the highest point inside the cathedrals could be filled by light through ornately stained glass windows. Two of the finest examples of these Gothic Cathedrals are both found in France. They are the Cathedral of Our Lady at Chartres and Cathedral of St. Stephens at Bourges.

Just as the medieval world built up the structural engineering techniques from their forebears, as your compliance regime matures you can implement more sophisticated strategies to make your Foreign Corrupt Practices Acct (FCPA) compliance program a part of the way your company does business. Using an article in the Spring 2014 issue of the MIT Sloan Management Review, entitled “Combining Purpose with Profits”, as a basis, I have developed six core principles for incentives, for the compliance function in a best practices compliance program.St. Stephens at Bourges

1. Compliance incentives don’t have to be elaborate or novel. The first point is that there are only a limited number of compliance incentives that a company can meaningfully target. Evidence suggests the successful companies are the ones that were able to translate pedestrian-sounding compliance incentive goals into consistent and committed action.
2. Compliance incentives need supporting systems if they are to stick. People take cues from those around them, but people are fickle and easily confused, and gain and hedonic goals can quickly drive out compliance incentives. This means that you will need to construct a compliance function that provides a support system to help them operationalize their pro-incentives at different levels, and thereby make them stick. The specific systems which support incentives can be created specifically to your company but the key point is that they are delivered consistently because it signals that management is sincere.
3. Support systems are needed to reinforce compliance incentives. One important form of a supporting system for compliance incentives “Is to incorporate tangible manifestations of the company’s pro-social goals into the day-to-day work of employees.” Make the rewards visible. As stated in the FCPA Guidance, “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.”
4. Compliance incentives need a “counterweight” to endure. Goal-framing theory shows how easy it is for compliance incentives to be driven out by gain or hedonic goals, so even with the types of supporting systems it is quite common to see executives bowing to short-term financial pressures. Thus, a key factor in creating enduring compliance incentives is a “counterweight”; that is, any institutional mechanism that exists to enforce a continued focus on a nonfinancial goal. This means that in any financial downturn compliance incentives are not the first thing that gets thrown out the window and if my oft-cited hypothetical foreign Regional Manager misses his number for two quarters, he does not get fired. So the key is that the counterweight has real influence; it must hold the leader to account.
5. Compliance incentive alignment works in an oblique, not linear, way. The authors state, “In most companies, there is an implicit belief that all activities should be aligned in a linear and logical way, from a clear end point back to the starting point. The language used — from cascading goals to key performance indicators — is designed to reinforce this notion of alignment. But goal-framing theory suggests that the most successful companies are balancing multiple objectives (pro-social goals, gain goals, hedonic goals) that are not entirely compatible with one another, which makes a simple linear approach very hard to sustain.” What does this mean in practical terms for your compliance program? If you want your employees to align around compliance incentives, your company will have to “eschew narrow, linear thinking, and instead provide more scope for them to choose their own oblique pathway.” This means emphasizing compliance as part of your company’s DNA on a consistent basis — “the intention being that by encouraging individuals to do “good,” their collective effort leads, seemingly as a side-effect, to better financial results. The logic of “[compliance first], profitability second” needs to find its way deeply into the collective psyche of the company.”
6. Compliance incentive initiatives can be implemented at all levels. Who at your company is responsible for pursuing compliance incentives? If you head up a division or business unit, it is clearly your job to define what your pro-social goals are and to put in place the supporting structures and systems described here. But what if you are lower in the corporate hierarchy? It is tempting to think this is “someone else’s problem,” but actually there is no reason why you cannot follow your own version of the same process.

Looking for some 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.

The Gothic Cathedral is one of the greatest structural engineering feats mankind has ever created. It combined a dimension of height not surpassed for nearly 1000 years with an ingress of light not previous seen in structures. This use of light facilitated the development of the artistry of stained-glass windows.

For a review of what goes into the incentive structures of a best practices compliance program, I would suggest you check my book Doing Compliance: Design, Create, and Implement an Effective Anti-Corruption Compliance Program, which is available through Compliance Week. You can review the book and obtain a copy by clicking here.
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, 2015