As I end my week’s exploration of the intersection of bribery and corruption in international sports, I have also ended a week of solid listening to The Eagles 1970s studio albums. In honor of Glenn Frey, I will also end this week with a final tribute to Frey and his work with this seminal band from the 70s. Today, it is a tribute to the first Eagles hit, Take It Easy. While Jackson Browne was the primary author of this song, Frey stepped in to finish it when Browne could not complete it. The Eagles also opened their first album, titled The Eagles, with this cut.
I cannot think of anyone born after about 1970 who does not instantly recognize the opening cords from Bernie Leadon’s lead guitar on this iconic song. If this song alone does not make you want to go to Winslow Arizona, well probably nothing will. In fact the song made the town so famous that the city of Winslow erected a life-size bronze statue and mural commemorating the song, at the Standin’ on the Corner Park. The statue stands near a lamp post, the male figure securing an acoustic guitar between his right hand and the shoe of his right foot. Above his head, a metal sign, crafted in the style of US Route shields, displays the words “Standin’ on the corner”.
As I have noted this week, the world of sports continues to provide ample lessons to be learned for the Chief Compliance Officer (CCO) or compliance practitioner. Although we no longer have the sad sack Astros to kick around, there are many other candidates out there you can draw inspiration from for your compliance regime. For today, I want recap some of these lessons.
Perhaps the clearest sign from the scandals reviewed this week and the ongoing Fédération Internationale de Football Association (FIFA) scandal is the role of regulators such as the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) in leading the international fight against bribery and corruption. Only the US had the wherewithal to bring the charges against FIFA. While the Swiss have tagged along, they certainly did not take anything like the lead in this matter. Further, the allegations of FIFA’s bribery was publicized in Britain as long ago as 2010 and the Serious Fraud Office (SFO) never brought charges against FIFA or its cronies.
The bottom line is that only the US government has the ability and, more importantly, the will to engage in such a worldwide investigation and coordinate the actions of numerous countries in providing assistance. Do you think the Swiss police would have been so involved if it was not for the US government lead in this investigation? From President Obama on down, the US government has made clear that it will lead the international fight against bribery and corruption. The FIFA indictments are yet one more indication that they will continue to do so.
From the International Association of Athletics Federations (IAAF) scandal there are certain aspects similar to FIFA but made even more invidious. Not only was a there a long entrenched self-serving and self-congratulatory cabal running the organization, but they even out did FIFA by allegedly extorting money from athletes who they expected of using performance enhancing drugs to suppress positive drug tests. These officials were allowed to not only run rampart but also engage in essentially self-government of themselves. Kind of like having the foxes guard the henhouse.
I think the lesson is the checks and balances required in any best practices compliance program that form the basis of compliance. While some of these checks and balances are in the form of multiple internal levels of oversight, such as a Compliance Committee, which might be made up of senior managers from various disciplines; another level is brought about by internal controls and the concept of the segregation of duties (SODs). No one person should be allowed have so much discretionary power that they can approve vendors, approve contracts; then approve invoices for payments on those same vendors and contracts they have previously approved.
In the corporate world this is fairly standard in the US but there continues to be Foreign Corrupt Practices Act (FCPA) enforcement actions, emanating from outside the US, where a Country or Regional Manager can make such multiple approvals. This is not only a recipe for disaster financially but also allows the creation of a pot of money to pay a bribe much easier. Internal controls also work towards having continuous oversight, if a technology solution is used it can facilitate both the prevent and detect prongs of a best practices compliance program.
The lesson for the US company which does not have a compliance program in place is that the basic forms of corporate governance are not only mandatory for a compliance and ethics regime but they are also the basics for any minimums of corporate governance in the 21st century. The level of any fraud, including bribery and corruption under the FCPA, can be low, yet the attendant costs can be far in excess of any fine or penalty. For FIFA and the IAAF, their cost will be played out in the international press and court of world public opinion for some time to come. For the former heads and senior members of those organizations, the cost may well be more pedestrian, with jail terms for felony criminal violations.
Finally, from the allegations around offers of bribes to throw matches in professional tennis is the clear lesson that employees that are offered bribes need to have an avenue to be able to report such conduct. For the CCO, it is important that employees have confidence and trust in the organization so they are willing to make such reports. To stop the scourge of bribery and corruption in any international sports group, the management must take the lead in communicating that such actions will not be tolerated and that anything less would result in expulsion and banishment. That is similar to any top management that must clearly set the expectation that it is more important for employees to follow the law than to make their quarterly numbers. For if management does not do so and communicates that making your quarterly numbers are more important, employees will find a way to make their quarterly numbers.
Moreover, it is important any company knows if a vendor, sales agent or any other party has offered or demanded a bribe to do business. Even if your employees tosses them out of the office on their collective ear, it is incumbent you be made aware of the demand/offer so you can bring it to the attention of the counter-party and take appropriate remedial action. Indeed, in many industries the number of agents or other representatives is small enough that they can be known. If there is a collective refusal to do business with such corrupt third parties, it can be a powerful driver of business behavior.
So I end this week with a fond farewell to Glenn Frey and I hope you are taking it easy about now. For a YouTube clip of The Eagles playing Take It Easy, click here.
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© Thomas R. Fox, 2016