What do real estate, trial lawyers and
Foreign Corrupt Practice Act (FCPA) compliance have in common? One of the
maxims you hear about the real estate business, even in the depressed market
over the past 18 months, is that the three most important things are: (1)
location, (2) location and (3) location. This commentator was a trial lawyer,
on the civil side, for about 18 years of his legal career and it was drilled
into him that the three most important things a trial lawyer brings to a
lawsuit are: (1) venue, (2) venue and (3) venue.
It was then with some interest that
this commentator saw a video on the Project
Counsel website (a great resource-they not only blog with summaries of
speakers at significant legal conferences but also present interviews with
conference speakers on its website), where Project Counsel Managing Director
Greg Bufithis, interviewed Tim Parkman, Managing Director of Lessons Learned
Ltd, a UK entity which assists companies in implementing compliance and ethics
programs. In response to a query by Mr. Bufithis on what was the single most
important item for a business which is implementing a compliance and ethics
program, Mr. Parkman responded that there were three: "(1) senior management,
(2) senior management and (3) senior management."
Parkman explained his logic behind this
statement of triumviratism because employees will pick up on the differences
between what senior management says versus the actions that they might take
with regard to compliance and ethics. He cited that a prime example of this is
what policy does a company take to punish those employees who may engage in
unethical and non-compliant behavior in order to meet company revenue targets
versus what rewards are handed out to those employees who integrate such
ethical and compliant behavior into their individual work practices going
forward?
A clear example of this is in the area
of annual bonuses. Does your company have, as a component of its bonus
compensation plan, a part dedicated to compliance and ethics? If so, how is
this component measured and then administered? There is very little in the
corporate world that an employee notices more than what goes into the
calculation of their bonuses. If a company sets expectations early in the year
and then follows through when annual bonuses are released, it can send a
powerful message to employees regarding the seriousness with which compliance
is taken at the company. There is nothing like putting your money where your
mouth is for people to stand up and take notice.
Parkman goes on to say that if you have
an employee who meets, or exceeds all his sales targets, but does so in a
manner which is opposite to the company's stated compliance and ethics values,
employees will watch and see how that employee is treated. Is that employee
rewarded with a large bonus? Is that employee promoted or are the employee's
violations of the company's compliance and ethics policies swept under the
carpet? If the employee is rewarded, or in any way not sanctioned for unethical
or non-compliant behavior, it will be noticed and other employees will act
accordingly.
In the energy industry, (and probably
lots of other industries) there is the following archetypal story. It usually
is told about a Regional Manager in the Far East or the Middle East who is
alleged to have said some along the following lines, "If I violate the Code of
Conduct I may or may not get caught. If I get caught I may or may not be
disciplined. But if don't make my revenue numbers for two quarters I will be
fired". If such a story is allowed to percolate throughout the company,
employees will feel that all that matters is hitting their revenue targets, not
acting in an ethical and compliant manner. Only senior management can directly
speak to this issue and senior management must make clear that "hitting the
numbers" in a manner which is antithetical to the company's compliance and
ethics program is not acceptable. But this must be done in both words and actions.
So does your company only "talk the
talk" or does it also "walk the walk?"
Visit the FCPA Compliance and Ethics Blog,
hosted by Thomas Fox, for more commentary on FCPA compliance, indemnities and
other forms of risk management for a worldwide energy practice, tax issues
faced by multi-national US companies, insurance coverage issues and protection
of trade secrets.
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
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© Thomas R. Fox, 2010