One sign of a mature
Foreign Corrupt Practices Act (FCPA) compliance and ethics program is the
extent to which a company's Human Resources (HR) Department is involved in
implementing a solution. While many practitioners do not immediately consider
HR as a key component of a FCPA compliance solution, it can be one of the
lynch-pins in spreading a company's commitment to compliance throughout the
employee base. HR can also be used to 'connect the dots' in many divergent
elements of a FCPA compliance and ethics program. My next couple of postings
will discuss the role of HR in such a program. The first installment will discuss
training, employee evaluation, succession planning and hotlines and
investigations. In the next posting, we will discuss background screening,
doing 'more with less' and finally, what to do when the government comes
calling.
Training
A key role for HR in any
company is training. This has traditionally been in areas such as
discrimination, harassment and safety, to name just a few, and based on this
traditional role of HR in training this commentator would submit that it is a
natural extension of HR's function to the area of FCPA compliance and ethics.
There is a training requirement set forth in the US Sentencing Guidelines.
Companies are mandated to "take reasonable
steps to communicate periodically and in a practical manner its standards and
procedures, and other aspects of the compliance and ethics program, to the
individuals referred to in subdivision (B) by conducting effective training
programs and otherwise disseminating information appropriate to such
individuals' respective roles and responsibilities."
What type of training
should HR utilize in the FCPA compliance and ethics arena? The consensus seems
to be that there are three general approaches to ethics and compliance training
which have been used successfully. The first is the most traditional and that
is in-person classroom training. This gives employees an opportunity to see,
meet and interact directly with the trainer, not an insignificant dynamic in
the corporate environment. It can also lead to confidential discussions after
such in-person training. All FCPA compliance and ethics training should be
coordinated and both the attendance and result recorded. Results can be
tabulated through short questionnaires immediately following the training and
bench-marked through more comprehensive interviewing of selected training
participants to determine overall effectiveness.
Employee Evaluation
and Succession Planning
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? Conversely what rewards are
handed out to those employees who integrate such ethical and compliant behavior
into their individual work practices going forward? One of the very important
functions of HR is assisting management in setting the criteria for employee
bonuses and in the evaluation of employees for the bonuses. This is an equally
important role in conveying the company message of adherence to a FCPA
compliance and ethics policy. This requirement is codified in the Sentencing
Guidelines with the following language, "The
organization's compliance and ethics program shall be promoted and enforced
consistently throughout the organization through (A) appropriate incentives to
perform in accordance with the compliance and ethics program; and (B)
appropriate disciplinary measures for engaging in criminal conduct and for
failing to take reasonable steps to prevent or detect criminal conduct."
Does a company have, as a
component of its bonus compensation plan, a part dedicated to FCPA 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. HR can, and should, facilitate this
process by setting expectations early in the year and then following through
when annual bonuses are released. With the assistance of HR, such a bonus 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.
In addition to employee
evaluation, HR can play a key role in assisting a company to identify early on
in an employee's career the propensity for compliance and ethics by focusing on
leadership behaviors in addition to simply business excellence. If a company
has an employee who meets, or exceeds, all his sales targets, but does so in a
manner which is opposite to the company's stated FCPA compliance and ethics
values, other 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, both monetarily and through
promotions, or in any way not sanctioned for unethical or non-compliant
behavior, it will be noticed and other employees will act accordingly. One of
the functions of HR is to help ensure consistent application of company values
throughout the organization, including those identified as 'rising stars'. An
important role of HR in any organization is to help in building trust
throughout the company and recognizing the benefits which result from that
trust.
Hotlines and
Investigations
One of the requirements
under the Sentencing Guidelines is that a company "... have and publicize a system, which may include mechanisms that allow
for anonymity or confidentiality, whereby the organization's employees and
agents may report or seek guidance regarding potential or actual criminal
conduct without fear of retaliation." This requirement is met by
having a hotline. One of the traditional roles of HR in the US is to maintain a
hotline for reporting of harassment claims, whether based on EEOC violations or
other types of harassment. It is a natural extension of HR's traditional
function to handle this role. HR can assist in formulating an initial response
to a hotline report to claims that may be (1) unfounded, (2) require immediate
action, or (3) require a consistent workflow towards resolution. In addition to
this initial assessment function, HR can assist in understanding if a report
incident is localized in nature or system and in providing a consistent
application of response. Lastly, HR is tasked with not only reporting, but
tracking such incidents, and this recordation of data is critical to maintain
the integrity of a FCPA compliance and ethics program in a company.
Regarding investigations,
HR can bring broad benefits to any FCPA compliance and ethics program through
an efficient investigation process. It is recognized that a Legal or Compliance
Department may wish to take over and complete an investigation process.
However, HR can bring a consistency in both the process and any discipline
which is imposed. Such consistency reinforces the senior management's message
of commitment by the company to FCPA compliance and ethics. Such a function by
HR can lead to an understanding of emerging risks. Lastly, it may be that
employees are more willing to speak up to HR and the building of trust can be
utilized to assist in overall risk mitigation.
The Human Resources
Department in any multi-national company has a significant role in not only
managing the employee base but in assisting to set the correct expectations.
Consistent applications of these core beliefs and values will assist any
company in remaining compliant and driving home the message that the company
takes FCPA compliance seriously.
The author will discuss
this topic in greater depth in an upcoming webinar on the role of HR in FCPA
compliance, Tuesday, May 18th at 2 PM CDT. For information and
registration details go to https://secure.confertel.net/tsregister.asp?course=509107.
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
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provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.
© Thomas R. Fox, 2010