At the recent Compliance Week 2011 Conference one of the
Key Note Speakers was Preet Bharara, United States Attorney for the Southern
District of New York. His topic was the general principles of ethics, integrity
and corporate culture. I found his remarks very appropriate for the compliance
professional in evaluating a company's overall compliance program.
He began his talk by discussing corporate culture. Some
of the most egregious conduct, which violated the Foreign Corrupt Practices Act
(FCPA), has come from companies with robust compliance programs. Many of these
companies have had criminal conduct at all levels of the corporate hierarchy.
He pointed to recent Deferred Prosecution Agreements (DPA's) entered into by
Alcatel-Lucent and Johnson & Johnson. This signaled to him that corporate
culture did not meet the goals stated in the compliance programs.
He stated that corporate culture is not, in and of
itself, dispositive, but one thing he has observed is that if a company has a
culture of what he termed "minimalism"; it may well put itself in a very
negative position. Preet urged that companies stop to see how close they could
come to getting up to the very line separating ethical from non-ethical
behavior. Rather they should aspire to "more than the minimum" because aspiring
to the minimum is a recipe for disaster.
He said the return from a such an overall program, of
doing more than simply the minimum, would return dividends if a company finds
itself in a FCPA investigation because a prosecutor can recognize the
difference is such a company attitude. Additionally if you are close to the
ethical dividing line, it may be very easy to step over this line so a company
should consider that it might step over the line without intending to do so, if
it always does business right at the line between ethical and non-ethical
corporate behavior.
Preet said that an ethical component should guide a
company's business actions. Not only will this return dividends with
prosecutors if a company is caught up in a FCPA charge, it will also help a
company in the market place. This is because there need not be a specific
charge brought against a company. Entire industries can be caught up in a FCPA
investigation. Moreover, if your company is so fragile that one subpoena
directed to it will destroy the business; your company needs to be well back
from the ethical line. In other words, your company should be even more careful
about staying away from the ethical line.
Preet views integrity as the most important
characteristic of a leader. He emphasized that a leader must be ready to do
more than simply talk about it, he must be willing to emphasize it. He used the
phrase that each company leader must "daily put on the drumbeat for integrity."
But after this most important characteristic, the true test of a leader is
whether he or she adds value. This is equally true in the ethics arena. Preet
argued that ethically run companies are more profitable.
Preet had some interesting comments regarding the role of
Human Resources in general and a company's hiring process in general. He said
that specific questions about ethics and integrity be incorporated into a
company's interview process. He did not mean the simple asking of questions
where a right or wrong answer was patently clear. He suggested that a company
delve into a candidate's decision making process for complex ethical scenarios.
In addition to the interview process, a similar rigorousness should be
incorporated into internal evaluations of employees. He pointed out that the
enablers in a company are really people that are ticking ethical time bombs and
that at some point they will make a misstep that could cost the company sorely.
In what I found to be very pointed remarks to my legal
profession, Preet said that there is a material difference between being a good
lawyer and a great lawyer. He said that a good lawyer can learn, even memorize
the rules; however, a great lawyer can help a client understand that in the
compliance and ethics arena. It makes better ethics and legal sense not to step
as close as you can to the rules. A company can be more profitable and much
better run if it steps back and operates ethically.
Preet's talk was very informative. It certainly gave this
compliance practitioner some very concrete ideas on how to advise clients to
stay out of FCPA trouble and if they do find themselves in such hot water, to
present a very persuasive case to a prosecutor.
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
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© Thomas R. Fox, 2011
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