In his Editor's View column, in the August issue of Compliance Week, entitled, "Compliance,
Collaboration and HR", Matt Kelly wrote about the interaction of
Compliance Departments and Human Resources (HR). He noted that while Compliance
Departments may look to HR to support internal investigations, HR can also be
used to assist in "molding company culture." However, it is rarely used for
this function. I heartily agree with Matt's sentiments. In addition to
supporting internal investigations, I believe that HR can be used in some of
the following ways to assist the Compliance Department. It can be a key
component in changing or maintaining your company's compliance DNA.
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 for HR's function to expand to the area of Foreign Corrupt
Practices Act (FCPA) compliance and ethics training. There is a training
requirement set forth in the US Sentencing Guidelines and 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 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 those 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 US 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 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.
Background Screening
A key role for HR in
any company is the background screening of not only employees at the time of
hire, but also of employees who may be promoted to senior leadership positions.
HR is usually on the front lines of such activities, although it may in
conjunction with the Legal or Compliance Departments. This requirement is
discussed in the US Federal Sentencing Guidelines for Organizations (FSGO) as
follows "The organization shall use reasonable efforts not to include within
the substantial authority personnel of the organization any individual whom the
organization knew, or should have known through the exercise of due diligence,
has engaged in illegal activities or other conduct inconsistent with an
effective compliance and ethics program."
What type of background checks should HR utilize in the
FCPA compliance and ethics arena? The consensus seems to be that HR should
perform at least routine civil, criminal and credit background checks. Care
should be noted in any such request made in countries outside theUnited
Statesas such information may be protected by privacy laws or where the quality
of such information is different in substance from that of the United States.
For instance in the United Kingdom, the request of a credit check can negatively
impact a prospective employee's credit score so such a background check may not
provide useful information to a prospective employer.
Additionally, although it may be difficult in the United
States to do so, a thorough check of references should be made. I say that it
may be difficult because many companies will only confirm that the employee
worked at the company and only give out the additional information of dates of
employment. In this situation, it may be that a prospective employer should
utilize a current employee to contact former associates at other companies to
get a sense of the prospective employee's business ethics. However, it should
be noted that such contacts should only be made after a thorough briefing by HR
of the current employee who might be asked to perform such duty.
A company can also use HR to perform internal background
checks on employees who may be targeted for promotions. These types of internal
background checks can include a detailed review of employee performance;
disciplinary actions, if any; internal and external achievements, while
employed by the company and confirmation of both ethics and compliance training
and that the employee has completed the required annual compliance
certification. A key internal function where HR can be an important lead is to
emphasize that an employee, who has been investigated but cleared of any
alleged ethics and compliance violations, should not be penalized.
When the Government Comes Calling
While it is true that a company's Legal and/or Compliance
Department will lead the response to a government investigation, HR can
fulfill an important support role due to the fact that HR should maintain, as
part of its routine function, a hard copy of many of the records which may need
to be produced in such an investigation. This would include all pre-employment
screening documents, including background investigations, all post-employment
documents, including any additional screening documents, compliance training
and testing thereon and annual compliance certifications. HR can be critical in
identifying and tracking down former employees. HR will work with Legal and/or
Compliance to establish protocols for the conduct of investigations and who
should be involved.
Lastly, another role for HR can be in the establishment
and management of (1) an Amnesty Program or (2) a Leniency Program for both
current, and former, employees. Such programs were implemented by Siemens
during its internal bribery and corruption investigation. The Amnesty Program
allowed appropriate current or former employees, who fully cooperated and
provided truthful information, to be relieved from the prospect of civil damage
claims or termination. The Leniency Program allowed Siemens employees who had
provided untrue information in the investigation to correct this information
for certain specific discipline. Whichever of these programs, or any
variations, that are implemented HR can perform a valuable support role to
Legal and/or Compliance.
Doing More with Less
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 in a company's FCPA compliance and
ethics program. The roles listed for HR in this series are functions that HR
currently performs for almost any US company with international operations. By
asking HR to expand their traditional function to include the FCPA compliance
and ethics function, aUS company can move towards a goal of a more complete
compliance program, while not significantly increasing costs. Additionally, by
asking HR to include these functions, it will drive home the message of compliance
to all levels within a company; from senior to middle management and to those
on the shop floor. Just as safety is usually message Number 1, compliance can
be message Number 1A. HR focuses on behaviors, and by asking this department to
include a compliance and ethics message, such behavior will become a part of a
company's DNA.
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I have previously written about Catelas software, see here.
It does some very cool stuff. The Catelas guys are putting on a series of
events to highlight their software and its uses in a FCPA compliance program.
On Tuesday, August 23 and August 30, at 1 PM EDT, they are hosting a webinar entitled,
"FCPA Investigations - Generate a Risk Assessment report, identify all key
people & content before you fly!" Information and Registration can be found
here.
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 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, 2011
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