Week in FCPA" colleague, Howard Sklar and I often
call the News Corp matter the case that keeps on giving. However, the same
might be said about the ongoing issues surrounding Hewlett-Packard (HP). From a
bribery and corruption scandal centered in Germany, the announcement of which
was broken by the Wall
Street Journal and has mushroomed into a wider geographic investigation; to
the less than one year tenure of its [now] former Chief Executive Officer (CEO)
Léo Apotheker; to a Board of Directors, some of whom never even met Mr.
Apotheker before he was hired because, as one Board member who was quoted in
York Times said, "we were just too exhausted from all the infighting" from
the decision to separate from the prior CEO Mark Hurd.
In a foreword by Noel Tichy, to the article by author
A.G. Lafley, in the October issue Harvard Business Review,
Art and Science of Finding the Right CEO", Tichy focuses on HP's lack
of succession planning as one of its key shortcomings. Lafley's article
discusses the issue of succession planning during his tenure as the CEO of
Procter & Gamble (P&G). Many of the concepts and issues that Lafley
discusses within the context of succession planning in general are applicable
to the concern of compliance within this area.
Lafley's article makes clear that succession planning
requires the same "coherence, discipline and thoroughness as governance,
enterprise risk and strategic oversight." In other words, it is just as
important. Sadly, many companies fail to give it the attention it requires.
Indeed, in a PricewaterhouseCoopers survey, cited in the foreword, nearly one-half
of the more than 1,000 directors gauged reported dissatisfaction with their
companies' succession plans. Imagine what that number would be if they took
into account the compliance aspect of succession planning.
Borrowing from Lafley, I have adapted his box for an
analysis of some of the characteristics that should be considered in succession
planning from the compliance perspective.
Personal judgments about overall compliance goals
Judgments regarding your team members regarding
Judgments on organizational systems for assessing
compliance with the organization
Judgments about how to engage stakeholders regarding
Personal judgments regarding compliance in your career
Judgments about how your team evolves in its compliance
approaches are new compliance challenges arise
Judgments about how to engage and align all
organization levels in compliance
Judgments in leading stakeholders to execute compliance
Personal judgments regarding compliance in times of
Judgments in how your team operates regarding
compliance in times of crisis
Judgments about how to work with your overall
organization in compliance in times of crisis
Judgments about dealing with key stakeholders regarding
compliance in times of crisis
Lafley makes clear that succession planning does not
begin at the time a CEO decides to retire. It should being at the time that a
CEO is hired. This is to prevent a decision at the last minute or, worse yet, "to
be left with effectively no decision." As well as the process being started at
the time of the hiring a new CEO it must also fully engage the Board of
Directors. Lafley provides several key points, all of which are applicable to
the compliance component of succession.
Compliance is a Continuous and Evolving
Lafley defines the criteria that the evaluation process
is an ongoing, not episodic process. In addition to a "broad and deep pipeline of
qualified leaders" the candidates should be put through a variety of roles. In
the compliance context, this would provide an opportunity to review the
initiatives and responses in several different areas. In addition to running
large and small business units, such candidates should oversee several
different functions, as broadly as the Chief Financial Officer (CFO) to Human
Define the Compliance Criteria and Measure
People against It
In many ways, evaluating a compliance criterion is as much
an art as it is science. However, Lafley states that a specific list of
"must-haves" is appropriate. It is not as simple as whether there was a
violation or not. It is broader than that calculus. I often write about Paul
McNulty's three 'maxims" which are (1) what did you do to prevent it; (2) what
did you do to detect it; and (3) what did you do when you found out about it?
Compliance for the CEO candidate is more than the third prong. How did you
inculcate compliance into the business unit that you are managing? What
controls did you put in place? And then what did you do when you found out
Explore Multiple Compliance Scenarios
Lafley defines this as "how the future might look". You
might explore a new geographic market with a candidate or a new product line,
either of which might bring new compliance challenges. Being a part of a team
to perform a risk assessment might indicate that new or different compliance
safeguards need to be considered. Should monitoring, through continuous controls
monitoring or other more sophisticated tools, be utilized as the compliance
program evolves be considered?
Remain Flexible but Focused on Compliance
Lafley points out that the choice of "a successor isn't a
done deal until the votes are cast and the announcement is made." He advocates
continuing to provide challenging projects, which would include those in the
compliance arena, which can continue to provide feedback and guidance from the
compliance perspective. As one division President told me "You are always being
evaluated." And so it should be. The selection of a new CEO is a substantial
investment by a large company. Having the right person in the position from the
compliance perspective is an important element in an overall evaluation.
Remember - it all starts with the "Tone from the Top".
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
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of trade secrets.
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© Thomas R. Fox, 2011
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