An article in the July Issue of Compliance Week Magazine,
entitled "Telling Your Board What it Needs to Hear", author Arielle
Bikard discusses the views of Pfizer Inc's Chief Compliance Officer (CCO),
Douglas Lankler, on how he keeps the Pfizer Board of Directors up to date on
compliance issues. There are many articles which focus on the information that
a Board of Directors may want to receive and this is one of the few articles
which focuses on the issues from the perspective of the CCO.
Due to a recent compliance enforcement action, Pfizer was
forced to separate its compliance function from its legal function and Lankler
began to report directly to the Board. This has led to a tripartite level of
reporting at the Board level. There is a monthly meeting of the Audit
Committee, to which he reports to, by telephone and bi-monthly in person
meetings, to which Lankler also reports. There is also a special Board level
committee dedicated to regulatory and compliance issues, to which Lankler began
reporting to in June. Lankler also submits an annual report to the full Board.
What is Measured and How is it Presented
Lankler noted that the Pfizer Board is "very concerned
about how the company is measuring improvements in the compliance function." To
provide this information, Lankler measures the results of inspections during
internal monitoring and auditing. He provided the example of whether a country
assessed received a "generally satisfactory" rating as opposed to the lessor
rating of 'satisfactory". He is also measured on "how much bad stuff I prevent
from happening." To determine this metric, Lankler brings in "external
environmental considerations" which look at what is happening in the industry
and what his and Pfizer's peers may be facing from the compliance perspective.
Lankler believes that the key to reporting is to provide
sufficient information presented in a manner which puts the emphasis on what is
important. To achieve the latter, he prepares a tracking chart and uses a red,
yellow and green dot next to each line of information. He believes that this
allows the conversation with the Board to be directed "in a way that makes
sense." If he adds to or subtracts from the tracking chart, "the change and its
cause are highlighted in a memo to the Board."
The annual report which is submitted to the Board comes
in at 30 pages or so. In it, Lankler sets out four different areas which he
believes that a Board needs to review on an annual basis. They include: (1) his
views on what he believes to be the most significant compliance risks to the
company, (2) his opinion on whether the program has sufficient resources to
achieve what is necessary in managing these risks, (3) his belief on the
"health of the organization from a compliance perspective", and, finally, (4)
his perception of management's commitment to compliance.
Lankler's Lessons Learned
Lankler also gave some lessons learned about what he
believed that the CCO should tell the Board. It is important that the CCO share
information with rest of management, in advance of the Board meeting, creating
transparency. As the CCO works with the General Counsel, outside legal counsel
and outside external audit quite closely throughout the year, he must work with
them closely during the preparation of the annual compliance report. Lastly,
and, from my experience always the one which is most important in any relationship
with senior management or the Board, make sure there are NO SURPRISES.
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© Thomas R. Fox, 2011
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