The cornerstone of a Foreign Corrupt Practices Act (FCPA)
compliance program is the US Federal Sentencing Guidelines (FSG). They contain
seven (7) basic compliance elements that can be tailored to fit the needs and
financial realities of any given organization. From these seven compliance
elements the Department of Justice (DOJ) has crafted its minimum best practices
compliance program which is now attached to every Deferred Prosecution
Agreement (DPA) and Non-Prosecution Agreement (NPA). The FSG assumes that every
effective compliance and ethics program begins with a written standard of
conduct; i.e. a Code of Conduct. What should be in this "written standard of
conduct? The starting point, as per the FSG, reads as follows:
Standards of Conduct, Policies and Procedures
(a Code of Conduct)
An organization should have an established
set of compliance standards and procedures. These standards should not be a
"paper only" document, but a living document that promotes organizational
culture that encourages "ethical conduct" and a commitment to compliance with
applicable regulations and laws.
In each DPA and NPA over the
past 18 months the DOJ has said the following as item No. 1 for a minimum best
practices compliance program.
1. Code of Conduct. A Company should develop
and promulgate a clearly articulated and visible corporate policy against
violations of the FCPA, including its anti-bribery, books and records, and
internal controls provisions, and other applicable foreign law counterparts
(collectively, the "anti-corruption laws"), which policy shall be memorialized
in a written compliance code.
In an article in the SCCE Complete Compliance and Ethics
Manual, 2nd Ed., entitled "Essential Elements of an Effective
Ethics and Compliance Program", authors Debbie Troklus, Greg Warner and
Emma Wollschlager Schwartz, state that your company's Code of Conduct "should
demonstrate a complete ethical attitude and your organization's "system-wide"
emphasis on compliance and ethics with all applicable laws and regulations."
Your Code of Conduct must be aimed at all employees and all representatives of
the organization, not just those most actively involved in known compliance and
ethics issues. From the board of directors to volunteers, the authors believe
that "everyone must receive, read, understand, and agree to abide by the
standards of the Code of Conduct." This would also include all "management,
vendors, suppliers, and independent contractors, which are frequently
There are several purposes identified by the authors
which should be communicated in your Code of Conduct. Of course the overriding
goal is for all employees to follow what is required of them under the Code of
Conduct. You can do this in a Code by communicating what is required of them,
to provide a process for proper decision-making and then to require that all
persons subject to the Code of Conduct put these standards into everyday
business practice. Such actions are some of your best evidence that your
company "upholds and supports proper compliance conduct."
The substance of your Code of Conduct should be tailored
to the company's culture, and to its industry and corporate identity. It should
provide a mechanism by which employees who are trying to do the right thing in
the compliance and business ethics arena to do so. The Code of Conduct can be
used as a basis for employee review and evaluation. It should certainly be
invoked if there is a violation. To that end suggest that your company's
disciplinary procedures be stated in the Code of Conduct. These would include
all forms of disciplines, up to and including dismissal, for serious violations
of the Code of Conduct. Further, your company's Code of Conduct should emphasis
it will comply with all applicable laws and regulations, wherever it does
business. The Code needs to be written in plain English and translated into
other languages as necessary so that all applicable persons can understand it.
As I often say, the three most important things about
your FCPA compliance program are document, document and then document. The same
is true of communicating your company's Code of Conduct. You need to do more
than simply put it on your website and tell folks it is there, available and
that they should read it. You need to document that all employees, or anyone
else that your Code of Conduct is applicable to, has received, read, and
understands the Code. For employees, it is important that a representative of
the Compliance Department, or other qualified trainer, explains the standards
set forth in your Code of Conduct and answers any questions that an employee
may have. Your company's employees need to attest in writing that they have
received, read, and understood the Code of Conduct and this attestation must be
retained and updated as appropriate.
The DOJ expects each company to begin its compliance
program with a very public and very robust Code of Conduct. If your company
does not have one, you need to implement one forthwith. If your company has not
reviewed or assessed your Code of Conduct for five years, I would suggest that
you do in short order as much has changed in the compliance world.
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
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© Thomas R. Fox, 2012
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