Tonight is the finals of the NCAA Men's Basketball
Tournament, known as March Madness. As I went to law school at the University
of Michigan, I will be pulling for the Wolverines to win the big game. If you
are not a Louisville or Big East fan I hope that you can pull for us or at
least throw some good mojo UM's way as we may need all the help we can get. Go
One of the things made clear in the FCPA Guidance is that
employees who engage in violations of the Foreign Corrupt Practices Act (FCPA)
must be disciplined. One of the Ten Hallmarks of an Effective Compliance
Program is discipline. The Guidance says that a company's compliance program
should apply from "the board room to the supply room - no one should be beyond
its reach." There should be appropriate discipline in place and administered
for any violation of the FCPA or a company's compliance program. But what if an
employee's conduct is something less than a clear violation of the FCPA? What
if an employee goes right up to the line, stands next to it and kicks dirt on
that line but never (seems) to go over. What should you do?
Imagine a scenario like the following. Your company is
engaged in delicate negotiations to merge with another entity which will
greatly increase the scope of your brand. You obviously do not want any
negative information to leak out into the public sphere that your company does
not follow its own Code of Conduct or the ethical values that it publicly
espouses. You are brought information that one of your top sales people has
engaged in a pattern of conduct that would appear not to meet your own company
standards. Further, it turns out that there are videos showing the conduct in
question. Not only do you see it but the company's head of Human Resources
(HR), Chief Financial Officer (CFO) and General Counsel (GC) see it as well. An
internal investigation commences and it is determined that no laws are broken
so you privately discipline the employee in question.
The merger goes through and thereafter it is decided that
an outside law firm should conduct a more thorough investigation. This outside
counsel interviews a full range of company employees and reviews internal
company communications. Other company employees say that the employee in
question is just very passionate about his job. However, it turns out that the
focus of this outside law firm's investigation was to determine if firing the
employee in question would give that employee a basis to sue the company for
wrongful termination. (The company in question is not located in the great
state of Texas where you can fire anyone for a good reason, bad reason or no
reason.) But even the outside law firm's report does note that the employee in
question did 'cross the line.' Yet you decide that no further discipline or
even a follow up on the employee in question is warranted.
Now assume that the videos in question become public.
There is outrage. Even the company President says that after reviewing the
video it only took him "five minutes" to decide to fire the employee in
question. The employee is fired and questions are being asked why you did not
fire the President as well?
The above fictional scenario was based on the New York
Times (NYT) article, entitled "Rutgers
Officials Long Knew of Coach's Actions", by reporter Steve Eder. In his
piece Eder details the long trail of evidence that Rutgers had been made aware
of regarding the abusive behavior of its men's basketball coach Mike Rice. Even
after two investigations and presentation of a video showing Rice throwing
basketballs at players, kicking them and taunting them with "homophobic slurs"
Rice was not fired. Rice was reprimanded, fined and the University assigned its
"sports psychologist to work with the team". It was not until this video went
viral and the whole world saw the abuse that Rice meted out to his team at
practices did the outrage become sufficient enough for Rice's termination. The Athletic
Director, who had been made aware of all of the above, had requested the
internal and external law firm investigations, yet did not terminate
Rice, was required to resign from all the fallout.
So just how much does it take for an entity to follow its
own values? What about the employee who does 'cross the line' and does business
in an unethical manner? Is that someone who can be trusted to follow the rules
and laws like the FCPA? The FCPA Guidance makes clear that appropriate
discipline should be "fairly and consistently applied across the organization.
No executive should be above compliance, no employee below compliance, and no
person within an organization deemed too valuable to be disciplined, if
warranted. Rewarding good behavior and sanctioning bad behavior reinforces a
culture of compliance and ethics throughout an organization."
I often talk about the Fair Process Doctrine and how it
behooves company's to treat employees fairly. However, there is also a
responsibility for a company to act appropriately when its employees engage in
conduct that is not illegal but is so far outside the acceptable norms that it
cannot be condoned. Remember what is true for Rutgers is also true for
businesses in the private sector.
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
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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
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© Thomas R. Fox, 2013
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