Originally Published in Inside Counsel | August 6, 2014 | By Paul Mandell
As the regulatory landscape continues to evolve throughout the world, large international companies are faced with an increasingly complicated mix of differing and occasionally inconsistent rules governing their work. Many businesses have invested heavily in compliance on their own volition or in response to one or more regulatory breaches; however, a large number of global businesses have compliance functions that are still in their infancy. Fortunately, for those businesses that have not yet turned their attention squarely on building a comprehensive compliance program, or which have merged teams with different levels of compliance sensitivity, it is never too late to start. Set forth below are a few tips to help companies with early-stage compliance programs to develop a suitably ethical, compliance-focused team.
1. Start at the top
Compliant behavior begins with an ethical culture. And to build an ethical culture, it is critical that the senior leadership of the business lead by example in embracing a culture of ethics and compliance. According to Gabriel Imperato, managing partner of Broad and Cassel’s Fort Lauderdale office and co-chair of the firm’s White Collar Defense and Compliance group, “Compliance takes a comprehensive commitment at all levels of an organization and includes at a minimum the right tone at the top.” Only once the right tone exists among the company’s senior executives will other employees follow suit. This will not guarantee compliant behavior, but it is a critical first step.
2. Train actively
To build a culture of compliance, it is critical that employees at the business understand the relevant boundaries for their behavior and business practices — many of which are not intuitive. As a result, companies must invest in training for employees that explains the rules governing the work of the business, as well as what kinds of behaviors are off limits. With respect to the nature and scope of training, compliance leaders should focus not merely on the most common risks. Rather they should train employees on a broad spectrum of compliance issues, both domestic and international. Moreover, training should not occur once; it should be an ongoing process that enables employees to revisit compliance topics repeatedly throughout their careers with the business. Investing in a strong compliance program is not a trivial investment, but the costs of noncompliance can bankrupt a business.
3. Learn from mistakes
When it comes to corporate compliance, no company is perfect. The reality is that otherwise good employees occasionally make compliance mistakes — some of which are caught internally, and others of which are brought to the company’s attention by authorities. No one enjoys making mistakes, but it is important to recognize that mistakes present valuable opportunities to teach employees about compliant behavior. Do not trivialize the mistakes that you discover, or sweep them under the rug. Rather, take the time to digest and discuss the compliance mistakes that happen, and build and communicate a tailored plan that can help others avoid similar situations. If you take the opposite course, chances are that the company will not learn from the mistake, increasing the odds of a repeat occurrence. As Imperato notes, “The move vividly that the cost of non-compliance can be displayed to all levels of an organization, the more the message of the value of compliant and ethical behavior can be woven into the fabric of an organization.”
Despite your best efforts to create a culture of compliance, employees are far less likely to take compliance training seriously or otherwise take additional steps to ensure compliant behavior unless they stand to gain from doing so. For this reason, it is critical to provide incentives to the corporate workforce that align their personal interests with the company’s compliance interests. Among the most powerful incentives are those connected to performance reviews; if employees are evaluated based on their adoption of ethical business practices, with compensation connected to those evaluations, they will be far more likely to keep compliance top of mind.
Corporate compliance is understandably a source of great concern for most large international companies. However, by having senior leadership set a positive example, with the right incentives and training for employees, today’s sophisticated corporations can vastly improve their odds in the battle to stay out of trouble with regulators and maximize time and effort spent on growing the business.