A Farewell To Dr. Randolph And Making Your Compliance Program Effective

by Thomas Fox
Contact

Henry E. RandolphDr. Henry Randolph died this week. He was a well-known expert in the field of dairy science. He was from a small town in Tennessee, obtained his PhD from the Ohio State University, moved on to teach at the University of Kentucky and, finally, taught for many years at Texas A&M University. His oldest son Ken was my best friend growing up in Bryan, Texas. Dr. Randolph always said that the milk cow was one of nature’s greatest creations and that as long as we humans didn’t mess up the product, milk was about the most perfect food. So I will have a tall glass of cold milk tipped to you, Dr. Randolph.

At his Memorial Service this week, the officiating pastor said something that struck me as key to an effective compliance program. The remark was that Dr. Randolph emphasized that most work in a company is done not during an emergency but is accomplished through the day-to-day tasks that are performed. Yesterday I wrote about the GlaxoSmithKline PLC (GSK) matter as portending the end of claims regarding a formal compliance defense to be enshrined in the Foreign Corrupt Practices Act (FCPA). I received a comment from Wayne Brody, from LRN Corporation, which I quote in full:

I’ll leave it to you distinguished counsel to discuss the questions of liability and defense, but your well-made point about E&C program effectiveness should be the one of even greater concern to in-house compliance professionals. As you’ve shown, GSK/China can be viewed as illustrative of compliance program failure, And, as has been widely discussed, the Morgan Stanley declination (in the Peterson/China matter) can be viewed as program success – the compliance defense par excellence. I think they are two sides of the same coin; that they illustrate the inherent limitations of measuring “effectiveness” in terms of the design and implementation of an ethics and compliance program rather than in terms of its actual impact on employee behavior. Whether there are five, seven, eleven or thirteen “elements of an effective program” (pick your guidance), whether or not there can be such a thing as a “rogue region,” and whether or not you’ve tracked how many email reminders each employee has received per risk factor all tell you very little about the values your people use to actually make decisions or how free they feel or likely they are to speak out should the need arise.

I’d be in the wrong business if I didn’t believe that ethics and compliance education and communication can inspire elevated behavior. But all the built-up, bolted-on, “Exhibit C” lockstep compliance program money can buy won’t make a bit of difference if the “effectiveness” we seek is other than impact. It’s something to keep in mind when conducting that “periodic review” the guidance requires.

Brody’s comment ties in with the remark I heard at Dr. Randolph’s Memorial Service. It is the day-to-day work of a compliance program which makes it effective. Such effectiveness drives not only actual compliance but it gives a company a better chance of overcoming any allegations of a FCPA violation. The Department of Justice (DOJ) and Securities and Exchange Commission (SEC) expressly make this clear in their joint FCPA Guidance. The Guidance states that “Effective compliance programs are tailored to the company’s specific business and to the risks associated with that business. They are dynamic and evolve as the business and the markets change.” The Guidance goes on to state that the DOJ and SEC ask three basic questions.

  • Is the company’s compliance program well designed?
  • Is it being applied in good faith?
  • Does it work?

Another way to phrase it might be:

1)      What did you do to prevent it?
2)      What did you do to detect it?
3)      What did you do to remedy it?

Whichever set of questions you choose to follow, I think it means that a key component depends on the size and structure of your company. It may be appropriate for day-to-day operational responsibility to be delegated to other specific individuals within a company. However, it may be that in a smaller company the compliance function can be handled by one or two individuals. But as the FCPA Guidance states, “the amount of resources devoted to compliance will depend on the company’s size, complexity, industry, geographical reach, and risks associated with the business.” Further, both the DOJ and SEC, in assessing whether a company has reasonable internal controls, “typically consider whether the company devoted adequate staffing and resources to the compliance program given the size, structure, and risk profile of the business.”

If you think back to the Pfizer Inc. Deferred Prosecution Agreement (DPA), under the ‘Enhanced Compliance Obligations’ attachment the company agreed to put in place a tripartite compliance function. The DPA specifies that Pfizer will maintain “significant” resources for the compliance function. These significant resources will be dedicated to several different types of compliance tools, including (a) an international investigations group charged with responding to and investigating anti-corruption compliance issues and ensuring that appropriate remedial measures are undertaken after the completion of an investigation; (b) an anti-corruption program office providing centralized assistance and guidance regarding the implementation, updating and revising of the FCPA Procedure, the establishment of systems to enhance compliance with the FCPA Procedure, and the administration of corporate-level training and annual anti-corruption certifications; and (c) a mergers and acquisitions (M&A) compliance team designed to support early identification of compliance risks associated with complex business transactions and to ensure the integration of Pfizer’s compliance procedures into newly acquired entities.

If there is a formal compliance defense grafted on to the FCPA, the reality is that companies will move towards a ‘Check-the-Box’ paper program. Such a program will not only be ineffective to prevent bribery and corruption but also give companies the false hope that they have an actual defense to allegations of a FCPA violation. This is because it takes work to make any compliance program effective. That was the message I heard in Dr. Randolph’s Memorial Service and the message that Brody communicated with his comment to my blog yesterday.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Thomas Fox, Compliance Evangelist | Attorney Advertising

Written by:

Thomas Fox
Contact
more
less

Compliance Evangelist on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!