Focus On Enabling Your People, Not Controlling Them, To Create an Effective Compliance Culture

JD Supra Perspectives
Contact

[An in-house perspective on how your legal team can help to create an effective compliance culture, by Matt Fawcett, senior VP, general counsel, chief compliance counsel, and secretary for multinational data storage and management company NetApp:]

We seem to see corporate scandals more often than ever. From Wells Fargo’s sales abuses to Volkswagen’s false emission reports, companies are finding themselves in the news for the wrong reasons. And for every revelation of unethical or illegal behavior, the media and public engage in outraged speculation. Where were the safeguards? How could this happen?

Legal departments can be left holding the bag

When bad behavior is exposed, the most obvious narrative is that the company lacked safeguards. By framing the scandal in this way – as a problem of compliance and enforcement – you quickly end up pointing the finger at the legal department. In companies that focus on control, the lawyers are often positioned as “enforcers.” If anything bad happens, the fault must (at least partially) be a failure of sufficient rule-making and enforcement. There is serious danger in forcing your legal departments into this role.

Think about what Wells Fargo is going through. It is facing a massive hit to its business and reputation, as well as potentially high penalties, due to the excesses caused by an out-of-control sales culture. Is that the fault of the Wells Fargo Legal department? No! What could a legal department do to counteract something deep and systemic, fully embedded in the company’s culture and incentive systems? If you let it get to that point, Legal can’t stop it.

...bad things happen if you set up Legal as the “police.” First, it encourages the rest of the company to behave like criminals. 

Two bad things happen if you set up Legal as the “police.” First, it encourages the rest of the company to behave like criminals. In companies where Legal is viewed as the watch dog, conventional wisdom is that “legal will stop us and we can push as far as we can go.” Second, it discourages people from engaging with or involving Legal in any way, frustrating the very purpose of the intended role from the start. 

For legal teams to be effective in supporting risk management and compliance, they must be seen as allies, not enemies, enablers not enforcers. No one wants to seek the help of the “department of no.” The lawyers will lose the right to influence anything and struggle to have any real impact. Further, by signaling to the company that the lawyers only enforce the rules, people then conclude that only the lawyers are enforcing the rules, which effectively licenses everyone else to do whatever they can get away with.

Focus on culture, not control

In a modern company that must move quickly and compete globally, it is so difficult to create a strong “control” system. Control – or at least, absolute control – is a myth. You can’t have rules for everything. You can’t have eyes everywhere.

In a modern company that must move quickly and compete globally, it is so difficult to create a strong “control” system...

Wells Fargo has over 265,000 employees. How big a legal department would you need to police an organization that size? The root cause cannot be poor enforcement of the rules. The problem was one of culture. Management and employees put a single-minded focus on revenue generation, going so far as to call their locations “stores” instead of “branches.”

There is so much surface area to a global organization, so many thousands of interactions and opportunities for abuse, there is simply no way to cover everything. The only real answer is enablement – and that means creating a culture of accountability. That isn’t the result of a policy, or a rule. You can’t mandate your way to strong, ethical behavior. It only comes when you bring good people together under a set of shared values.

Culture Influences Compliance 

Culture is where you get the real accountability and impact. When employees of all levels believe in and support policies and standards, that’s when you see real compliance.

Culture is where you get the real accountability and impact.

Consider Volvo. The company recently achieved an unheard of 100% participation rate in a recall affecting its line of heavy trucks. In an industry where recalls usually reach at most 70% of targeted vehicles, this is an amazing result. And it can be entirely attributed to a culture of commitment to safety.

First, the company itself identified the problem, a potential fault in the trucks’ steering shaft, and voluntarily launched the recall. Second, the company committed massive people and resources to get the word out. They promoted it on social media. They sponsored segments on satellite radio stations popular with truck drivers.

They did this because they had a core belief that it was the right thing to do, notbecause their Legal department told them to. Volvo and other companies achieve great things every day through their culture. It is their protection, their shield.

People are the priority

There is no single model for an effective corporate culture. Cultures are different because people are different, and great companies come in many forms. You can have a more supportive, collaborative work environment, or you can have an intense, aggressive culture. Either can be effective. The key element of culture is the shared commitment to a few standards. In good companies of all stripes, it is known that some things are simply not tolerated. Where misbehavior occurs, it is everyone’s job to report and act on it, not just the legal department. 

Don’t try to oversee and control every aspect of an employee’s life. Focus on enabling people and investing in culture. Stop committing time and energy to the failed model of control. And free up your legal department to be effective partners, not scapegoats.

*

[As senior vice president, general counsel, chief compliance counsel, and secretary for NetApp, Matthew Fawcett is responsible for all legal affairs worldwide, including corporate governance and securities law compliance, intellectual property matters, contracts, and mergers and acquisitions. He has overseen the development of NetApp Legal into a global high-performance organization with a unique commitment to innovation and transformation.]

Written by:

JD Supra Perspectives
Contact
more
less

JD Supra Perspectives on:

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:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide