Why Can’t We Be Friends? Compliance And HR

by Thomas Fox
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I have long been an advocate of the compliance function working with the Human Resources (HR) function in any company to help achieve greater compliance under anti-corruption laws such as the Foreign Corrupt Practices Act (FCPA) and UK Bribery Act. I think that HR is uniquely situated to ‘connect the dots’ in many areas of compliance. My thoughts on this subject were echoed in a recent article in the June issue of Compliance Week Magazine, in an article by Jaclyn Jaeger, entitled “How Compliance and HR Can Get It Together”. Jaeger quoted Alex Weisgerber for the following, “Boards are increasingly asking their executive teams to identify and address major people risks.” He further stated that “The HR-compliance partnership can help anticipate this request and set the organization’s human capital risk management agenda proactively.”

However, Jaeger wrote that in some companies this cooperation towards the goal of greater compliance has been found to be lacking. There may be several factors which lead to a more asymmetrical approach by these functions, particularly due to “gaps in communication and collaboration between compliance and HR.” She quoted Weisberger that “The two groups simply haven’t found many opportunities to collaborate in supporting organizational performance.” While I disagree with this statement, Jaeger’s article does detail some of the steps the compliance practitioner can take to bring these two corporate functions into alignment.

Jaeger quotes Shanti Atkins, for the following, “The first challenge to overcome is the “deeply held stereotypes that legal, compliance, and HR typically have of each other.” It’s important to talk about those if we are to get past them.” But perhaps more importantly is the notation held in many legal departments and compliance functions that “the HR function is not a strategic player in the company—that its central function is to manage paperwork, schedule training sessions, and mediate mundane spats such as who hogs the best space in the parking lot.”

As mentioned above, I have long advocated that HR is uniquely situated to connect the dots and along this line of thought, Jaeger wrote that “Getting employees to function as a coherent, engaged unit has to do with people, not policies—and people issues are exactly where HR excels, or course. HR has its finger on the pulse of employee culture, Atkins says because it is the primary channel employees use to complain when there is a problem—and those problems are usually a warning sign of wider compliance-related issues.” What are some of the areas that HR can assist the compliance function with? I believe that there are five key areas. They include the following.

Training

A key role for HR in any company is training. This has traditionally been in areas such as discrimination, harassment and safety, to name just a few, and based on this traditional role of HR in training this commentator would submit that it is a natural extension of HR’s function to expand to the area of FCPA compliance and ethics. There is a training requirement set forth in the US Sentencing Guidelines. Companies are mandated to “take reasonable steps to communicate periodically and in a practical manner its standards and procedures, and other aspects of the compliance and ethics program, to the individuals referred to in subdivision (B) by conducting effective training programs and otherwise disseminating information appropriate to such individuals’ respective roles and responsibilities.”

Employee Evaluation and Succession Planning

What policy does a company take to punish those employees who may engage in unethical and non-compliant behavior in order to meet company revenue targets? Conversely, what rewards are handed out to those employees who integrate such ethical and compliant behavior into their individual work practices going forward? One of the very important functions of HR is assisting management in setting the criteria for employee bonuses and in the evaluation of employees for those bonuses. This is an equally important role in conveying the company message of adherence to a FCPA compliance and ethics policy. In addition to employee evaluation, HR can play a key role in assisting a company to identify early on in an employee’s career the propensity for compliance and ethics by focusing on leadership behaviors in addition to simply business excellence. If a company has an employee who meets, or exceeds, all his sales targets, but does so in a manner which is opposite to the company’s stated FCPA compliance and ethics values, other employees will watch and see how that employee is treated. Is that employee rewarded with a large bonus? This requirement is codified in the Sentencing Guidelines with the following language, “The organization’s compliance and ethics program shall be promoted and enforced consistently throughout the organization through (A) appropriate incentives to perform in accordance with the compliance and ethics program; and (B) appropriate disciplinary measures for engaging in criminal conduct and for failing to take reasonable steps to prevent or detect criminal conduct.”

Hotlines and Investigations

One of the requirements for a company under the Sentencing Guidelines is that they “… have and publicize a system, which may include mechanisms that allow for anonymity or confidentiality, whereby the organization’s employees and agents may report or seek guidance regarding potential or actual criminal conduct without fear of retaliation.” This requirement is met by having a hotline. One of the traditional roles of HR in the US is to maintain a hotline for reporting of harassment claims, whether based on EEOC violations or other types of harassment. It is a natural extension of HR’s traditional function to handle this role.

Regarding investigations, HR can bring broad benefits to any FCPA compliance and ethics program through an efficient investigation process. It is recognized that a Legal or Compliance Department may wish to take over and complete an investigation process. However, HR can bring a consistency in both the process and any discipline which is imposed. Such consistency reinforces the senior management’s message of commitment by the company to FCPA compliance and ethics. Such a function by HR can lead to an understanding of emerging risks. Lastly, it may be that employees are more willing to speak up to HR and the building of trust can be utilized to assist in overall risk mitigation.

Background Screening

A key role for HR in any company is the background screening of not only employees at the time of hire, but also of employees who may be promoted to senior leadership positions. HR is usually on the front lines of such activities, although it may be in conjunction with the Legal Department or Compliance Department. This requirement is discussed in the Federal Sentencing Guidelines for Organizations (FSGO) as follows “The organization shall use reasonable efforts not to include within the substantial authority personnel of the organization any individual whom the organization knew, or should have known through the exercise of due diligence, has engaged in illegal activities or other conduct inconsistent with an effective compliance and ethics program.”

When the Government Comes Calling

While it is true that a company’s Legal and/or Compliance Department will lead the  response to a government investigation, HR can fulfill an important support role due to the fact that HR should maintain, as part of its routine function, a hard copy of many of the records which may need to be produced in such an investigation. This would include all pre-employment screening documents, including background investigations, all post-employment documents, including any additional screening documents, compliance training and testing thereon and annual compliance certifications. HR can be critical in identifying and tracking down former employees. HR will work with Legal and/or Compliance to establish protocols for the conduct of investigations and who should be involved.

Lastly, another role for HR can be in the establishment and management of (1) an Amnesty Program or (2) a Leniency Program for both current and former employees. Such programs were implemented by Siemens during its internal bribery and corruption investigation. The Amnesty Program allowed appropriate current or former employees, who fully cooperated and provided truthful information, to be relieved from the prospect of civil damage claims or termination. The Leniency Program allowed Siemens employees who had provided untrue information in the investigation to correct this information for certain specific discipline. Whichever of these programs, or any variations, that are implemented HR can perform a valuable support role to Legal and/or Compliance.

Doing More with Less

While many practitioners do not immediately consider HR as a key component of a FCPA compliance solution, it can be one of the lynch-pins in spreading a company’s commitment to compliance throughout the employee base. HR can also be used to ‘connect the dots’ in many divergent elements in a company’s FCPA compliance and ethics program. The roles listed for HR in this series are functions that HR currently performs for almost any company with international operations. By asking HR to expand their traditional function to include the FCPA compliance and ethics function, a US company can move towards a goal of a more complete compliance program, while not significantly increasing costs. Additionally, by asking HR to include these roles, it will drive home the message of compliance to all levels and functions within a company; from senior to middle management and to those on the shop floor. Just as safety is usually message Number 1, compliance can be message Number 1A. HR focuses on behaviors, and by asking this department to include a compliance and ethics message, such behavior will become a part of a company’s DNA.

If your company does not integrate HR into several ongoing roles for FCPA compliance I believe that is high time you did so. Jaeger’s article points out several steps you can take to bring these two functions into greater collaboration. From my perspective, HR can be a valuable partner for compliance and one that you should begin to take advantage of now.

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

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