The following is a Q and A with Richard Bistrong and Ethic Intelligence, which was published in Ethic Intelligence, Expert Corner, in May 2014. It appears here with permission of the publisher.
Richard Bistrong spent much of his career as an international sales executive. He was the Vice President of International Sales for a large, publicly traded manufacturer of police and military equipment, which included residing and working in the UK. Prior to that, he was the Executive Vice President (and founding family member) for one of the largest global manufacturers of bullet resistant vests for the police and military.
In 2007, as part of a cooperation agreement with the United States Department of Justice and subsequent Immunity from Prosecution in the UK, Mr. Bistrong assisted the United States and other governments in their understanding of how FCPA violations occurred and operated in international sales.
In 2012, Mr. Bistrong was sentenced as part of his own Plea Agreement, and served fourteen-and-a-half months at a Federal Prison Camp. He now blogs at www.richardbistrong.blogspot.com about current FCPA compliance issues, drawing from his own perspective to discuss trends and compliance challenges, especially as they might impact overseas sales and marketing organizations. Mr. Bistrong has a BA from the University of Rochester and an MA in Foreign Affairs from the University of Virginia, including studies at the Institute for European Studies in Vienna, Austria.
Today we question Mr. Bistrong about his observations on compliance since his release from prison in December 2013 and what he considers to be the greatest challenges to anti-bribery programs and ethics at the international sales and marketing level.
You have written a great deal since your release in December, how do you see the current state of anti-bribery compliance?
First, thank you for inviting me to this Q and A. I hope that our dialogue might provide value to your community of compliance professionals and practitioners as they look at their own organizations and existing compliance challenges.
As to the “current state” of anti-bribery compliance, it is quite impressive, and the volume of conversation certainly increased dramatically while I was in custody. What I noticed most was the evolution of the discussion into numerous “prisms” from which compliance is analyzed and discussed; there are legal forums, accounting and audit forums, investigatory discussions and organizational debates, which specifically address the structure of compliance programs and personnel. While there is a great deal of overlap, each of these groups use their own expertise and perspective to apply a unique set of criteria when discussing current anti-bribery issues.
Given the frequency of discussion and depth of expertise, do you see any gaps?
I do, and I say this respectfully. When I look at the backgrounds, both educationally and professionally, of the compliance leaders, they certainly have an impressive set of credentials and accomplishments in their respective fields. I tend, however, to think of anti-bribery in the context of those employees who operate on the front lines of international sales, marketing and business development. Given that these are the groups which are most likely to encounter a “corrupt event,” I am somewhat concerned that there is not more of a discussion about their perspective and issues in confronting risk.
I share this observation from my own experience in international sales, but also from the viewpoint that those who often face the greatest risk of exposure to overseas corruption are those furthest away from the C-Suite. The front line sales and marketing teams, especially in low integrity regions, are the ones who will encounter corruption and risk. Thus, my unease is that I don’t hear or read much about their “voice” in how to make an anti-corruption and ethics program “stick” at the field level, taking into account the often difficult environments in which they operate.
I think for some of the compliance community, there is not much debate, and to some extent, that is understandable. The anti-bribery laws are “lines in the sand,” and those operating internationally need to understand the details of those laws, and pay careful attention to insuring that their conduct does not cross the line. But, in practice, do such decrees give overseas personnel the necessary training and tools to deploy when confronting a corrupt or potentially corrupt transaction?
Clearly, individuals and organizations with extensive experience and credentials are the most qualified to design, implement and monitor an anti-bribery program. But I wonder if they are listening to the “real world” challenges from the front lines and helping to develop training programs and behavioral models to deal with that risk? Or, is it simply “compliance from above” with a “sign-it or leave” set of options.
What about the relationship between business strategy and compliance?
In light of current anti-bribery reporting and enforcement actions, I ask if corporations are looking at their business strategies (globally and regionally) to make sure that financial forecasts and sales plans are aligned with the promotion of an anti-bribery program? Furthermore, as incentive packages are functions of business strategies, are those packages also aligned with anti-corruption programs and ethics?
If strategy is pulled back at the C-Suite level, does it expose an executive message of strict anti-bribery compliance, while the economics of the sales growth plans and corresponding personal incentive packages speak to a “win over everything else” mentality? If those messages are not alligned, then on the front line, international personnel will be left to interpret what management “really wants,” and that presents problems to both individuals and corporations.
I think this conflict was best captured by the Chief Medical Officer of GSK who recently stated in an interview (after additional bribery issues were reported in Jordan and Lebanon) that “sometimes you have to step backwards to move forward,” when it comes to compliance and business practices. I think Siemens also embraces the necessity of aligning an entire business model and strategy to ensure corruption free and sustainable business over the long term. It can be done, but it will most likely require some financial retrenching. And, I ask, how many organizations are ready to reduce their sales forecast (most likely on a regional basis) in order to re-engineer their compliance programs and practices?
Are you suggesting that companies may have to remodel their entire business plan to embrace an anti-bribery program and ethic?
That depends on the region, current business practices, and how incentive compensation is structured. If you have a “low integrity” corrupt region and a sales team with a high percentage of total compensation based on personal sales performance, then the compliance message is going to be distorted or perhaps discarded. In such a scenario, the salesperson considers the necessity of sales growth to make bonus and plan above other considerations. For that person compliance and sales growth become a zero-sum game. In other words, “compliance becomes bonus prevention.” Both cannot exist together.
Business strategies are going to drive international, front-line teams, who are working in difficult environments far removed from the C-Suite. Those teams face the day-to-day business realities in their territories. If the business strategy and compensation plans are properly aligned with an “anti-bribery” ethic, then the “default” behavior to those teams is going to be developing clean, supportable business over the long term. Properly motivated and trained, they will not be concerned about delivering compliance over sales to their sales manager if encountering a corrupt transaction.
Thus, when facing a corrupt scenario (usually with no witnesses), which might result in a “win” for sales, they will default to proper anti-bribery conduct. As a Siemens executive said at the 2013 Dow Jones Global Symposium on Compliance, when his country managers are faced with a corrupt transaction, the response is “it’s not because compliance says I can’t do it, it’s because I don’t do it.” That message transcends compliance.
So, if an organization asked to hear your thoughts about their compliance program, what would you do?
Well, first I would share what I would not do. I am neither an attorney, nor do I have any background in risk, audit or due diligence. So I would not seek to analyze any of those elements. I do understand, however, the challenges faced by overseas sales, marketing and business development groups. I would listen to and evaluate the greatest challenges they face, regionally and globally, to understand how those challenges relate to corporate business strategies. In other words, I am looking for how strategy and compliance are aligned to see where the true “default” behavior lies at the sales level.
I would then want to look at the sales and expense forecasts to see how the business strategy is differentiated by region, especially in the high risk territories, to see if the business planning is taking into consideration the risks of corruption, so that there are no “zero-sum” tensions in terms of compliance and sales. I would visit corporate HR to assess incentive compensation, compliance and business strategy to identify where there are inherent tensions. In the end, I would use information from the field, look at the regional business plans, and then see what behavior incentive compensation is promoting, ends (sales) or means (compliance).
My goal would be to isolate areas, both globally and regionally, where there is risk that compliance policy is getting distorted or discarded at the field level due to inconsistencies between strategies, compensation and desired behaviors.
As I shared at the 2014 Dow Jones Global Symposium on Compliance, when those discussions at the sales level start “the more upset compliance is by what is discussed, the better the conversation is going.”