Compliance Isn’t Going Away (and neither should you) – Part I

by Thomas Fox
Contact

Now I’ve heard there was a secret chord; That David played, and it pleased the Lord

But you don’t really care for music, do you?; It goes like this

The fourth, the fifth’; The minor fall, the major lift

The baffled king composing Hallelujah

Hallelujah; Hallelujah; Hallelujah;Hallelujah

You might say we need him now more than ever. Unfortunately, we lost him last week as Leonard Cohen passed away at age 82. He was truly one of the greatest song writers during my lifetime. Yesterday I presented my views on why I believe that Foreign Corrupt Practices Act (FCPA) enforcement will continue under the new administration. Today, I want to begin a multi-part series (sorry I don’t know how long it will go) about why compliance will not change under a Trump administration. To do so, and to honor Leonard Cohen, I will begin this series through the lens of Cohen’s most famous work Hallelujah. To say it took some time for the song to become the staple and classic that it is today is an understatement.

In an interview on the New Yorker Radio Hour, Cohen said the song had literally over 200 drafts. At one point it had 80 different verses. As noted in the Life of A Song column in the Financial Times (FT) by David Cheal, the song was “an epic, hymnal composition with biblical allusions (David, Bathsheba and Samson are referenced).” He went on to say that “Cohen later said the song took him two years to write.” Yet when it was released in 1984, it was not a hit. It took John Cale to popularize the song when he included it “in a 1991 Cohen tribute album, I’m Your Fan. Shorn of the clunky accoutrements of Cohen’s version, the song was allowed to shine.”

Yet this is not the version that most people are familiar with today as the explosion of the song’s popularity came from a cover by Jeff Buckley in 1994 “whose exquisitely pure tenor voice, recorded with a churchy echo, seemed ideally suited to the song’s religious themes. Since then, “Hallelujah” has become one of the most covered songs ever, up there with Yesterday and My Way.” However, and at this moment of my life and the life of this country, I find the most exceptional version of Hallelujah to have been the version performed by Kate McKinnon in place of the usual opening monologue on the November 12, 2016 episode of Saturday Night Live (SNL), which you can view by clicking here. It certainly lifted me up, which is what I needed about now.

All of the above speaks to what we in the compliance community need to understand now. It is not the end of the world or even the end of compliance. While I am fairly certain that FCPA enforcement will continue I have no doubt that the compliance profession will continue to grow but flourish. The reason is that good compliance is good business and any process which helps businesses to be more efficient and do business more profitably it is not going to diminish in size or importance.

Just as the song went through multiple reviews, versions and was recorded by several artists before it attained its now iconic status, the compliance profession has evolved as well. John MacKessy, writing in the Finance Professionals’ Post, in a piece entitled “Knowledge of Good and Evil: A Brief History of Compliance, noted that the FCPA and Environmental Protection Act (EPA) “prompted companies to develop internal resources that would actively monitor compliance with the laws, rules, and regulations of their industries.” The next step in the evolution of the compliance profession was the defense procurement scandals from the 1980s, where the industries sales of “$400 hammers and $600 toilet seats” to the US government led to the Defense Industry Initiative (DII). This industry led initiative created “a set of principles endorsing ethical business practices and conduct” within the defense industry for its dealings with the US government.

The next step in the evolution of the compliance profession was the 1992 US Sentencing Guidelines which, for the first time, set out what the government would consider for credit in sentencing of organizations. Many tribute these 1992 Sentencing Guidelines for the creation of the modern compliance profession. These guidelines included credit for “the specific elements of an effective compliance and ethics program. Companies that embarked on such programs would be eligible for more lenient sentences. To qualify as “effective,” a company’s compliance program would not only have to establish standards and procedures to prevent and detect criminal conduct, but would have to actively promote a culture encouraging ethical conduct and compliance with the law. The emendation of those guidelines in 2004 reflected the need for corporate boards to demonstrate knowledge of compliance programs and fulfillment of oversight responsibilities as part of monitoring the effectiveness of companies’ compliance and ethics programs.”

The next major step was the financial accounting frauds and scandals of the late 1990s and early 2000s including Enron, WorldCom and Tyco. These scandals were so wide-ranging, with senior executive participation, if not directing of the corporate fraud that a new legislative response was required and this response was the passage of the Sarbanes-Oxley Act of 2001 (SOX). Aaron Einhorn, writing in the Denver Journal of International Law & Policy, in an article entitled “The Evolution and Endpoint of Responsibility: The FCPA, SOX, Socialist-Oriented Governments, Gratuitous Promises, and a Novel CSR Code”, said, “sections 302 and 404 of SOX together require corporate executives to state their responsibility for designing internal controls, to create such controls, to assess and evaluate these controls, and to draw conclusions about their effectiveness…” SOX specifically charges executive officers with internal controls duties.” Einhorn ends this section by noting, “internal controls have been transformed from a recitation of general duties lodged upon the corporation as a whole to a statement of specific duties imposed on corporate executives in particular.” This strengthened the compliance professional who was called upon to design these internal controls.

The next major legislation which enhanced the compliance function was the Dodd-Frank Act of 2010, passed in response to the 2008 financial crisis. MacKessy pointed to the downfalls of Bear Stearns and Lehman Brothers as drivers of more compliance because they both “demonstrated the degree to which external risk events can create a loss of confidence resulting in permanent reputational damage and impaired shareholder value.” The legal and legislative response has been that companies should design effective compliance programs which use risk based programs as a basis to design, create and implement effective compliance programs. Joe Howell, Executive Vice President (EVP) for Workiva Inc., has gone further, drawing a straight line from the FCPA to SOX to Dodd-Frank in the development of the compliance function.

All of this means compliance is not going away, no matter what the law enforcement priorities of the new administration. Companies understand that compliance and business ethics have a role in not only driving business strategies and initiatives but that more compliant companies are better run companies and at the end of the day more profitable because they have better controls. MacKessy ends his piece by stating the compliance programs “can provide multiple rewards – from risk mitigation, to reputational enhancement, to business strategy development.”

The compliance profession is where the magic happens in a corporation. Whether it be specific tasks of making sales, vetting relationships or the spade work of creating policies and procedures, it is compliance that drives the discussion of how we should do business. The corporate compliance profession fulfills the business obligation in doing things the right way for, at the end, it will be the compliance profession which implements the requirements of compliance whether those requirements are anti-corruption laws such as the FCPA, the UK Bribery Act, Anti-Money Laundering (AML), export control, anti-trust regulations, or any other regulation that you can name. Equally importantly, the compliance profession is teaching corporations how to evaluate risks and the compliance profession leads that discussion. It is the compliance profession that is the most innovative in not only protecting corporations, but actually helping corporations do business, do business more efficiently, and do business more profitably.

All of this shows compliance has developed over many years and for many reasons. None of this is going away. Tomorrow I will begin to consider the business applications and implication of compliance in more depth (and a couple of numbers from Leon).

[View source.]

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.
Custom Email Digest
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.