How Odysseus Can Inform Compliance Enhancement

by Thomas Fox

What are your thoughts on Odysseus? Is he a villain or a hero? The ancient philosophers had many differing views on him. One view that struck me was held by Antisthenes, a disciple of Socrates. Antisthenes used the actions of Odysseus as a defense against those who attacked the discipline of philosophy as mere sophistry; that is focusing on words not deeds. Antisthenes presented Odysseus as someone whose words themselves were good deeds. Further, the actions of Odysseus showed his abilities as a team player, a cooperative hero. Recently, I thought about the concept of Odysseus and words as good deeds in the context of the post-acquisition requirements of the Foreign Corrupt Practices Act (FCPA).

Although not specifically stated in the recently released Department of Justice (DOJ)/Securities and Exchange Commission (SEC) FCPA Guidance, enforcement actions from 2011 and 2012 would seem to indicate that a company should have an integration completed in 12-18 months after the underlying transaction is concluded. I considered the post-acquisition integration issue when reading an article in the MIT Sloan Management Review Winter 2013 issue, entitled “Building Your Company’s Capabilities Through Global Expansion”, by authors Donald Lessard, Rafael Lucea and Luis Vives. The thesis of the article was that for companies to create and sustain global competitive advantages, they need to adopt a systematic approach to exploiting, renewing and enhancing their core capabilities.

While the focus of the article was on marketing and sales, as I read the article I came to believe that it has implications beyond marketing into the post-acquisition integration required by the DOJ under the FCPA. I believe that the framework which the authors have developed can be a way for companies to think through both FCPA post-acquisition integration but also which compliance enhancements need to be introduced in foreign operations. This second point is significant because one issue that seems to bedevil compliance practitioners is how to integrate and enhance your compliance program across the globe. There are both language and cultural differences which make a ‘one-size-fits-all’ approach sometimes problematic. The article also provides some valuable insight into how a company might make its US centric FCPA compliance program a value add for its foreign operations.

The authors provide a framework under which they believe a company can evaluate the potential for enhancing its current sources into capabilities for development in foreign markets and work for post-acquisition integration. So using the authors’ framework, I will adapt it into the compliance space.

  1. Are the compliance capabilities developed relevant to the users in the foreign jurisdiction or in the acquired entity? Do the compliance enhancements or post-acquisition integration bring value to these diverse entities?
  2. Are the compliance capabilities you are using as the basis for the enhancements or post-acquisition integration appropriate for these internal markets? Do they help or hinder the capture of value in the company?
  3. Are the compliance capabilities that you have develop in the US transferrable to the foreign operations or acquired entities? Can you deploy these compliance enhancements to foreign operations or post-acquisition integration without sacrificing too much value creation?
  4. Are the new enhancements that the company will develop through acquisition or foreign operation expansion of its compliance program complementary to existing capabilities within the company?
  5. Are any of the compliance capabilities, that will be used in the enhancements or post-acquisition integration, complementary to existing compliance capabilities that currently exist in either of those two groups?
  6. Are any of the compliance capabilities that currently exist in the foreign operations or acquired entities, transferable back to the US?

The initial goal should be that any compliance program augmentation, whether for an acquired company or a foreign operation, should result in “an overall enhancement of the company’s capabilities” and global position. This means that while it may initially appear that the compliance group of a company is the Land of No; such should not the case for the compliance enhancement or integration to succeed. The authors believe that a company should build on its existing capabilities to show that the new processes or policies will create greater value. The example I give in training is expense reports. I ask whether anyone does not have to fill out an expense report to be reimbursed. The answer is always the same; everyone has to fill out an expense report. I then go on to explain that the FCPA will require you to list who you took to dinner or provided a gift to, what their title is and how much you spent. In other words, the obligation of an individual employee to provide the basic information to be used by others is not much in addition to the information they are currently providing.

My colleague Jay Rosen of Merrill Brink often says that translation services are only part of the equation when his company translates a compliance program or policy. It is important to understand not only the cultural context but have cultural sensitivity to issues. The classic examples are mooncakes or the tradition of giving small gifts when meeting a person for the first time in the Far East. It is viewed as a ritual which has deeper and and greater meaning more than simply a handshake. While many companies worried about this issue or even prohibited the giving of such small gifts, the FCPA Guidance has made clear that the DOJ/SEC are not looking for violations relating to such small gifts unless they are a part of an overall systemic failure of your compliance program.

In the business world it is not always words v. deeds. Another way to look at it might be consider entrepreneurial people v. process people. Entrepreneurial people tend to make things happen in an organization. They can wear many hats at once. Process people tend to have a deeper focus in a particular area. You need a balance of both in an organization.

The authors have provided a framework for you to consider in your post-acquisition compliance program integration. Further, it provides a context for you to enhance your compliance program in foreign operations. Much like Antisthenes views on Odysseus, you can translate the words of compliance into the doing of compliance

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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Thomas Fox

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