Question: What essential aspect of FCPA compliance is also the toughest for organizations to come by? Here’s a hint. It’s what made the man on the left, Ben Hogan, the greatest golfer of his day.
It may as well be a physical law — like the law of gravity or one of the laws of thermodynamics. Whatever you call it, there’s always a strong and almost irresistible tendency by organizations to make downward adjustments in their FCPA compliance efforts. A sort of relativism seeps in at every seam, corner and crack. For example, pressure grows to dilute typical compliance-related reps and warranties in joint venture or agency agreements — especially when an attractive foreign principal threatens to walk away. Many sophisticated overseas parties have learned by now to argue that typical FCPA compliance language is “insulting and demeaning.” When the complaints work, the agreements are softened, and compliance obligations become weaker by a little or a lot.
In a similar way, compliance is sometimes compromised in staunchly nationalistic countries, such as China or Russia. “Referring to U.S. law and the FCPA insults our sovereignty and our domestic legal system,” the foreign parties say. That old argument still works sometimes, resulting in FCPA compliance language that’s sharp and clear being replaced with fuzzy and less offensive references to “applicable law.”
At other times, a strong-willed executive from within the organization itself — perhaps someone with a sales or business development function — might work to water down FCPA compliance. A seasoned veteran or cocky newcomer might stay away from compliance-related training and administrative duties. Predictably, their next step is to ignore, block or hinder compliance efforts directed toward a potential overseas partner they’ve been courting for a while.
Being consistent in compliance sounds hard and it is, so the next question is whether every company really needs to be a Ben Hogan? The answer is yes — with an exclamation point! Consistency is a specific requirement of an “effective compliance program.” The 2005 U.S. Federal Sentencing Guidelines say, “The organization’s compliance and ethics program shall be promoted and enforced consistently throughout the organization . . . .” (See Chapter 8 – PART B – §8B2.1. Effective Compliance and Ethics Program, Subsection (b) (6)) Without a consistent effort, then, an organization might lose the chance to mitigate its potential criminal penalties for an FCPA offense. The Sentencing Guidelines allow for mitigation of up to a life-saving 95% of the recommended penalties — but only if the organization can demonstrate that it has an effective compliance program. It won’t be able to do that if it comes up short on consistency.
What’s the best way to maintain a consistent approach to FCPA compliance? As dog owners and parents of young children know, you reward compliance and punish non-compliance. That’s not just common sense; it’s also advice straight from the Sentencing Guidelines themselves. Subsection (b) (6) cited above says in full: “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.” The Guidelines allow an organization to be creative when it comes to punishing an errant employee. As the commentary to Subsection (b)(6) says, “Adequate discipline of individuals responsible for an offense is a necessary component of enforcement; however, the form of discipline that will be appropriate will be case specific.” Similar creativity is permitted in dishing out rewards for exemplary performance.
Like in a good golf swing, consistency in FCPA compliance is essential — and so hard to achieve. But consistency truly is an aspect of compliance where each individual in an organization can make the difference between a slice, a hook or a beauty down the middle.
View Chapter 8 – PART B – §8B2.1. (“Effective Compliance and Ethics Program”) of the 2005 U.S. Federal Sentencing Guidelines here.