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Mike Scher on VW’s compliance screw up (with video)

Michael Horn, president and CEO of Volkswagen Group of America, said Tuesday: “Our company was dishonest… we have totally screwed up.”

VW rigged U.S. car emission tests by installing software designed to cheat. It’s setting aside €6.5 billion ($7.23 billion) to cover costs of repairing the cars and “other efforts to win back the trust of our customers.”

About 482,000 diesel cars in the U.S. were affected by the cheating and more than 10 million world wide.

I’m teaching a workshop with Professor Cava at the University of Miami next month and I really should play the video clip below for the participants. Saying we screwed up by the CEO is true transparency, whatever his motivation may have been.

But as another FCPA Blog contributor said to me this week, environmental compliance is below the radar as far as compliance programs go. There may be other areas too.

This leads me to think about the scope and depth of compliance culture in a complicated company. Which areas are considered at risk and what kinds of measures address that risk?

In the healthcare world of hospitals, clinics and doctors, compliance departments are much better developed. Their methodology for risk analysis and creating compliance programs is far more sophisticated than in other industries.

Why? I wrote a post about this a few months ago. Taxpayer dollars in the range of $1 trillion per year flow-through healthcare organizations. After lots of prosecutions, the regulators and healthcare organizations created a much more complex and fully functioning business system for controlling compliance risk.

The growth of the compliance movement will improve when we change the theoretical and strategic focus. Right now it relates to legalistic requirements versus business systems for all organizations.

No company would operate without a system for managing cash flow and financial controls. Compliance is not seen that way. But it should be. It’s a new and important business system.

As I said in the earlier post, compliance officers in the healthcare field are running a new form of business system to identify compliance risk and manage it all the way up to the level of decision-making by boards.

With a system like that in place, the brass at VW today would be celebrating record sales instead of apologizing to the world for screwing up.

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Michael Scher is a senior editor of the FCPA Blog. He has over three decades of experience as a senior compliance officer and attorney for international transactions. He can be contacted here.

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