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Bar News - December 17, 2014

Business Law and Business Litigation: Advising Corporate Clients on Ethics and Compliance


The existence of a robust and effective Ethics and Compliance Program (ECP) can mitigate adjudicated damages or even help your corporate client avoid prosecution altogether in the event of a compliance crisis.

The compliance challenges of every organization are unique. There are no “off the shelf” solutions. When tailoring advice to meet the needs of your client’s business, it’s best to start with the basics.

Why should your corporate client care about having an ECP?

Refer them to the Federal Sentencing Guidelines, The Foreign Corrupt Practices Act, The UK Bribery Act or any Google search involving the words “corporate” “compliance” and “failure.”

In customer-facing enterprises, compliance (and increasingly, sustainability) are competitive advantages.

Increased whistleblower protections have incentivized your client’s employees and third-party affiliates to look for compliance breaches. It’s far better for you client to find out about his or her gaps and to remediate those gaps than it is for a potential whistleblower to find those gaps first.

What does your client need?

It’s important that your client develop standards and procedures to prevent and detect criminal conduct within the organization.

The company’s board of directors or governing body should be knowledgeable about the content and operation of the ECP and exercise oversight with respect to its implementation and effectiveness.

Additionally, high-level personnel should be assigned overall responsibility for the ECP.

Make sure your client’s company is not giving substantial authority to employees (new or recently promoted) who have engaged in activities that would make it difficult for your client to argue their activities are consistent with your overall ECP.

The company also should be able to produce evidence of having taken reasonable steps to communicate (periodically) its standards and procedures by conducting effective training programs.

These steps should include ways to ensure the ECP is followed, methods for evaluating its effectiveness and the creation of a system for reporting violations anonymously, without fear of retaliation (for example, a hotline to report concerns). Additionally, the company should engage in consistent promotion and enforcement of the ECP through offering appropriate incentives to perform and implementing appropriate discipline for failure to perform.

After criminal conduct has been detected, the organization must take reasonable steps to respond appropriately to the conduct and to prevent similar conduct, including making necessary modifications to its ECP.

So, what does all of this mean for the attorney advising his or her corporate client on compliance? Here are some key areas in which you can help your corporate client achieve a successful ECP and avoid potential violation claims:

Policies and procedures. Help your clients draft appropriate policies. There are tons of great providers online but even a simple Google search should give you something from which to build. A Code of Conduct (COC) is imperative. It need not be daunting and should comport to the industry in which your client operates.

Oversight and accountability. The buzz phrase “tone from the top” is key here. The ECP can’t be a middle management initiative only. If your client operates under a board of directors, board members need to informed and knowledgeable about the program.

Education, communication, awareness. The policies and procedures you develop with your client can’t merely sit in a binder in the staff room. There should be effective training, communication and general awareness. Larger companies may elect to spend money on outside providers or brand their in-house programs with promotional materials. Simpler avenues are available; the effectiveness of your client’s efforts is more important than the money spent on them.

Delegation of authority/due diligence. When hiring for positions of authority (or promoting someone into a position of authority from within), your client needs to do a little digging. The standard applied will be “knew or should have known.” Background checks may be customized through a variety of providers to meet the needs of your client’s industry and budget.

Enforcement: “stick and carrot.” Enforcing the ECP can be as easy as embedding compliance training metrics into performance reviews and publishing a policy relating to misconduct. Of course, enforcing the policy and the metrics consistently is key, so make sure your client isn’t just paying lip service to the idea. If an employee engages in misconduct, and your client ignores its policy on discipline, courts will cut no slack merely because the organization had the policy in place.

Monitoring, risk assessment. Continually assessing the compliance environment is important. When new regulations (for example, Conflict Minerals Reporting) arrive on the scene, you want your clients to be aware and able to assess their risk of exposure.

Ongoing program improvements. A “robust and effective compliance program” is a moving target. Creating one is not a onetime exercise after which you can exhale and bask in its glow. As the organization grows and changes, so too will its compliance needs. The same is true for the workforce and the regulatory landscape. To be effective, almost by definition, the program has to improve continually.

Successful business organizations need more from their attorneys than ever before. By understanding the legal requirements and practical applications of effective ECPs, you can provide meaningful and intrinsically valuable advice to your business clients.

Author’s Note: For a more detailed analysis of the basics of ECPs, see Essential Elements of an Effective Ethics and Compliance Program, by Debbie Trokulous, Greg Warner and Emma Wollschlager Schwartz in the Society of Corporate Compliance and Ethics’ The Complete Compliance and Ethics Manual 2014.

Amy K. Monk

Amy Monk is senior legal and compliance counsel for Albany International Corp. Admitted to practice law in New York and New Hampshire, she currently sits on the Ethics Committee of the NH Bar Association and is a certified Sustainability Leader through the Peter T. Paul College of Business and Economics.

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