Does Compliance Matter?

I am attending the Global Ethics Summit 2010, hosted by Dow Jones and Ethisphere. Here are my notes, live from this session:

When trouble arises, one of the factors prosecutors consider during an investigation is the existence of a strong compliance program. Recently proposed amendments to the Federal Sentencing Guidelines would formally lower the sentencing range for companies with certain compliance mechanisms in place. But is there enough incentive for companies expending resources, particularly in tough economic times, or will they just get in trouble anyways? And at a time when a company’s brand value is increasingly dependent on intangible assets such as reputation, what are the financial repercussions on compliance? Do companies with ethical reputations really outperform those not known for their good behavior?

Panel:

• Joan Meyer, Partner, Baker & McKenzie LLP
• Jeffrey Benjamin, Vice President & General Counsel, Novartis
• Patricia Nazemetz, Chief Ethics Officer, Xerox
• Charles Elson, Director, HealthSouth
• Gregory S. Nixon, Senior Vice President, General Counsel, Corporate Secretary & Chief Compliance Officer, DynCorp International

Jeff noted the importance of a “Speak Up” culture at a company. You need employees to report problems up the chain. Leaders at all level can chill a “Speak Up” culture.

Since Greg’s company is a government contractor, they need to make the government happy or they lose their biggest customer.

Jeff thinks one of the key elements of an effective compliance program. Live training is by far the most effective. (He gives an “F” to the summit because there was not much interaction.) He makes sure that the trainees get lots of documentation and information before the training session. He makes sure that annual training is different each year.

Patricia sees alignment as a key you need to make sure the compliance program is aligned and in the context of the underlying business. Access is key so that people have an open door to ask questions. Analysis is key to make sure that you spot issues. Adjudication needs to be in place so that bad acts are punished. You need to think about how much disclosure you make internally and externally.

Charles emphasized the need for repetition is needed. You need to keep sending out the message. He also though compliance and legal departments should be looked at as profit centers, not cost centers.

Greg emphasized the need to have a way for people to come forward and for the company to know what to do when someone comes forward.

Charles compared the hotline to the moon mission. People complained that going to the moon was a waste of time and money. But there were tremendous collateral benefits from the moon mission. (Love that Tang and Velcro.) The same is true for the hotline. It can provide tremendous insight to the corporate operations even if nothing material as a compliance issues comes from the hotline.