Category: Conference Notes

Doing More with Less: Compliance During Tough Economic Times

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

Let’s face it: compliance is usually seen as a cost center. While there’s been some good and interesting research about the positive impact on the business of a good ethical culture and brand, that message has not permeated everywhere. So in tough economic times, those responsible for their company’s compliance programs are forced to do more with less. How do you work with a smaller budget without sacrificing the quality or effectiveness of your efforts? And what are the best companies doing to demonstrate the value of and return on their own efforts?

Speakers:

  • Ronnie Kann, Managing Director, CELC, Corporate Executive Board
  • Alexandra Wrage, President, Trace International
  • Keith Abrams, Vice President & Associate General Counsel, Bayer NA
  • Dean Krehmeyer, Executive Director, Business Roundtable Institute for Corporate Ethics
  • Jeremy Wilson, Senior Manager, Ethics Office, Cisco Systems

Resource Allocation

Jeremy looked to collaboration to help maximize resources. Start by figuring out resources you have internally to limit external expenditures. Cisco has lots internal technology resources. Take advantage of your technology resources. They leverage internal social media tools to help communicate with employees and managers. Since they own WebEx they do lots of videoconferencing.

Dean is seeing the compliance and ethics trying to push activities upward to get boards and C-level executives more involved in their programs. There is an emphasis on making the business case.

Keith pointed out that there as much interest throughout organizations to do the right thing. The board is sometimes behind.

Alexandra pointed out that in a time of decreasing budgets, legal and compliance should not have a disproportionate cut. Working with shoddy partners and illegal conduct has real business costs.You need to make compliance business-relevant.

Enhancing the Program

Look to your peers and competitors to show what others are doing. Complying with regulations are important but meeting the level of your industry is even more important when the practice exceeds regulatory standards.

Storytelling is important. Stories are one of the best ways to demonstrate corporate culture.

Risk Management

The 2008 financial crisis had a much bigger financial loss than the Enron era wave of corporate governance changes. The outrage is bigger also. But we are not seeing as many perp-walks and prosecutions. The crisis may have been more about failures of risk management than a failure of corporate governance. You still need ethics and compliance to be a fundamental part of corporate operations.

We need to make it clear that bribery is not a victimless crime. It sometimes seems that it does not have the headline issues of environmental violations. Hopefully, the SEC and DOJ prosecutions will cause companies to focus on the dangers of bribery. The result is not just fines, but people are going to jail for bribery.

Broken Trust

How can your company help restore the public trust in it? It’s a business issue. You should have your ethics and compliance program show the lead in restoring that broken trust. Show your internal employees how you are restoring trust so it will be apparent externally. Empower your employees so they know the answers.

Strategic Implications

It’s hard to tap into the business processes. Compliance is usually outside the flow of business processes. Don’t talk “at” people. You need to engage them and have a dialogue. If the issues were easy, they wouldn’t be issues.

Alexandra points out that compliance has an important role when entering new markets. There are natural allies in the markets to help deter bribery. Bribery is theft and increases the costs to consumers. She has case studies and reports that shows that you can succeed by not paying bribes. You have to go with a strong message at the beginning. After the first time you pay a bribe, the government officials will line up with their hands out.

There are lots of stakeholders who were damaged by the current corporate ethics wave. More than the Enron-era corporate ethics wave. Companies need to find the balance between innovation and compliance. You don’t want to be a barrier to new business (as long as it is ethical and compliant.)

Global Insights into the Anti-Corruption Landscape

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

Dow Jones Risk & Compliance presents the results of a recent survey of current anti-corruption regulation, emerging trends and the impact on corporations around the world.The speaker was Rupert de Ruig, Managing Director, Risk and Compliance, Dow Jones & Company.

He started by looking back at 2009. He labeled the “year of the individual.” People were increasing being prosecuted and going to jail for compliance failures. There was an extension of control person to impose liability for supervisors/directors who were directly involved in the bad actions.

The United Kingdom is implementing a bribery bill. It’s expected to become law in 2010. The purpose is to make it more clear what is a bribe to make it easier to prosecute. It goes beyond the FCPA because it also covers bribes to private companies, not just public officials. It’s applicable if you have operations in the UK.

As corruption continues is some jurisdictions, companies are not entering the markets in those countries. Since the reach of the FCPA is extra-territorial, you need to be careful where you operate.

Equatorial Guinea Case Study

Rupert used this country as a case study. He pointed out the enormous wealth due to its oil reserves. That wealth has not made its way to the larger community. There is an oligarchy of officials that retain most of the wealth, largely through corruption. There is a need to better keep corrupt money out of the United States.

Bringing Corrupt Officials to Justice

652 senior government officials were arrested in 2009 for corruption, with 17 from North America, 138 from Africa, and 167 from Europe (including Eastern Europe and Russia).

Dow Jones State of Anti-Corruption

Dow Jones recently published their 2009 State of Anti-Corruption.

They found 30% of the survey takers said their company did not have an anti-corruption program.

They found that business expansion has been limited by the FCPA. They are concerned that the cost of bribery in some countries is too great. (I would guess that it is both the direct dollar cost and the cost of potential prosecution.)

A third of companies felt they lost business to a competitor who paid a bribe.

Tone at the Top: The Board’s Role

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

Understanding and supporting a prudent ethical and compliant tone throughout an organization is a core responsibility of the board of directors. Board actions are more transparent than ever to employees, investors, regulators, media and the general public. This session will discuss the challenges and keys to success for today’s boards. What are the responsibilities and associated liabilities of the Board for a company’s compliance? How can a board become actively involved in assuring employees, stakeholders and regulators that their organization is being proactive about ethics and compliance?

Speakers:

  • Thomas O’Neil, Advisor, WellCare Health Plans
  • C. Turney Stevens, Dean, College of Business, Lipscomb University
  • TK Kerstetter, President & CEO, Corporate Board Member

Turney started off by a need to focus on the tone throughout the organization. It is great to have the board of directors focused on integrity and ethics. But it is useless if that message does not reach down throughout the organization.

Thomas pointed out the need to view and get involved in company operations. They should not limit their involvement to meeting in the boardroom.

Watershed Events

The test of company’s culture is during a crisis. TK used the example of Wal-Mart, when the vice-chairman was found to be abusing gift cards. They had to set the culture and discipline that person (terminate?).

Overload

It can be overwhelming for a board to oversee all of the operations. They need to have faith in the organization. Directors need to get comfortable that the company is doing the right thing. Turney mentioned the work of Ben Heineman and his book  High Performance with High Integrity. It is important to create some metrics to measure the process and the compliance program. Heineman came out of GE and its culture of measurement.

Cutting Corners

With the pressure of hitting budgets and performance goals, how do you temper this with the need to operate with integrity. The board needs to show that the employee was a rogue and that the company had the culture, operations and monitoring in place that would normally prevent the rogue employee from succeeding. You need to show that you were a reasonably prudent director. (Of course the standard for being a reasonably prudent director is a continually increasing standard.)

You need to temper “missing the numbers” and the need for integrity. How to reconcile these competing forces? It’s tough.

Going Public

Private equity firms need to do a better job on compliance, ethics and the “tone at the top” when preparing their portfolio companies to go public. There are the regulatory issues of course. But there is an increased pressure to make the numbers in the public markets.

Working Toward a Healthier Organization: Pfizer’s Compliance Program

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

Picture of Douglas Lankler

There are a number of challenges associated with maintaining integrity as a top priority in a highly competitive global business. But sometimes, despite company’s most earnest efforts to effectively implement compliance metrics and an ethical culture, things can go wrong and subject a company to governmental scrutiny and penalties. Join us as Pfizer’s ehief compliance officer Douglas Lankler candidly discusses this reality and how corporate leaders handle the challenge of compliance in a global setting—and how to effectively address and rebound from cases on noncompliance.  Douglas M. Lankler, Senior Vice President & Chief Compliance Officer, Pfizer was interviewed by Timothy P. Erblich, Executive Vice President, Ethisphere Institute, Ethisphere.

Lankler started with Pfizer in 1999 at the start of the compliance program at Pfizer (and at the start of the compliance field). He told some of the background on the Pfizer investigation on Bextra. (see: Pfizer and Compliance.) It was a very difficult outcome for the company. It had a tremendous impact internally. Everyone talks about it and everyone wants to make sure it does not happen again.

The result was a very rapid evolution of the compliance program. As a big company, they already had a robust program. This made it better. When you have 100,000 employees and 99.99% of them are doing the right thing, that still leaves some bad employees.

Pfizer is very acquisitive so it is key to integrate the acquired companies into the Pfizer culture. Systems can keep an eye on employees. But culture helps them to make sure they make the right decision when no one is looking. They have taken the extra-ordinary measure having employees wear integrity pins. (Lankler had one on his lapel.)

The audit committee and the entire board of Pfizer are very focused on compliance issues. Of course there are more than financial issues for compliance failure at a healthcare/pharma company. Compliance failures can kill people.

For Pfizer the key is monitoring at a very granular level. The compliance program needs to dive deep into the transactions, sales levels and questions from customers. An increase is sales is great, but can also be a red flag for something bad happening.

Part of the problem with changing standards and regulations will be used to look back at prior actions. Something you did in 2004 will be evaluated with a 2010 perspective. (This is one of the reasons to stay ahead of the regulatory landscape.)

In dealing with a government investigation, it is very important to put yourself in the shoes of the prosecutor. When listening to the strategy of your outside counsel you need to listen to it from the prosecutor’s perspective. The prosecutor found a problem. You need to help them understand the company operations. They see the problem (and the jury will see the problem) in isolation. You need to show them that the company is as upset about the problem as the prosecutor.

As part of their settlement with the government, Pfizer’s CCO reports directly to the CEO. Previously Lankler reported to the general counsel. This was a big change for Pfizer. The company is highly regulated so there is a tight connection between the legal division and the compliance division. Outside of the legal division, he does not have the legal spending power of the legal department behind him. (He was No.2 in legal.) There was tension between the importance of compliance having a seat at the head table and the importance of support from the legal group.

Compliance 2010 – What’s Next?

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

“New challenges abound amid advancing best practices, not to mention the continually escalating rate of enforcement both by U.S. regulators and overseas officials. What’s on the horizon for compliance? This roundtable discussion comprised of leading ethics and compliance officers will share their insight into what’s next, how to be prepared, and their own seasoned advice on how corporate executives can keep their organizations from making headlines for compliance or ethics transgressions.”

  • David G. Barry, Managing Editor, Financial Information Services, Dow Jones & Company
  • Grace Renbarger, Chief Ethics and Compliance Officer, Dell Computer
  • Haydee Olinger, Corporate Vice President & Global Compliance Officer, McDonald’s
  • Peter Jaffe, Chief Ethics and Compliance Officer, AES
  • Genie Gavenchak, Senior Vice President, Chief Compliance and Ethics Officer & Deputy General Counsel, News Corporation

Peter lead off. He is looking ahead for continuous improvement. They have an existing program that they think is solid. They have good relationships internally and wants to have even better relationships. They are also looking to better adapt to local cultures.

Grace pointed out that they were dealing with the economic downturn in 2009 by focusing closer in internal fraud issues. With a potential recovery in 2010, they are looking for better global compliance with a flat budget. Dell as a company is looking to put integrity and ethics at the forefront of its business.

McDonald’s is looking to stay ahead of the trends and regulations. Social media, privacy and HR issues will be important in 2010. They leverage their outside law firms to help with training. In foreign markets they own more restaurants, as opposed to franchise, so they want to set the tone for future franchisees.

News Corp. is looking at how to best operate in difficult foreign markets. They want the message that they will not play the old game. But at the same time they need to operate in those countries. (Disclosure: News Corp is one of the largest tenants of my company.)

Federal Sentencing Guidelines

The next question was the proposed amendments by the US Sentencing Commission. [Prior post: Proposed Amendments to Sentencing Guidelines] One panelist raised whether the effect of the amendments would be to make the general counsel the CCO. This would seem to be step back since many companies have been separating the GC and CCO functions. Most of the panelists report to the general counsel, but have lots of contact with their boards and CEOs.  One panelist really disliked the incorporation of document retention issues into compliance and ethics practices.  The panel also pointed out that the are just minimum standards.

Foreign Corrupt Practices Act

Each of the panelists have increased their focus on FCPA issues.  Each mentioned that they were trying to standardize their practices across the world. Each has a closer focus on countries with higher levels of corruption. (Nobody was willing to point fingers at any particular country as being the most problematic.)  They have made their foreign operations and foreign partners aware that the FCPA applies to them, even though they are not in the US.

One panelist mentioned that they are moving from lawyer based training to internal programs with greater focus on internal practices, not the law. One key is how to do all of this awareness and training in a cost effective way. In-person training is the most effective, but also the most expensive. One of the keys is leverage. Focus on training the trainers and the tone from the top. The top is not just the CEO, but the head of local operations and middle management.

Social Networking Sites

The panel started with a statistic that 25% of companies have fired someone for what they did on a social media site. News Corp. has taken this head on, but also has the problem that they own MySpace and are a media company. The key is to set boundaries to prevent damage to the company and to clarify ownership of content. McDonald’s has over a million employees and at the same time trying to use social media proactively. A big focus is on trademark and intellectual property issues.

Compliance in Mergers and Acquisitions

The key is to be part of the acquisition diligence process to vet any issues ahead of time. Integration is a bigger issue. You need to unify the codes and investigation processes so they are standard across the organization. One issue is that smaller companies tend to have many of the compliance and ethics process in one person and one process. A bigger company has it broken out into separate components.

Citizens United, Corporate Campaigning and Pay to Play

Panelists said that they already have political donations and lobbying policies in place. There is more of a focus on pay-to-play. When interacting with the government as a contractor you need to be focused on the issue.

Top Issues for 2010

  • Overall government regulation.
  • No idea. There were so many curveballs in 2009 and there will likely be more in 2010.
  • Communication and education.
  • Organizational scorecard for compliance and ethics

The One Year Club: Five Things Companies Learn After a Year of Enterprise 2.0 Adoption

enterpise 2.0

I’m attending the Enterprise 2.0 Conference in San Francisco. I’m sharing my notes from this session. At the outset, organizations are often eager and excited about the benefits they anticipate from cultivating adoption and use of social and collaborative tools. But talk to those same organizations six months or one year after they’ve started, and you’ll hear a different story. Some organizations have experienced measurable success, others are struggling with a range of adoption and use issues, but all will tell you to watch out for several factors they didn’t anticipate.

  • Stewart Mader, Founder and Senior Consultant, Future Changes
  • Thomas Vander Wal, Principal & Senior Consultant, InfoCloud Solutions (speaking, just briefly, from a remote, undisclosed location.)

The issue of lack of capacity is re-thinking how you use the space. He used some urban design analogies, including community adoption and reliability. (Stewart’s wife is a landscape architect.)

Stewart advocates focusing on solving small day-to-day issues instead of trying to change the enterprise. Changing the enterprise is scary to most people. Mass collaboration is not the right way to go. (Wikipedia is a bad model for Enterprise 2.0.) Smaller groups of people who trust each other works better for collaboration.

Collective, community, collaborative, sharing listening and holding onto are each different activities. Different Enterprise 2.0 tools are better at some of these activities and not so good at others.

When focusing on the group, you need to know what type of interaction they need.

Never underestimate how busy people are and how easily they may dismiss a new tool.

Another myth is the 1-9-90 rule (1% create most of the content, 9% do some, and 90% are passive.). Its true for the internet, but not true inside the enterprise. (I also found this to be true. There is much more contribution when focused on a group.) Tools focused at the enterprise as whole, as opposed to working groups, will have fewer contributors. The tools will not have a hockey stick adoption curve that you see on the web. You will see steps of adoption inside the enterprise. You may see spikes of activity, especially after a presentation their use. But that use is merely exploratory.

Rules are for impatient people. See what works and adapt to the use. A pilot is the stepping stone to demonstrate utility and value. Case studies are nice, but internal use stories are much better. Adoption happens at the lunch table. Hearing it helped solve a problem for a person they know is the best sale tool.

Enterprise 2.0 tools are like swiss army knives. They do lots of things. You need to find the best uses. Give people permission and encouragement to find the best uses.

A wholesale replacement can often been seen as being out in left field. People do not like big changes. People have an easier time adopting tools that ease an obvious pain point. You need to fix a problem. The problem is a need. Focus on day-to-day problems.

Tools are the foundation. You need them. But you need to know how to use them.

Stewart ended with his analogy to dog “messaging.” See more: What Can Location-based Social Networks Learn From Dogs? Stewart seems to learn a lot about messaging from his dog.

Straight from the Horses’ Mouths

enterpise 2.0

I’m attending the Enterprise 2.0 Conference in San Francisco. I’m sharing my notes from this session. The 2.0 Adoption Council presents the market’s first in-depth research on a representative sample of early adopters in large organizations. This session will cut to the chase on issues that have plagued pundits and vendors alike.

Dan and Carl conducted a survey of large companies that have been adopting Enterprise 2.0 tools. The companies all had over 10,000 employees. None have deployed to 100% of employees. But of course many, many companies do not even have email deployed to 100% of their employees. Most shop floor employees do not have email.

Resistance is real. Most of the resistance comes from users. In the survey 49% encountered IT resistance and 64% experienced management resistance, but 72% experienced resistance from users. Of those 38% overcame IT resistance, 40% overcame and only 32% overcame user resistance. So the user resistance was the strongest and harder to overcome.

Looking at management issues, the biggest issue is measuring ROI: 69% experienced issues with ROI, but only 12% overcame it.

The biggest issues with IT was the immaturity of the technology. 54% experienced resistance from IT, but only 17% overcame this resistance.

Lessons learned:

  • Enterprise 2.0 isn’t free
  • Driving adoption isn’t magic, it requires
    • resources
    • time
    • focus
    • money

The ROI is there. It’s just hard to measure.

Analysts on SharePoint 2010

enterpise 2.0

I’m attending the Enterprise 2.0 Conference in San Francisco. I’m sharing my notes from this session.

  • e2 Moderator – Irwin Lazar, Vice President, Communications Research, Nemertes Research
  • Christian Finn, Director of SharePoint Product Management, Microsoft
  • Mike Gotta, Principal Analyst, Burton Group
  • Rob Koplowitz, Principal Analyst, Forrester Research

SharePoint is a platform. The move from the 2003 version to the 2007 solidified the treatment as a platform. It is also getting better integrated with the rest of the Microsoft development framework.

SharePoint does require a big overall strategy. It’s not a lightweight deployment. But the deployment of lots of grass-roots deployments of Enterprise 2.0 tools causes lots of governance, privacy and control issues. SharePoint helped manage those issues. But the 2007 was flawed and caused its own sets of problems.

SharePoint 2010 requires top-level decisions and policies before the grass-roots content creation can begin. It’s tough to start small. Maybe the cloud version/SaaS model is better. It’s more agile.

Christian, after sitting quietly, pointed out that software is both a platform and an application. People to be able to use it right out of the box. He admits that SharePoint will not move as fast, but that means the platform is more stable. They are open as a platform, welcoming third-party add-ons to bring additional functionality.

The panelists agreed that SharePoint did a great job of focusing on things like records management. But SharePoint, with its 3 to 4 year development cycle, will always be behind the market. Christian points out that 3 years it the typical adoption cycle for software.

The Social, Mobile Web: Business Productivity in an Era of Twitter, Facebook, and Unified Communications

I’m attending the Enterprise 2.0 Conference in San Francisco. I’m sharing my notes from this session. Clara Shih,founder and CEO of Hearsay Labs, which develops web applications to track brand engagement and accelerate sales on Facebook and Twitter. She is also the author of The Facebook Era: Tapping Online Social Networks to Build Better Products, Reach New Audiences, and Sell More Stuff.

Facebook is CRM, its the way to manage your contacts and stay in touch. She makes the argument that email is dead.

(I think this is a losing argument. You will lose just about everyone if you make this statement. So what if college students are not using email. They are not working inside a business organization.)

Companies are investing more time and money on social media as part of their marketing strategy.

She put forth that Facebook is the template for online identity. It has become socially acceptable to share photos, interests and demographic information. You can get to know people more quickly.  Now you also have the layering in the real-time identity.

The transaction costs of communication are being reduced. Email was cheaper than phone calls. Facebook and Twitter allow you to reach an even broader audience even cheaper. Especially, keeping in touch with weak ties.

She showed the tool she made called Faceconnector (originally called FaceForce) that pulled Facebook information into Salesforce. Essentially enhancing that CRM system.

Is Enterprise 2.0 a Crock?

enterpise 2.0

I’m attending the Enterprise 2.0 Conference in San Francisco. I’m sharing my notes from this session.

  • e2 Moderator – David Berlind, Chief Content Officer, TechWeb
  • Jamie Pappas, Manager, Social Media Strategy, EMC
  • Bryce Williams, Social Media Consultant, Eli Lilly
  • Megan Murray, Community Manager/Project Coordinator, Booz Allen Hamilton
  • Claire Flanagan, Senior Manager, KM and Enterprise Social Collaboration, CSC
  • Bruce Galinsky, Director IT, Metlife
  • Greg Lowe, Social Media Architect/Program Manager, Alcatel-Lucent

David started off by point out that this session was set up as a response to Dennis Howlett’s Enterprise 2.0 What a Crock. (Although he didn’t mention Dennis by name, merely saying a ZDnet blogger.) The panelists are part of the Enterprise 2.0 Adoption Council.

Workplace Transformation.

The first topic the panel addressed was workplace transformation. Greg pointed out that Alcatel wants to break down organizational silos so that people doing similar things can find each other. He points out that in big organizations have a hard time finding internal expertise.

Claire pointed out that the tools are enabling devices.She points out that the tools are not an incremental change, but a quantum leap. She comes from knowledge management where the concept was to push information into a new silo. These new tools allow knowledge capture as part of the workflow.

Bruce agreed. The tools make sharing easier.  Bruce emphasized the need for speed and innovation in the marketplace. Enterprise 2.0 tools help.

Business Process

Claire points out that the 9-to-5 office has been eroding. People are collaborating around the world, so face to face collaboration is not feasible.

Intellectual Property/Privacy/Governance

You need to focus on the governance and compliance issues. There was some discussion of the benefit of open governance, allowing organization groups to get input from other groups in creating policies.

Companies need to start stop not trusting their employees. The biggest threat is from within. But you need to educate employees. Malicious people will find ways around the lock-down. Email is no more secure than Enterprise 2.0 tools.

Religious Wars (Technology and Generational Bias)

The importance is tools that are easy and intuitive to use. Some companies prefer open source, some prefer Microsoft and others IBM. People want the tools to communicate better to remove information silos.

Bottom-Line Business Benefits

The elusive quest for ROI on technology tools. The panelists agree that this is the biggest challenge. It is hard to show the direct benefits of collaboration. One panelists took the time saved approach to measurement. The tools allowed a project to be done faster. Another did a comparison of the time and money comparison between reply-all emails and a wiki. (Of course, this is soft dollars.)

Then the audience joined in.

One question was how you value the better decision-making that can come from use of Enterprise 2.0 tools. A panelist gave the example of how the company sent an open question on how to save money. They got lots of good feedback and money-saving ideas. The tools allow management to get better feedback and an ability to tap into the conversations happening in the organization.

Claire pointed out the need to find a tool that is “addictive.” Employees will vote with their feet and use what works best for them. Tools need to be easy to use and intuitive. And of course, useful.

My Take

Enterprise 2.0 is still looking for pays to justify itself. People that have used the tools (at least the good tools) do find them addictive. The problem is comparing the tools to email when it comes to ROI. The ROI for email was easy. Email was obviously cheaper and faster than mail or overnight delivery of documents. It was also cheaper than a phone call. The ROI for Enterprise 2.0 tools is much more elusive.

I think Enterprise 2.0 should look to some of the arguments for knowledge management. Sure, knowledge management largely died because the tools and approach were flawed. I find the Enterprise 2.0 approach to be the better approach to knowledge management. You are capturing the intellectual capital of your enterprise as part of their workflow.