What Can We Learn About Compliance Programs From a Robot

tweenbot

We all need some help if we want to get to our destination. I was struck by Kacie Kinzer’s experiment using this “tweenbot” in New York City. “Tweenbots are human-dependent robots that navigate the city with the help of pedestrians they encounter. Rolling at a constant speed, in a straight line, Tweenbots have a destination displayed on a flag, and rely on people they meet to read this flag and to aim them in the right direction to reach their goal.”

This simple little robot, that can only roll in a straight direction at a constant speed, made it from Northeast Corner of Washington Park in NYC to the Southwest Corner of the park. It took 29 people to intervene: pushing the little robot in the right direction, pulling it out form under park benches, and redirecting it away from the curb.

I think there are some lessons that a compliance professional can learn from this experiment:

  • Simplicity works
  • Put on a human face
  • Have a clear goal
  • Allow others to help you

Are there any other lessons that you saw?

Here is a video showing parts of the Tweenbot’s journey through Washington Park:

Thanks to Jenny Williams from GeekDad for this story: Tweenbots: Help a Lost Robot Find Its Way.

The 4 Ps of the Internet: Personal, Private, Professional, and Public

4_ps_of_social_internet

I often hear the challenge of using the social internet as struggling with the balance of social (or personal) information and professional information. This never seemed to frame the issues correctly for me. Was it really one or the other?

So I started thinking about the 4 Ps: Personal, Private, Professional, and Public.

These seemed to be the terms that most people talked about. Many people struggle with the balance of what information they make available on the internet. Some of this was information published through personal choice. Some of this was information published because it is public information.

If you are a professional, you are marketing yourself and want some of your professional career public. Conversely, there are aspects of your social life that you want to be private. But there are many personal things you would want to be public and some professional things that you would want to be private. There was a struggle with balance, but was it really one against the other.

So I sat down with the 4 Ps and tried to draw out my thoughts to see if I could change this analysis. I came up with this drawing:

4_ps_of_social_internet

There is the balance of professional versus personal and another balance of private versus public. With any item of information you need to evaluate which area it falls into. Public and professional information is in the green zone and can go right out there. Meanwhile the personal and private information is in the red zone and you want to hold on tight to it.

So what goes in the yellow zone? An example for me is my kids. I often talk about The Son and The Daughter, but rarely use their actual names. I put up a few pictures of them but in more limited location.

What about the orange zone? I am sure everyone has some black marks in their professional career that they want to keep out of the public eye. (Not me of course!) If you are a lawyer and have a disciplinary action against you, that may be public knowledge. You may not want to publicize it. (Avvo does!)

What do you think of this analysis?

Corresponding with Cornelius – a new series of blog posts

200-state-street

Not all of my online conversations take place here at Compliance Building. I try to make as many comments in other places as I do here. Twitter is a sporadic stream of thoughts, comments, and replies. I also try to leave as many comments on other blogs as I do posts here. I think you should join some of those other conversations. Here are some other blog posts that caught my eye and made me leave some commentary.

Corresponding with Cornelius on Collaboration with Clients by David Hobbie at Caselines

A follow up to my earlier post on Extranets for law Firm and Client Collaboration

Why Corporate Ethics is Usually an Oxymoron by Charles Green of Trust Matters

Charlie does not like the idea of ethics being treated as separate process and an individual course. I agreed.

Live Events in the Age of Social Media by Bill Pollak of Incisive Media

Bill points out the ways Twitter and the social internet are changing the ways conferences are run and what happens after. I point out that they are also changing what happens before the conference.

How Are Lawyers using Twitter by Simon Chester on Slaw.ca

I share the ways I use Twitter.

Training: What Works? By Alexandra Wrage on the wrageblog

A great grouping of four types of workers in anti-bribery training. I note that the same paradigm can be applied to most compliance and ethics training.

Social Networks and Employer Branding by Brand for Talent

Mark and I are writing some guidelines on the use of social media for our readers. We invite you to join the conversation.Let us know how you think we can embrace these tools versus police them. I offered up my draft blogging / social internet policy.

The Three Types of Collaboration by Jordan Furlong of Law 21

Jordan sets out a paradigm of three types of collaboration: Lawyer-to-lawyer, lawyer-to-client, and client-to-client. It is one of the few times I have disagreed with Jordan.

I have to credit David Hobbie with coming up with the phrase “Corresponding with Cornelius” which led to this blog post title and this new series of blog posts. (At least new for me.)

Carried Interest Tax Legislation

congressman sandy levin

We saw in the Obama budget (A New Era of Responsibility) that the administration was looking to raise revenue by taxing the carried interest for private investment funds. I was waiting to see how that one line item in the budget might translate into actual legislation and a change in tax policy. Congressman Sandy Levin from the 12th District of Michigan introduced the first attempt: H.R. 1935.

The changes in H.R. 1935 are focused on taxing the carried interest only to the extent the fund managers did not have an underlying investment in the fund. The bill proposes a new section 710 to the Internal Revenue Code in Subchapter K. Any net income from an “investment services partnership interest” will be treated as ordinary income and any net loss will be treated as ordinary loss.

“Investment services partnership interest” means

any interest in a partnership which is held by any person if it was reasonably expected (at the time that such person acquired such interest) that such person (or any person related to such person) would provide (directly or indirectly) a substantial quantity of any of the following services:

(A) Advising as to the advisability of investing in, purchasing, or selling any specified asset.
(B) Managing, acquiring, or disposing of any specified asset.
(C) Arranging financing with respect to acquiring specified assets.
(D) Any activity in support of any service described in subparagraphs (A) through (C).

There is an exception for “qualified capital interest” which will not be converted to ordinary income or loss, so long as the income, gain, loss, or deduction allocated to the “qualified capital interest” is in the same manner as it is to other partners and that those allocations are significant.

“Qualified capital interest” means so much of a partner’s interest in the capital of the partnership as is attributable to:

(i) the fair market value of any money or other property contributed to the partnership in exchange for such interest,
(ii) any amounts which have been included in gross income under section 83 with respect to the transfer of such interest, and
(iii) the excess (if any) of–

(I) any items of income and gain taken into account under section 702 with respect to such interest for taxable years to which this section applies, over
(II) any items of deduction and loss so taken into account.

This would seem to prevent private investment fund managers from converting a management fee into a partnership interest in the fund. I have not figured out how this affects a performance-based promote allocation in a fund structure.

As the Congressman characterizes the legislation in his press release:

“The legislation clarifies that any income received from a partnership, capital or otherwise, in compensation for services provided by the employee is subject to ordinary tax rates. As a result, the managers of investment partnerships who receive a carried interest as compensation will pay regular income tax rates rather than capital gains rates on that compensation. The capital gains rate will continue to apply to the extent that the managers’ income represents a reasonable return on capital they have actually invested themselves in the partnership.”

Since the bill was only introduced last week, it is too early to start changing things to address the changes in this bill. The bill may not pass and it may end up looking very different after it goes through the legislative meat grinder.

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Document Behaviors

A version of this post originally appeared in my old blog: KM Space.

I have been focusing a lot of attention on the behaviors towards documents. After all, a wiki page is just another type of document. When producing documents, I have noted five types of behaviors: collaborative, accretive, iterative, competitive and adversarial.

Collaborative
With collaborative behavior, there are multiple authors each with free reign to add content and edit existing content in a document, and they do so.

Accretive
With accretive behavior, authors add content, but rarely edit or update the existing content. Accretive behavior is seen more often in email than documents. Each response is added on top of the existing string of information with no one synthesizing the information in a coherent manner. I have seen this in wikis as well where people will add content but not edit others content.

Iterative
With iterative behavior, existing content is copied to a new document. The document stands on its own as a separate instance of content. The accretive behavior is distinguished from the iterative behavior by the grouping of similar content together. With accretive behavior the content is being added to the same document, effectively editing the document. With iterative behavior, the person creates a new document rather than adding to an existing document.

Competitive
With competitive document behavior, there is a single author who seeks comments and edits to the document as a way to improve the content. However, interim drafts and thoughts are kept from the commenters. The transmission of the content to a client or a more senior person inside the firm will result in a competitive behavior.

Adversarial
Adversarial behavior is where the authors are actually competing for changes to the content for their own benefit. Although there may be a common goal, the parties may be seeking different paths to that goal or even have different definitions of the goal.

Collaborative, accretive and iterative content production are largely internal behaviors. Competitive and adversarial are largely external document behaviors. Of course, a document may end up with any or all of these behaviors during its lifecycle.

I decided to re-post and update this based on Jordan Furlong’s The three types of collaboration on Law 21. Jordan set up three types of lawyer collaboration lawyer-to-lawyer, lawyer-to-client, and client-to-client. Read his post and let us know how you think we can mesh these two concepts together.

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Breaking Down Compliance Silos: The Cost-Effective Approach to Managing Compliance

Michael Rasmussen, President of Corporate Integrity, Julian Parkin, Group Privacy Programme Director at Barclays, and John Kelly, Director at OpenPages, spoke in a webinar on taking a strategic approach to managing compliance. The webinar was sponsored by Compliance Week. These are my notes.

Michael set the stage by asking: Does your organization walk its talk? He equated risk to an iceberg. You have a big chunk of risk awareness visible to many. But 90% of it is below the surface. He equated that 90% to “risk ignorance.” As you might expect with a graphic of an iceberg, he used a Titanic metaphor.

A soloed approach to GRC leads to a lack of visibility, wasted resources, unnecessary complexity, a lack of flexibility, and vulnerability. Compliance is NOT going away. It is a business process that is only increasing in volume and complexity.

barclays

Julian took over and started with a focus on data privacy and operational risk. Many companies come into compliance because they have an “incident.” As a financial institution, they are very concerned with customer data and how their employees treat it. They focused not only on the stored data, but their hardware as well.

Barclays used this great branding tool to reinforce the message. There were several instances where they took a laptop left alone or other data source, leaving just this postcard behind. For them it is important for them to show to their customers that their information is safe with them, just as their money is safe with them.

John took over to display some of his company’s IT solutions for compliance. He pointed out that a spreadsheet fails as a compliance tool because it lacks the audit trail to show what infotmation was known when.

Whistleblower Programs: Challenges for Multinational Companies

skadden

Katherine D. Ashley, Gary DiBianco, Dana H. Freyer, Matthias Horbach, Pierre Servan-Schreiber of Skadden, Arps, Slate, Meagher & Flom LLP put together a nice article addressing the challenges of exporting the whistleblower requirements under Section 301 of Sarbanes-Oxley to operations in the European Union: Whistleblower Programs: Challenges for Multinational Companies. 

Section 301 of the Sarbanes-Oxley Act of 2002 created a requirement that public company audit committees establish procedures for the “confidential, anonymous submission by employees of the company of concerns regarding questionable accounting or auditing matters.” Most companies have expanded the use of this hotline to include any violation of law or violation of company policy.

On the other side of the Atlantic, European labor and data protection laws offer more protection and rights to the whistleblower’s target. It is struggle to get a whistleblower hotline that works around the world. The folks at Skadden offer some suggestions in their article.

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IRS Issues New Guidance on COBRA Subsidy

recovery_gov1

The Internal Revenue Service has issued Notice 2009-27 (.pdf), providing new guidance relating to the COBRA subsidy made available under the American Recovery and Reinvestment Act of 2009. Notice 2009-27 provides guidance on the definition of involuntary termination and assistance eligible individual. It also provides more detail on calculating the subsidy and determining the election periods.

Notice 2009-27 defines “involuntary termination” as

…  a severance from employment due to the independent exercise of the unilateral authority of the employer to terminate the employment, other than due to the employee’s implicit or explicit request, where the employee was willing and able to continue performing services. An involuntary termination may include the employer’s failure to renew a contract at the time the contract expires, if the employee was willing and able to execute a new contract providing terms and conditions similar to those in the expiring contract and to continue providing the services. In addition, an employee-initiated termination from employment constitutes an involuntary termination from employment for purposes of the premium reduction if the termination from employment constitutes a termination for good reason due to employer action that causes a material negative change in the employment relationship for the employee. … The determination of whether a termination is involuntary is based on all the facts and circumstances….

The notice goes into much greater detail about “involuntary termination” if you are still unsure.

Notice 2009-27 defines “assistance eligible individual.”

An individual must be an assistance eligible individual to be eligible for the premium reduction. Under ARRA, an assistance eligible individual is a qualified beneficiary as the result of an involuntary termination that occurred during the period from September 1, 2008, through December 31, 2009, is eligible for COBRA continuation coverage at any time during that period, and elects the COBRA continuation coverage. In order to be a qualified beneficiary, the individual must be covered under the group health plan on the day before the involuntary termination (except in the case of a child born to or adopted by a covered employee during a period of COBRA continuation coverage or in certain circumstances where coverage was wrongfully denied the individual (see section 54.4980B-3, Q&A-1)). For purposes of Federal COBRA, an individual who loses group health coverage in connection with the termination of a covered employee’s employment by reason of the employee’s gross misconduct is not a qualified beneficiary and thus cannot be an assistance eligible individual.

Notice 2009-27 provides some more information on calculating premium reduction (questions 20 to 26), the coverage eligible for premium reduction (questions 27 to 29), the beginning of the premium reduction period (questions 30 to 32), the end of the premium reduction period (questions 33 to 44), the recapture of premium assistance (questions 45 to 46), and the extended election period (questions 47 to 55)

Although Notice 2009-27 answers many of the open questions, there are still some unanswered questions:

  • What mechanism should Multiemployer Plans use for collection of the premium reimbursement?
  • If an assistance eligible individual has paid for individual coverage through March and April of 2009, may he re-instate his COBRA as of May 1, 2009? If so, is he entitled to nine months of premium assistance starting May 1, 2009?
  • What penalties apply to employers who provide the subsidy, intentionally or unintentionally, to qualified beneficiaries who are not Assistance Eligible Individuals?

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Developing a Culture of Honesty and Integrity…its Not Easy!

RW Associates

EthicsPoint sponsored and presented a webinar from Bob Phillips of RW & Associates, Inc. on Developing a Culture of Honesty and Integrity…its Not Easy! These are my notes.

Bob started with a quote from Stephen Covey: “The leader of the future, of the next millennium, will be one who creates a culture or value system centered upon principles.”

Bob moved on to “organizational culture” and focused first on culture. “Culture is the social and political environment in which people get their work done.”  He considers the elements of the culture as

  • Common behavior patters, consistency in behavior that builds trust
  • Understood and practices consistent behaviors that supports organizational goals and objectives
  • Integrated personal and organizational beliefs and behaviors

A starting point is whether you and your leaders openly model and support honest and open interpersonal interactions that is designed to build trust. He finds the receptionist is a great barometer of an organization. Can they pass the test of what the organization is like? Another barometer is to build trust by giving employees the information they need to do their jobs.

  • Can employees be honest and direct with their opinions and ideas?
  • Can they speak up and disagree without fear of retributions?
  • Are organizational messages that may be critical to employee’s jobs communicated quickly and directly to all employees?

Inconsistent leadership creates an environment of fear and the “foxhole” mentality.

On the other side, open cultures have a direct connection between organizational vision, values, and behavior. The leader should be able to translate the values hanging on the wall or the code of conduct on their bookshelf into action. Show your employees that you are committed to them and they will be committed to you.

He attached monetary gain to have a great place to work.  If you invested in the Fortune’s Best 100 Places to Work, you would have a better return than the broader stock market. From 1998 to 2006, the average annual return achieved by the S & P 500 was 5.97%, while the Russell 3000 achieved an average of 6.34% per year. By comparison, if you had bought shares in the 1998 ‘100 Best’ and simply held on to them until end 2006, you would have achieved average annual growth of 10.65%. If you had reset your portfolio each year on publication of that year’s ‘100 Best’ list, you would have achieved 14.16% annual growth. There is a dollar value to building a great place to work.

Leaders need to show consistent behavior to build trust, show a passion for the values, demonstrate ethics, and model the honest and open behavior. That also means accountability and consequences for meeting or failing to meet the values.

The keys to success start with an open and listening leadership. The culture needs to accept multiple points of view, but be committed to one course of action. You need to engage your workforce to let them know that they are being heard.

There is also a need to reconcile personal beliefs with your organization’s belief structure. You may get an employee who works in less ethical culture. There are multiple elements to a platform of integrity. Employees need to understand how they are expected to perform their work. They need to know that the organization’s principles are in place to ensure the organization meets their business and financial goals.

Honesty starts with individuals, but it is leadership and the organization that provide the environment to make it work. But in the end, it is the individuals within the organization that must be accountable. An organization cannot have a culture of honesty and integrity if leadership does not create an environment that accepts and models open and honest communication.

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NBA and OFAC

nba

It is unusual to see a story where the National Basketball Association intersect with the U.S. Treasury’s Office of Foreign Assets Control. But that is the lot in life for the 7-foot-2 Hamed Haddadi, a back up center for the Memphis Grizzlies.

Since Mr. Haddadi is from Iran, he is apparently subject to the decades old trade embargo. As a result of Iran’s support for international terrorism and its aggressive actions against non-belligerent shipping in the Persian Gulf, President Reagan, on October 29, 1987, issued Executive Order 12613 imposing a new import embargo on Iranian-origin goods and services. Section 505 of the International Security and Development Cooperation Act of 1985 was utilized as the statutory authority for the embargo which gave rise to the Iranian Transactions Regulations, Title 31, Part 560 of the U.S. Code of Federal Regulations.

International trade is not my area of expertise, but I assume that Mr. Haddadi fell into the category of “goods or services.”

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