Tag: Compliance Week 2010

Social Media and Compliance

Compliance, ethics, and legal executives at Johnson & Johnson, Best Buy, and The Travelers Companies will provide details on their social media policies, programs, and experiences, focusing on a variety of cultural, legal, and disclosure-related issues.

    Featuring:

  • Johnson & Johnson Senior Counsel & Assistant Corporate Secretary Douglas K. Chia
  • Best Buy Chief Ethics Officer Kathleen Edmond
  • The Travelers Companies, Inc. SVP, Chief Compliance Officer & Group General Counsel David Baker
  • Compliance Week Columnist; President, Docket Media LLC; Founder and Editor, Securities Docket, the ubiquitous Bruce Carton (moderator)

I introduced Bruce and the rest of this panel. Then I helped to control the rambunctious crowd.

Travelers is using social media for complaints. You make a claim through their iPhone app. They also use it as a tool for customer service and advertising. They will push out an update on Twitter and Facebook when a catastrophe van in the area of a natural disaster.

Doug is active in social media so he can look at how the company could use social media. Currently their prime use is for their retail products. They are going to where their customers are hanging out. They use the JNJ BTW blog to publish current events at Johnson & Johnson. They are using the corporate twitter (JNJcomm) account to push out information from the shareholder meetings.

Doug highlighted a list of legal, compliance, reputational and logistical issues to consider when a company steps into social media.

Kathleen created her blog to help educate her workforce about what could get you fired. Retail companies have a huge employee turnover. The industry average is close to 100%. If someone is going to tell her story, she wants to be the person to tell it.

Best Buy has lots of social media outlets: Twelpforce, CEO’s Whiteboard, CEO’s Twitter, CMO’s Twitter, CMO’s blog.

She also used internal social media to help develop policies. She used an internal wiki to get feedback on potential policies and issues. She thinks feedback from employees is important in developing good, enforceable policies.

There is the fear of litigation. What you say could cost you and subject you to a lawsuit. Of course, if it’s effective it can save you lots of money by avoiding the bad situations.

It’s tough to work in a conservative company when facing something as innovative as social media.

One company assemble a social media task force to draft a social media policy. They managed to create a user reference manual to give detailed guidelines to the employees.

The audience expressed some concern about the improper disclosure of company information. The panel pointed out that social media is merely a newer avenue for disclosure. People have been able to improperly disclose information for years.

One of the panelists stated that they do block access to social media sites. Another pointed out that employees could just go to their mobile phone or find other ways to waste time.  It seems silly to block access to the sites if you are using the sites to market your company.

An interesting audience question was whether a privacy failure at a social media site would impact the company. Could you be tainted by a Facebook failure. It seems remote.

How do you manage the boundaries between personal and professional uses of social media. Make it clear that you are not stating the company position. Don’t use the company name in your handle or profile name. It’s @dougchia, not @J&JDougChia.

Materials:

David Baker:

Doug Chia

Kathleen Edmond

Former SEC Chairman Harvey Pitt: Goldman Sachs, SEC Enforcement, and Lessons For Our Times

Prestigious firms sued by the SEC, subjects of negative reports, forced to endure angry Congressional testimony arising out of their involvement in the financial crisis of 2008, already provide important lessons for corporate executives. Kalorama Partners CEO Harvey Pitt—the former SEC chairman who has penned a Compliance Week column for seven years—makes his fifth appearance at Compliance Week’s annual conference with a look at the lessons executives can learn from current events.

These are my notes, live from the keynote:

He started off by comparing himself to Phil  from Groundhog Day, forced to repeat the events over and over again. Of course he also quoted Yogi Berra: It’s like deja vu, all over again.

He was critical of the new financial reform because he feels that the reasons for the Great Panic have not been accurately identified. As our economy has become more complex and interconnected with other global economies, the impact of not understanding is getting greater.

There is no way government fiat, by itself, can eliminate misconduct. It does not mean we should not put laws into place. But we need to get people to be willing to not enter into that conduct. Government will fail in identifying all of the bad behavior.

The question with Goldman is for companies charged by the government survive and deal with the fallout from being sued. Goldman lost billions in market value. He thinks the case will never get litigated and its just a matter of big the pound of flesh will be. Goldman cannot afford to litigate the case.

Strong defenses are not a guaranty of success. You need to think about the damage by entering into the battle in the first place.

He went through lessons to be learned:

  1. Bad things happen to good companies. You need a gameplan for a big problem happening.
  2. Critical to avoid the Alexander Haig problem. Make sure you know who will be in charge when a problem arises.
  3. The race is to the swift.
  4. Tight lips sink ships. You need to have effective communication with your directors. They need to know.
  5. Time and tide wait for no one. You need to get on top of problems immediately.
  6. Ask the four questions:
    • How did we learn about this problem?
    • Was this a systemic problem?
    • Who was harmed and to what extent?
    • What assurance do we have that this problem will not occur?
  7. In crisis stay away from litigators. They want to win the case; you want to save your company.
  8. Know when to hold ’em, know when to fold ’em. Know what is at risk if things go bad, quickly.
  9. Let sleeping dogs lie. Do not accuse the government of incompetence.
  10. Don’t burn bridges. Regulators have long and enduring memories.
  11. You don’t have to be wrong for the government to be right. You other constituents matter.
  12. In a crisis, the prime word is candor. Don’t wait until you know all of the facts or are forced to break your silence.
  13. Avoid hubris. Don’t say that you were “doing god’s work” unless you’re in the clergy.
  14. Maintain a sense of humor.

During the Q&A with Compliance Week publisher Scott Cohen, the Commissioner expressed the importance of maintaining good communications with regulators.

You need to avoid the Wizard of Oz syndrome. You need to press the flesh and meet with people through out the organization. You need to put a personal face on the compliance program.

(Disclosure: I own some shares in Goldman Sachs. I bought them when the stock price went down as a result of the SEC action.)

Metrics and Measurement: What to Track, Why, and How

What metrics should be tracked, and why? What do they actually tell you? Three unique perspectives will be explored from compliance, risk, and legal officers at Biogen Idec, PSEG, and OfficeMax. The trio will demonstrate, discuss, and debate the data they measure, the metrics they track, and the reasons for both.

Featuring:

These are my notes, live from the session:

How do compliance professionals demonstrate that what they are doing is effective and efficient? It’s difficult because compliance success is usually about what did not happen.

OfficeMax has some measurements that are key to retailers, including inventory shrink.

One risk that have to managed at a public utility is options trading and financial risks. They do lots of  market trading. That means they also have trader compliance issues. They have the classic compliance requirements of wall street, although it’s from the end user perspective.

They are highly regulated so there is compliance risk, of failing to follow the complex rules. There is strategic risk in designing the business operations. Lastly there is tactical risk in deploying the strategy and meeting the requirements of compliance.

Biogen tracks metrics around policy development. They track how long it takes and how much it cost. If it’s taking lots of outside resources, maybe they will consider bringing a resource internally.

One key discussion of the panel was the business impact of the measurements. Ideally, the measurements should impact business decisions and business strategy.

The panel emphasized the need for collaboration across the enterprise. Other units are already measuring business operation. Take advantage of the existing information. You can get better information (and save costs).

The more you understand the business and the more you demonstrate your knowledge of the business, the more successful you will be. Metrics for the sake of metrics is useless.

It’s great to generate stories about the bullets you dodged by identifying issues and risks before they have an impact on the business. Try to transform compliance from a value-add from merely being a cost-center.

Second City and Compliance

One of the surprises of Compliance Week 2010 is the attendance of Second City. I only thought of them as the comedy improv troupe working in Chicago and Toronto. Second City has a long history of great comedians learning their craft and performing for them. Gilda Radner, John Belushi, Tina Fey and Chris Farley are just a few of the stars and superstars that have come through Second City.

About 15 years ago they launched a corporate communications division. Their approach? Humor is an effective device for addressing tough subjects and improvisation is great tool for open, honest communication, creativity and professional development.

I was able to attend a closed door session at Compliance Week 2010, working on personal communications. It was an interesting, informative and fun session.

Engage and Connect: Improvisation as a Tool for Open, Honest Communication: For many companies, a common ethics and compliance challenge is in finding fresh ways to make important topics relevant to their employees—engaging individual contributors and management in the conversation and creating a willingness to discuss tough subjects and grey-zone issues. Second City Communications, the business solutions division of the world-famous comedy theatre, will discuss how they’ve successfully utilized improvisation, humor, and learning methods to help clients improve ethics/compliance education and awareness. This session will include interactive exercises, small-group work, facilitated discussion, and multimedia to showcase how to create conversation, gain stronger insights, and make ethics and compliance topics more relevant for your global workforce. It featured Second City Communications Producer and Director of Learning Sarah Finch and Lee Smart.

Second City Communications has a new line for ethics and compliance. (See Second City Ethics and Compliance FAQ)

We’ll see more of them when they are on the main stage for the closing wrap-up.

The SEC’s Agenda: Enforcement and Regulatory Priorities

Compliance week starts off with a Keynote speech from U.S. SEC Commissioner Luis A. Aguilar, dubbed “The Enforcement Commissioner” by Compliance Week in March 2009, will provide an update on SEC’s enforcement developments and priorities, including topics such as penalty guidelines and the SEC’s streamlining of the formal order process. Commissioner Aguilar will also explore broader regulatory priorities and the SEC.

I’m sure the full text of the speech will be published soon after this speech. (UPDATE- Text of the speech: Market Upheaval and Investor Harm Should Not be the New Normal.) These are my notes, live from the presentation:

(Of course, the statements are his and not necessarily the view of the SEC.)

Its been an interesting year since he gave last year’s keynote at Compliance Week 2009. We have seen breakdowns in the markets and failures that could have been prevented by better and more extensive regulation. Re-regulation was part of the problem and the public expects reform. Wall Street and Main Street are in a struggle over regulation, with Wall Street making the loudest statements and are better connected.

He does not lay the blame solely on Wall Street. The legislature and regulators have to accept some of the blame for not reigning in the exotic financial transaction. He put forth four themes:

  1. Regulatory oversight is piecemeal.
  2. The SEC needs a real-time transparent view into the markets.
  3. The regulations  need to revisit the concept of the “sophisticated investor.”
  4. We must remember the crucial role that the SEC plays in rigorous oversight.

He spent some time using the Flash-Crash on May 6 as an example of the problems. There was a significant failure and still, weeks later, we don’t understand what happened or how to prevent it.

He is looking forward to the self-funding mechanism in the Dodd bill to escape the perennial funding shortfall at the SEC.

by Francine McKenna

He thinks the approach to the “sophisticated investor” is short-sighted. Even these investors need transparency and full disclosure. Since these institutional investors are often just an aggregation of small investors, therefore having a huge impact on small investors. A pension fund may have billions in assets, but those assets reflect the retirement savings of its workers.

He wants to focus on effective deterrence, by scaring people with the possibility of sanctions. “I do not want that to happen to me.” That means harsher sanctions, more individual sanctions, and more money penalties (not merely disgorgement). Crime should not pay.

“Corporate penalties come out of the shareholders pocket.” He dismisses that concept. Management controls how money is spent. He thinks lots of that penalty would go to bonuses. He threw out the idea of SEC penalties coming out of the bonus pool for the company.

He thinks insider trading penalties should not be merely disgorgement plus a penalty equal to a disgorgement. He thinks the SEC should set penalties at the maximum under the statute: 3X.

He is also looking for stronger de-debarment powers to kick bad actors out of the securities industry and out of the management of public companies.

Unfortunately, the Commissioner need to run out to the joint SEC-CFTC meeting on Emerging Regulatory Issues.

One question was about the PCAOB case in the Supreme Court. He said the SEC has some contingency plans (he chose not to disclose), but recognizes that it will be up to Congress to change the law.

Other coverage:

Compliance Week 2010

I’m attending Compliance Week’s Fifth Annual Conference. It’s a great agenda. (Although it will hard to top last night’s Lost series finale. Although hopefully it will be less confusing and have more answers.)

I will try to publish my notes from the sessions I attend just as I did from the 2009 Compliance Week conference. Here is my tentative agenda:

The SEC’s Agenda: Enforcement and Regulatory Priorities
U.S. SEC Commissioner Luis A. Aguilar, dubbed “The Enforcement Commissioner” by Compliance Week in March 2009, will provide an update on SEC’s enforcement developments and priorities, including topics such as penalty guidelines and the SEC’s streamlining of the formal order process. Commissioner Aguilar will also explore broader regulatory priorities and the SEC.

Engage and Connect: Improvisation as a Tool for Open, Honest Communication
For many companies, a common ethics and compliance challenge is in finding fresh ways to make important topics relevant to their employees—engaging individual contributors and management in the conversation and creating a willingness to discuss tough subjects and grey-zone issues. Second City Communications, the business solutions division of the world-famous comedy theatre, will discuss how they’ve successfully utilized improvisation, humor, and learning methods to help clients improve ethics/compliance education and awareness. This session will include interactive exercises, small-group work, facilitated discussion, and multimedia to showcase how to create conversation, gain stronger insights, and make ethics and compliance topics more relevant for your global workforce.

High-Performance Compliance Organizations – What Works Best
How do you define “high performance” for the compliance organization? What works best when designing, implementing, and managing a compliance organization? What have other organizations learned as they have developed their compliance organizations? What learnings can you take home that will drive change, performance, and value? These are just some of the issues that will be explored in this interactive roundtable discussion. Join PricewaterhouseCoopers’ Joe Atkinson and chief compliance officers at Visa and PETCO Animal Supplies to gain perspectives on how others define “value” in the function and learn what works—and what doesn’t—in managing today’s compliance function.

Former SEC Chairman Harvey Pitt: Goldman Sachs, SEC Enforcement, and Lessons For Our Times
Prestigious firms sued by the SEC, subjects of negative reports, forced to endure angry Congressional testimony arising out of their involvement in the financial crisis of 2008, already provide important lessons for corporate executives. Kalorama Partners CEO Harvey Pitt—the former SEC chairman who has penned a Compliance Week column for seven years—makes his fifth appearance at Compliance Week’s annual conference with a look at the lessons executives can learn from current events.

Effective & Cost-Effective Training, Awareness & Advocacy
The compliance leaders at Terex, United States Steel, and Bertelsmann will preview their training programs, discussing how they train, how they track it, and how they gauge effectiveness.

Social Media & Compliance
Compliance, ethics, and legal executives at Johnson & Johnson, Best Buy, and The Travelers Companies will provide details on their social media policies, programs, and experiences, focusing on a variety of cultural, legal, and disclosure-related issues.

View From the Top: JetBlue, Governance & Compliance
JetBlue Airways President and CEO David Barger, and JetBlue Chairman of the Board Joel Peterson, will explore tone-at-the-top, cultures of integrity, and the evolution of JetBlue’s corporate governance and compliance programs. To be explored: How JetBlue built integrity as a core value to be considered in every decision made by every crewmember; why JetBlue separated the CEO and Chairman roles, and more.

Tuesday:

U.S. Rep., House Financial Services Committee Chair Barney Frank
Barney Frank is the U.S. House Representative for Massachusetts’ 4th congressional district. In 2007, Rep. Frank became the chairman of the powerful House Financial Services Committee, which oversees much of the financial services industry, including securities, insurance, banking, and housing. Rep. Frank will address those four industries in his keynote, and will take questions from attendees.

FCPA Issues Facing Multinational Companies
Curtis Lu, SVP and Deputy General Counsel, Chief Ethics and Compliance Officer of Time Warner, and Baker Botts attorneys Andy Baker and Michael Barta will discuss the challenges associated with the growing trend of multi-sovereign enforcement efforts after Siemens, Halliburton and BAE. They will also discuss best practices and strategies for avoiding FCPA problems in international M&A activities after DOJ Opinion Release 08-02.

Metrics, Measurement, and Your Company’s Practices
Join Conseco Chief Compliance Officer Mark Johnson for a closed-door conversation on the metrics and measurement tactics employed by your company. Attendees will have the opportunity to compare and contrast their own policies in a safe environment, discussing the merit of “negative” vs. “positive” metrics, board reporting challenges, and the value of process-oriented vs. results-oriented data.

SEC Disclosure Update With Shelley E. Parratt
Shelley Parratt of the SEC’s Corporation Finance Division will provide an update of the Commission’s disclosure program, including topics such as executive compensation disclosure, climate-change disclosure, and other proxy disclosure issues, as well as updates regarding the Comment Letter process.

Demonstrating ROI and Communicating Value
How do you demonstrate and prove the value and success of your programs? The compliance leaders from The Home Depot, General Electric Company, and Duke Energy will discuss the tactics and data they have used to demonstrate the “net benefit” of compliance, ethics and risk programs.

Organizational Structures That Work: Small-Company Edition
In contrast to our “large company” edition Monday morning, this session will explore how smaller public companies structure their compliance functions. The CCOs at PETCO, Schnitzer Steel, and VeriSign—each with under $5 billion in revenue—will outline, compare and contrast the structure of their compliance organization, focusing on their functions, reporting structure, organization, responsibilities, infrastructure and more.

The 2010 OCEG GRC Achievement Awards Presentation
The Open Compliance and Ethics Group will recognize the great strides that many organizations have made in improving and integrating their approaches to governance, risk management, and compliance.

U.S. Dept. of Justice Acting Deputy Attorney General Gary Grindler
Gary Grindler, the second-highest ranking official at the U.S. Justice Department, will talk about the department’s policy goals and initiatives to fight corporate fraud, including white-collar crime issues such as securities and commodities fraud, healthcare fraud, and the work of the Financial Fraud Enforcement Task Force.

Wednesday:

U.S. DoJ Asst. Attorney General, Criminal Division, Lanny Breuer
Lanny Breuer, selected by President Obama to head the Criminal Division of the Justice Department in January 2009, will discuss practical matters for companies dealing with the Justice Department, including topics such as cooperation, attorney-client privilege, and the importance of pre-existing compliance programs. Breuer will also discuss the Department’s increasing use of proactive law-enforcement strategies and tools, such as wiretaps, to combat financial fraud.

SEC Enforcement and Investigations Update
Compliance Week Columnist Bruce Carton, a former SEC Enforcement staffer, and U.S. Securities and Exchange Commission Division of Enforcement, Market Abuse Unit Assistant Director Rob Cohen, will provide a recap of current SEC enforcement actions on topics such as the FCPA and insider trading, and will lead a discussion of the Enforcement Division’s new reforms to accelerate corporate investigations.

Second City Summary: Compliance Week 2010 Conference Wrap-Up
Get ready for a fun, interactive, high-energy conference closer from Second City Communications, the business solutions division of the world-famous comedy theatre. Using observations, ideas, and insights garnered from the entire three-day conference, Second City Communications will play back what they’ve heard, offering a real-time wrap-up of key conference takeaways, and providing a host of ideas you can bring back to your company. This is a closing session you won’t want to miss!