31 Days to a More Effective Compliance Program

Corporate culture is finally being acknowledged as a key ingredient in a successful business, particularly one that operates ethically and in compliance. But what are some indicia of good culture and more importantly what are some indicia of a toxic culture? A recent article in the MIT Sloan Management Review provided some guidance. In Why Every Leader Needs to Worry About Toxic Culture, the authors posited that by pinpointing the elements of toxic culture in a company, its leaders focus on addressing the issues that lead employees to disengage and quit. These ideas have significant importance for the compliance function as it navigates corporate culture, both in assessing and improving it. 

Moreover, the Chief Compliance Officer and corporate compliance function were identified in the 2023 3 Evaluation of Corporate Compliance Programs as the keepers of institutional justice and institutional fairness. This means recognizing and then preventing a toxic culture from spreading and infecting your entire organization squarely in the compliance wheelhouse. The article lays out key red flags for every CCO and compliance professional to look for in assessing culture. Finally, for any company with a toxic culture, the chances are much greater to be defrauded by its own employees or to defraud others through bribery and corruption by violating such laws as the Foreign Corrupt Practices Act (FCPA). 

The authors identify behaviors that they call “the Toxic Five attributes”, being “disrespectful, noninclusive, unethical, cutthroat, and abusive – poison corporate culture in the eyes of employees. While organizational culture can disappoint employees in many ways, these five elements have by far the largest negative impact on how employees rate their corporate culture and have contributed most to employee attrition throughout the Great Resignation.” As a CCO or compliance professional you need to be on the watch for them and take steps to remedy them if you see or hear about them. 

 Three key takeaways:

1. Are the attributes of a toxic culture present in your organization?

2. The 2020 Update to the Evaluation of Corporate Compliance Programs mandated the compliance lead this effort.

3. Does your organization have abusive behavior? 

Check the free webinar on the new tool, The Culture Audit with Tom Fox and Sam Silverstein on Tuesday, November 20, 12 CT. For more information and registration, click here.

Learn more about your ad choices. Visit megaphone.fm/adchoices

Assistant Attorney General Kenneth A. Polite Jr. began his speech on the clawback policy developed by the DOJ to promote “innovative approaches to compensation,” which would “shift the burden of corporate malfeasance away from uninvolved shareholders onto those more directly responsible.” She believes “Companies should ensure that executives and employees are personally invested in promoting compliance,” as “nothing grabs attention or demands personal investment like having skin in the game, through direct and tangible financial incentives.” This led the Criminal Division to “develop guidance, guidance on how to reward corporations with compliance-promoting compensation programs.”

The clawback initiative has two parts. “First, every corporate resolution involving the Criminal Division will now include a requirement that the resolving company develop compliance-promoting criteria within its compensation and bonus system. Second is the creation of a 3-year pilot program under which the “Criminal Division will provide fine reductions to companies who seek to claw back compensation from corporate wrongdoers.”

 Three key takeaways:

1. The clawback policy was developed to promote “innovative approaches to compensation.

2. Clawbacks will include those who had supervisory authority over the employees or business area engaged in the misconduct and knew of, or were willfully blind to, the misconduct.

3. How far will the DOJ push companies to move for clawbacks, and how far down the chain will it go?

Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to a special podcast series on the Compliance Podcast Network, 31 Days to a More Effective Compliance Program. Over these 31 days series in January 2025, I will post a key part a best practices compliance program each day. By the end of January, you will have enough information to create, design or enhancement a compliance program. Each podcast will be short, at 6-8 minutes with three key takeaways that you can implement at little or no cost to help update your compliance program. I hope you will plan to join each day in January for this exploration of best practices in compliance. 

In today’s business environment, compliance professionals leverage data analytics to adhere to regulatory requirements and ethical standards. This episode focuses on the importance of defining specific risks an organization wants to monitor, capturing relevant data creatively, and utilizing internal expertise to build effective data analytics programs. By starting small and focusing on one risk at a time, compliance officers can demonstrate their dedication to improving compliance despite limited resources. Additionally, a data-driven approach helps shift focus from individual policy violations to identifying systemic issues, enhancing overall organizational compliance. Key takeaways include understanding multiple factors in creating data-driven compliance programs, recognizing the value of shifting focus to systemic issues, and gradually building analytics capabilities.

Key Highlights

·       Defining and Identifying Risks

·       Innovative Data Capture and Internal Collaboration

·       Demonstrating Value to Senior Management

Resources

Listeners to this podcast can receive a 20% discount to The Compliance Handbook, 5th edition by clicking here. 

Learn more about your ad choices. Visit megaphone.fm/adchoices

In March, Deputy Attorney General (DAG) Lisa Monaco reviewed a number of initiatives by the DOJ that every compliance professional needs to study in some detail. These new initiatives included: (1) The Criminal Division’s Pilot Program Regarding Compensation Incentives and Clawbacks; (2) Evaluation of Corporate Compliance Programs; and (3) Revised Memorandum on Selection of Monitors in Criminal Division Matters.

Monaco set the tone for the week by identifying five general areas of DOJ focus. (1) Inspiring a Culture of Compliance; (2) Voluntary Self-Disclosure Programs; (3) Promoting Compliance through Compensation and Clawback Programs; (4) Resource Commitments to Corporate Criminal Enforcement; and (5 ) Individual Accountability. 

Three key takeaways:

1. A culture of compliance continues to be the most important component of DOJ review.  

2. Self-disclosure will be the number one factor for reducing a potential fine and penalty. 

3. Expect more individual accountability.   

Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to a special podcast series on the Compliance Podcast Network, 31 Days to a More Effective Compliance Program. Over these 31 days series in January 2025, I will post a key part a best practices compliance program each day. By the end of January, you will have enough information to create, design or enhancement a compliance program. Each podcast will be short, at 6-8 minutes with three key takeaways that you can implement at little or no cost to help update your compliance program. I hope you will plan to join each day in January for this exploration of best practices in compliance. 

In today’s episode, we delve into the significant updates in the evaluation of corporate compliance programs, focusing on messaging apps, internal controls, and adequate compensation. The revised language in the ECCP highlights the DOJ’s increased scrutiny on the use of messaging apps, emphasizing the need for tailored policies that align with a company’s specific risks and business needs. We also discuss the critical importance of internal controls as minimum expectations set by the DOJ, and the necessity of continuous monitoring to manage these risks effectively. Lastly, we examine the newly added provisions related to adequate compensation, ensuring that compliance teams are empowered and protected against retaliation. The episode concludes by summarizing three key takeaways for compliance professionals: the growing importance of communications compliance, the need for robust and functional internal controls, and the imperative of adequately compensating compliance personnel. 

Key Highlights

·       Messaging Apps and Compliance

·       Internal Controls and Risk Management

·       Adequate Compensation for Compliance Teams

Resources

Listeners to this podcast can receive a 20% discount to The Compliance Handbook, 5th edition by clicking here. 

Learn more about your ad choices. Visit megaphone.fm/adchoices

Messaging Apps

There was a significant addition to the language around messaging apps. The ECCP opened this section by noting, “Messaging applications have become ubiquitous in many markets and offer important platforms for companies to achieve growth and facilitate communication.” For any company under investigation or in a FCPA enforcement action, the DOJ will evaluate its “policies and mechanisms for identifying, reporting, investigating, and remediating potential misconduct and violations of law governing the use of personal devices, communications platforms, and messaging applications, including ephemeral messaging applications.”

Internal Compliance Controls

Under Section II, entitled Is the Corporation’s Compliance Program Adequately Resourced and Empowered to Function Effectively?  We find the new language, “In this regard, prosecutors should evaluate a corporation’s method for assessing and addressing applicable risks and designing appropriate controls to manage these risks.” This simple sentence packs quite a punch as it requires both appropriate internal compliance controls and then monitoring of those controls to see if they are managing the risks identified in the risk assessment.

Adequate Compensation and Salary/Bonus Review for Compliance

Under Section III, there is a significant new addition to the ECCP. It forces a company to adequately compensate those employees who investigate and pass judgment on misconduct. But it is more than simply adequate compensation, as it also requires a company not to retaliate via low salaries, limited raises, or other compensation for doing their jobs as compliance officers. In other words, if the CEO is being investigated by compliance, that same CEO should not be setting or reviewing the salary of the CCO or those doing the investigation. This mandates that the DOJ review the entire corporate organization on these issues.

Three key takeaways:

1. Communications compliance will be a key issue for compliance professionals going forward in 2024.

2. You must have both appropriate internal controls and ensure they are functioning.

3. In addition to adequate resources, a compliance function must be shown to adequately pay, promote, and protect those involved in compliance investigations.

Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to a special podcast series on the Compliance Podcast Network, 31 Days to a More Effective Compliance Program. Over these 31 days series in January 2025, I will post a key part a best practices compliance program each day. By the end of January, you will have enough information to create, design or enhancement a compliance program. Each podcast will be short, at 6-8 minutes with three key takeaways that you can implement at little or no cost to help update your compliance program. I hope you will plan to join each day in January for this exploration of best practices in compliance. 

In this episode, we discuss how the Department of Justice (DOJ) has emphasized the importance of designing and implementing compliance-based compensation schemes. Financial incentives, such as deferred or escrowed compensation tied to conduct, play a critical role in fostering a culture of compliance. The episode also explores the necessary continuum of assessment, analysis, implementation, and monitoring that companies must follow for effective compliance incentive programs. Additionally, Tom covers the DOJ’s rigorous approach to consequence management, particularly concerning clawback provisions in executive contracts. The episode guides compliance professionals on the essential steps and analyses required to adhere to the enhanced DOJ expectations. Key takeaways include the importance of financial incentive analysis and the distinct yet related roles of clawbacks and consequence management within a compliance program.

Key Highlights

·      Starting with Incentives and Consequences

·      Incentive Program Breakdown

·      Consequence Management Deep Dive

Resources

Listeners to this podcast can receive a 20% discount to The Compliance Handbook, 5th edition by clicking here. 

Learn more about your ad choices. Visit megaphone.fm/adchoices

Day 1-Data-Driven Compliance

Welcome to a special podcast series on the Compliance Podcast Network, 31 Days to a More Effective Compliance Program. Over these 31 days series in January 2025, I will post a key part a best practices compliance program each day. By the end of January, you will have enough information to create, design or enhancement a compliance program. Each podcast will be short, at 6-8 minutes with three key takeaways that you can implement at little or no cost to help update your compliance program. I hope you will plan to join each day in January for this exploration of best practices in compliance. 

In the first episode of ‘One Month to a More Effective Compliance Program’, host Tom Fox, the Compliance Evangelist, emphasizes the increasing importance of data analytics and monitoring in the realm of compliance. Highlighting insights from the DOJ, this episode illustrates how data-driven compliance can significantly improve decision-making, business efficiency, and risk management. By leveraging technology and effective data analysis, companies can uncover hidden issues such as improper payments and improve overall corporate transparency. Tom Fox discusses the necessity for compliance programs to have quick and easy access to data to ensure informed decision-making and proactive compliance management.

Key Highlights

·      Importance of Data Analytics in Compliance

·      Implementing Data-Driven Compliance

·      Challenges and Solutions in Data-Driven Compliance

Resources

Listeners to this podcast can receive a 20% discount to The Compliance Handbook, 5th edition by clicking here. 

Learn more about your ad choices. Visit megaphone.fm/adchoices

The 2023 ECCP had significant changes regarding compliance-based incentives, both financial and non-financial; consequence management; messaging apps; and ancillary matters.

I.               Incentives

This section begins with a new introduction that makes clear the seriousness in which the DOJ views incentives, both financial and other types of incentives. The ECCP states, “The design and implementation of compensation schemes play an important role in fostering a compliance culture.”

The ECCP also added a new section on financial incentives, which directs prosecutors to specifically evaluate how a company designs and applies financial incentives. These four questions basically breakdown into the following continuum: (1) Assessment, (2) Analysis, (3) Implementation; and (4) Monitoring.

II.             Consequence Management

The DOJ has been talking about clawbacks for some time now. However, the revised language of the ECCP puts more rigor into what the DOJ is now mandating.

 a.         Clawbacks

The DOJ has made it clear that companies need to seek to recover amounts paid out to executives that were illegally received as corporate compensation. This could include both salary, stock options, similar payments, or discretionary bonuses. All of this means every compliance program will need to analyze each of these components as set out.

b.         Consequence Management

The DOJ also mandated that compliance programs take a deeper dive into their entire financial incentive program—both incentives and disincentives. While there is some overlap with the clawback language, there is quite a bit of newness in these areas. The DOJ’s hotline and speak-up reports directly relate to a company’s culture of compliance.

Three key takeaways:

1. The 2023 EECP brought significant changes to both financial incentives and negative consequences as well.

2. The new financial incentives analysis is: (1) Assessment, (2) Analysis, (3) Implementation; and (4) Monitoring.

3. Clawbacks and Consequence Manage are related but separate parts of a best practices compliance program.

Learn more about your ad choices. Visit megaphone.fm/adchoices