Making the Case for Compliance
California Lawyer

Making the Case for Compliance

July 2013

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In the face of both recent legislation and more aggressive enforcement efforts by state and federal regulators, public companies are naturally eager to set up compliance programs before any problems occur. However, at a time when managers prefer to operate by consensus rather than fiat, the

successful implementation of such programs by general counsels and compliance officers has become a lot more difficult.

In organizations characterized by this consensus style, decisions, strategies, and programs require buy-in by an entire team of participants. The lack of authoritarian leadership in such a culture creates potential problems for anyone creating new programs and processes. And this holds true for the lawyers who are charged with the task of installing compliance programs.

I had the exceedingly good fortune of raising four daughters. My wife and I shared a consensus management style. We utilized it often, and especially for planning our annual family vacation. This involved all six of us picking the vacation spot and activities.

One year I surprised everyone with a trip that I had secretly selected and planned myself. I thought that a surprise trip would be welcomed. I gave only cursory information, even to my wife: how long the trip would last, the weather forecast at the location, the type of clothes to take, and that we would travel by plane.

Much to my surprise, I got a lot of push-back. Our seven-year-old said: "Dad, you are asking us to trust you, but we always make vacation decisions together." Even though the trip turned out to be highly enjoyable (we went to Disney World), I vowed never to plan a surprise vacation again. In our family culture, everyone wanted to participate in the entire process. They wanted a consensus - not Dad's authoritarian surprise.

About a dozen years ago, when I was the general counsel of a Fortune 150 global company, I found myself confronted with that same sort of resistance. I was about to make two significant changes in Europe, including one to the structure of my own organization. Because of the importance of these changes, I decided to discuss them at our executive management board meeting. I presented my case to the executive body and received their full support. Nevertheless, I recognized that the presidents of our two European business groups had not yet had a chance to weigh in on my proposed changes. Since the executive management board had already spoken, it was, technically speaking, a done deal. But in an abundance of caution, I requested a follow-up meeting of the executive board together with the two European presidents.

This second meeting lasted only a few minutes and it was an unmitigated disaster. Both presidents objected to my changes, and nobody else said a word. And because ours was a consensus culture, I was unable to go any further with the plan.

Obviously, the persistence and innovation of the leader are crucial to the success of any program. But this is especially true for the lawyers and other leaders who create compliance programs. In a consensus culture, there is no such thing as a "mandatory" program. Even one that is being implemented with apparent success can fall apart later if the consensus fails.

Another example: A few years ago our CEO sent me to live in Europe. My assignment was to direct our European team to implement a new corporate strategy. I immediately met with resistance. Even our outside consultant couldn't get any traction with the Europeans. We were at an impasse. The CEO simply told me to use my "influence."

I remembered the lessons I had learned previously. Rather than allowing the consensus culture to kill this project, I started visiting other European companies that had successfully adopted similar strategies. I selected capable individuals from these other companies to participate on in-house panels. When our people listened to the Europeans from other companies talk about how successful this strategy was, our own team members began to accept the new ideas.

To be sure, when resources are scarce and budgets are small to nonexistent, it's quite tempting to try to implement a compliance program as quickly as possible. But often this is a huge mistake. Indeed, I believe that in the long run the best way to save money and ensure a compliance program's success is to use a five-step process.

The first two steps - assessment and planning - must occur before implementation begins. It's important for the lawyers and project leaders to make the business case, analyze the resources, define the implementation road map, and most critically, adopt a communication plan. Then the actual implementation (step three) can begin. Investing time and money in a thorough approach to assessment and planning can highlight potentially costly risks and gaps that might otherwise have been overlooked.

Moreover, no compliance project can be a success until step four - the ongoing audit and measurement plan - is finalized and becomes a routine part of the program. Since individuals in a consensus culture typically feel empowered to act with a degree of independence, they may come to believe that some of the compliance processes no longer apply to them. If this tendency is left unchecked, it can threaten the integrity of the entire program.

Step five - change management - occurs continually, particularly in a consensus culture, to keep everyone aligned with the program, including new team members. General counsels and compliance officers need to remember that their programs must be monitored and communication continued on an ongoing basis to ensure that the processes are being respected.

Change is rarely easy, and achieving consensus is often very difficult. But going through a well thought-out process that's designed to secure buy-in on the front end, and to maintain it, will maximize the chances of success of these programs that are so vital to the well-being of every public company.

David R. Birk, retired senior vice president and general counsel of Avnet Inc, is the managing director of Black Belt Compliance. ( )

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