The first of the new year is typically the time to look forward at trends and general thoughts of what’s to come. This year, the Expert Advisors at Global Compliance, the leading provider of comprehensive, integrated ethics and compliance solutions, would like to take a quick look back to see how we did in our 2010 predictions – and what our scorecard might tell us for 2011.
Here’s how we did on our top 5 predictions for 2010:
Prediction 1: “Looking for a Place to Hide? Don’t try Social Media…or … Twittering Your Compliance Away”
Facebook, You Tube, Twitter and social networks create huge compliance and reputational problems … thousands of issues great and small will surface throughout 2010. But the big question for 2010 may be: what are the new rules of privacy in this new environment?
Past: We nailed this one, but given the ubiquity of online devices and the primal human desire to communicate in 140 characters or less, it’s not that surprising. The boundaries of the workplace were tested and tried – and not just by sexting celebrities (see Eva Longoria and Tony Parker and allegedly Brett Favre): 2010 saw the Quon case where the Supreme Court ruled against a police officer who was disciplined after he used his work pager to send personal – and racy – text messages. On the other hand, we saw the National Labor Relations Board sue an ambulance service for terminating a union employee who criticized her supervisor on Facebook.
2010 also showed that no one is immune from temptation, even those who should know better. As reported by The News & Observer, Monty Cook, the former editor of The Baltimore Sun, was hired UNC’s Chapel Hill’s School of Journalism and Mass Communications to head an online news service whose mission is to test journalism and marketing theories in today’s hothouse of electronic media saturation. Presumably, the public scandal and Cook’s subsequent resignation over texting inappropriate messages to a student with whom he was reportedly having an affair were not part of an experiment to see how quickly bad news travels.
Future: Our successful prediction in 2010 gives us confidence for more of the same in 2011: As technology continues to expand our avenues of communication, employees will find new ways to use employer resources for personal benefit; employers will increasingly seek to limit that misuse of their resources, and the courts will continue to step in after the fact to define boundaries as to whether or not social media sites can be viewed as virtual workplace water coolers.
Prediction 2. Who is Watching the Watchers?
The SEC has been accused of numerous regulatory lapses … Regulatory agencies have been accused of poor oversight of: food safety, mortgages, credit agency valuations, mines and oil leases and even toys …this may be the year when the public demands more efficiency and accountability from the public sector.
Past: OK, we got this one too, but we didn’t predict the extent of the changes. 2010 was a year for regulatory accountability, especially at the SEC. Kathy Griffin (no, not the “D-List” comedienne – don’t be that cynical) was named the SEC’s first chief compliance officer. The Dodd-Frank Wall Street Reform and Consumer Protection Act was also enacted with planned new oversight of the financial sector – including the opening of a separate SEC whistleblower office. According to SEC chairman Mary Schapiro, “This law creates a new, more effective regulatory structure, fills a host of regulatory gaps, brings greater public transparency and market accountability to the financial system and gives investors important protections and greater input into corporate governance.”
That’s great – but when? The SEC recently announced delays in launching the new office and other elements of Dodd-Frank due to budget challenges. Perhaps some of the 2010 record bonuses on Wall St. (see Prediction 3) could help off-set the shortfall.
Future: Even with budget questions, we expect to see more aggressive oversight in 2011 – especially coming from the Republican controlled House Oversight and Government Reform Committee. As CBS News reported, Darrell Issa plans a series of far-reaching hearings that will investigate the FDA, Fannie Mae and Freddie Mac, corruption in Afghanistan, the government’s response to Wikileaks, the shortcomings of the Financial Crisis Commission, and the impact of regulation on job creation … and that’s just in January.
Prediction 3. The Search for New Loopholes Continues
Outside of Manhattan and the Beltway, the American public is “mad as hell” … Millions of Americans do not think it is fair that Main Street is still living with consequences from the Banking Sector failings of 2009 … while many bank executives are rewarded. As anger and cynicism increase, watch out for Congress to try to get ahead of the angry crowd.
Past: Oops, a bit of a miss this time. While there were a few marches on Washington in 2010, the “angry crowds” didn’t seem to be heard. The average Wall St. bonus for 2010 is expected to top last year’s level even though a recent study by Bloomberg showed that a true “crowd” – more than 70 percent of Americans – says big bonuses should be banned this year at Wall Street firms that took taxpayer bailouts. According to the same study, one in six favors a 50 percent tax on bonuses exceeding $400,000.
What did Wall St. do? Banks evidently considered early bonus payouts to ensure higher take home amounts in case Congress failed to extend the Bush tax cuts. So much for mob rule. However, there were some changes made. According to The Council of Institutional Investors, Morgan Stanley and Wells Fargo have aligned bonus payouts with long-term performance. The Financial Times also reported that Goldman Sachs adopted a provision in its executive compensation scheme that will reward top officers based on their ability to meet long-term performance goals without encouraging “imprudent risk-taking”.
Future: Perhaps this time the revolution will be coming from the other side of the Pond in 2011. According to the Economic Times, EU regulators approved a new law capping bankers’ cash bonuses to 30 percent of the total bonus and 20 per cent for “particularly large” bonuses.
Prediction 4. Healthcare Companies Crack Their Compliance Piggy Banks
This industry represents the largest sector of our economy, and it has accounted for more fines and settlements than any other sector over the past ten years. Continued scrutiny of marketing practices … will keep healthcare firmly in the lead with regulators.
Past: Healthcare did get their fair share of headlines during 2010, with President Obama signing the health care overhaul, which, according to the New York Times, was the most expansive social legislation enacted in decades. However, while all eyes were on Congress and the White House, the DOJ wasn’t taking their eyes off the pharmaceutical and drug companies. It was a scorching year for the DOJ, recovering over $2 billion in healthcare fraud – the largest in its history.
But the regulators are only following the money. According to a study by watchdog group Public Citizen, the pharmaceutical drug industry has become the biggest defrauder of the federal government, surpassing the defense industry.
Future: So while the 112th Congress will now focus on “repeal-and-replace” of the 2010 Health Care Reform, we predict even more scrutiny from regulators in 2011 (see Prediction 5).
Prediction 5. A Hot Year for the DOJ
We will see many more prosecutions in 2010 …Just in time for the 2010 release of “Wall Street: Money Never Sleeps”. Modern day Gordon Gekkos, beware.
Past: While “Wall Street: Money Never Sleeps” took in more than $130 million in box office receipts, the Attorneys General were not napping. The DOJ collected nearly $7 billion in civil and criminal fines in 2010 – an all time high. That was a 30 percent increase in criminal collections and nearly 60 percent increase in civil collections.
Future: The DOJ will try to break its 2010 record and start talking in terms of ROI to the new rulers of the House (see Prediction 2). And January is already starting the trend with the announcement of a $2.8 billion settlement by Bank of America for its Countrywide Financial mortgage loans.
And One More –
A Fine Line Gets Blurrier – Third Party Risk Becomes First Level Concern
Future: There is an increasingly fine line between companies and their third party partners. Perception is reality – and reality is costly for all parties (see Gulf oil spill hearings with BP, Transocean and Halliburton). Government regulators have been expanding their existing focus on corruption and we predict it’s only going to get tougher in 2011 with increasing demands that organizations monitor and be held responsible for the activities of their third parties. Across the Pond (again – see Prediction 3), the UK Bribery Act extends to any company that conducts any of its business in the UK or a third party doing business with or on behalf of the company.
Considering that most organizations still lack effective compliance programs for themselves, let alone for their third parties, expect to see a number of headlines for third party compliance violations. Given all this, predicting a scramble to put into place third party risk programs seems kinda – well – unethical. Like shooting fish in the proverbial barrel.
Happy New Year.
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About the Author
Nick Ciancio is the Chief Compliance Officer for Global Compliance. He has more than 25 years of experience in senior marketing and business development positions in the telecommunications and technology industries. Currently, he is responsible for driving international sales efforts.
Prior to joining Global Compliance, Nick served as Vice President of Corporate Integration and Infrastructure Development at Ethernet networking services provider Yipes Enterprise Service. Before Yipes, he served as Chief Marketing Officer for Curiosity.com, and previously he held the title of Vice President of New Product and Business Development for US West Communications. Nick began his telecommunications career with Pacific Bell serving as Director of Marketing, and he was then promoted to Executive Director, New Product Development.
Before entering telecommunications, Nick served as a Mathematical Statistician for the U.S. Department of Agriculture.
Nick holds a Master of Art in Statistics from Pennsylvania State University and a Bachelors of Science and Masters of Science in Mathematics from the University of Massachusetts.
About Global Compliance
Global Compliance the leading provider of comprehensive and integrated ethics and compliance solutions. The Company currently partners with over 4,000 clients including public and private corporations, academic institutions, government entities, and non-profit organizations in over 200 countries – covering over 25 million client employees. Global Compliance is headquartered in Charlotte, N.C. www.globalcompliance.com
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