This is part two in a two-part series where “The Fraud Guy” John Hanson divulges two key things businesses can do to avoid disaster after reaching a settlement with the government. John previously discussed assigning and empowering a project leader or manager. Today he closes by going into further detail about how companies can spiritually comply with their agreements.
Spiritual Compliance
Another significant and common contributor to post-traumatic settlement disorder is a tendency by some organizations to focus on meeting the “letter” of their settlement agreement obligations and not the “spirit.” Compliance with the terms of a settlement agreement should not be viewed as a “check the box” exercise.
The government takes a dim view of organizations that have compliance programs that “live on a shelf” and may penalize more harshly such organizations than those who have no compliance program at all. Similarly, if the efforts of an organization to comply with their settlement agreement obligations exist on paper and not in practice, the organization assumes a grave risk.
One of the primary goals of the government in requiring certain post-settlement actions by an organization is the institution of an effective compliance and ethics program and internal controls aimed at reducing the risk of recurrence of the same or similar misconduct as that which led to the settlement agreement. Accordingly, how quickly the organization meets their obligations and, more importantly, the effectiveness of their efforts in doing so, are of tremendous importance.
Determining the effectiveness of an organization’s remedial measures requires much more effort than mere compliance with the letter of a settlement agreement’s obligations. Take, for example, compliance training. While a settlement agreement may require quarterly compliance training, such training is meaningless if the employees who receive the training cannot understand or apply it within the context of their roles. Accordingly, aside from assuring that the training is appropriately designed and affected to maximize such an understanding, an organization may utilize tests, surveys and/or post-training interviews to assess the training’s effectiveness. To the extent it is found not to be effective, it should be immediately remediated.
Another common post-settlement goal of the government is the strengthening or institution of a high ethical tone within an organization, commonly referred to as “tone at the top.” To successfully meet the spirit of an organization’s compliance with their settlement agreement obligations, the upper management of an organization must set the tone and take the lead. The degree to which management demands that the organization’s post-settlement efforts go beyond the letter of compliance has a great impact, in the same manner as their tone, actions and personal accountability does in affecting an ethical tone throughout an organization.
“Tone at the top” is not a compliance buzzword or catch phrase, it is real and plays a very significant role in affecting employee behavior and compliance throughout an organization. How upper management acts and holds themselves accountable sets the ethical tone and standard for how all employees are expected to conduct themselves and their accountability in doing so. While the settlement agreements used by government agencies may vary in how directly they address an organization’s ethical tone, it is generally among their chief concerns.
In living up to the spirit of a settlement agreement, an organization’s management, starting at the very highest levels, must take an active role in setting and living a tone that exemplifies ethical behavior and accountability. In the post-settlement world, this may well begin with the tone they set as it regards complying with their settlement agreement obligations. If, for example, a settlement agreement requires that all employees certify their having read and understood an organization’s compliance policies, upper management should be among the first to do so.
Another strong indicator of spiritual compliance and a positive tone is when organizations look for ways to go above and beyond the letter of their obligations as per the settlement agreement. While settlement agreements have become standardized to some extent, and in such a manner as to address compliance and ethics program issues relatively adequately, the government officials who are involved in drafting them are generally not experts in compliance and ethics programs and may, in fact, have little or no compliance knowledge and/or experience. Because of this, the obligations required in settlement agreements that pertain to corporate compliance and ethics programs may sometimes be minimal, vague and not necessarily comport with that necessary to achieve the government’s ultimate goals.
As an organization endeavors to meet their settlement agreement obligations, they should keep in mind the goals and spirit of their settlement agreement and seek ways to assure that such overarching goals are met or exceeded. One example of this occurred with an organization that I served as the monitor of, who instituted a process around business opportunities that went beyond that required in their settlement agreement and proved successful in preventing the same misconduct that gave rise to their problems. This reflected very favorably upon how seriously the organization and its management viewed compliance and the ethical tone within the organization.
Conclusion
There are other things that occur within organizations that contribute to post-traumatic settlement disorder, but the two discussed above are two of the largest contributors to problems and/or failure that I have seen through the unique lens of an independent corporate monitor.
Getting out of organizational intensive care doesn’t equate to discharge. Organizations must be disciplined, rigorous and take with grave seriousness their settlement agreement obligations. A focus on the spirit of the settlement agreement, together with order and accountability in assuring that all settlement obligations are met timely and effectively, significantly mitigates the risk of post-traumatic settlement disorder and ultimately helps an organization become stronger and better servants of their customers, employees, shareholders/owners and the public-at-large.
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