What’s Your Compliance Plan?

This article was republished with permission from Tom Fox’s FCPA Compliance and Ethics Blog.

Fred Thompson died this week. He had a long and distinguished government career, including working in the Senate Watergate Committee as a staffer. Thompson was credited for coming up with the signature question from the Watergate hearings, uttered by then Tennessee Senator Howard Baker who asked, “What did the President know and when did he know it?” It was Thompson who asked the query to former White House aide Alexander Butterfield, “Mr. Butterfield, were you aware of the existence of any listening devices in the Oval Office of the President?” thereby publicly revealing the existence of tape recordings of conversations within the White House, which led to the ultimate downfall of President Nixon.

He was later a former Senator from Tennessee who moonlighted as an actor. My favorite Thompson line came from the movie version of The Hunt For Red October when as Rear Adm. Joshua Painter, he asks protagonist Jack Ryan, played by Alec Baldwin, “What’s his plan? Russians don’t take a dump without a plan, son.” He, of course, is referring to the plan of Soviet sub captain Marko Ramius to defect.

However, my favorite Thompson movie line also introduces today’s compliance topic: As a Chief Compliance Officer (CCO) or compliance practitioner, how do you manage — as a leader or a manager? Herminia Ibarra, writing in the Financial Times On Management column, in a piece entitled, “When a leader is not a manager and other modern myths,” recently posed this question. I found this article very useful for any CCO to consider when thinking about how to effect a culture of compliance. While most organizations and their employees succeed when they do what they think is the right thing to do, the role of a CCO or compliance practitioner can be seen from both perspectives.

Ibarra begins with the rather bold statement “It’s hard to think of a business idea that has had more sticking power than the distinction between leadership and management. And, as with most simple but powerful notions, the dichotomy is part caricature, part resonant truth. We have come to use it as a shorthand to distinguish the noble from the slavish, the outstanding from the ordinary, the good from the bad.” She even quotes business scholar Warren Bennis for the following: “The manager is a copy; the leader is an original.”

Yet even using this stereotypical dichotomy as somewhat of a straw man, Ibarra states, “Archetypes persist because they convey valuable lessons, but they are myths nonetheless and it’s instructive to trace this one back to its origins. It started with sociologist Max Weber, who distinguished between forms of authority. ‘Rational-legal authority’ is impersonal, based on rules and hierarchical relations that limit personal discretion. ‘Charismatic authority’ is personal, based on exceptional individual qualities, insight or accomplishments, which inspire followers.”

She also noted that “management and leadership [are seen] as different kinds of work, not different kinds of people. Management aims to ensure efficiency through routine planning, organising and co-ordinating; leadership aims to create change by envisioning a better future, aligning those who can make it happen, or block it, and inspiring them to do it.” She drew from retired Harvard Professor John Kotter, who urged that companies “require a mix of both, the right dose depending on context: the more complexity — more products, geographies, units — the more management is needed; the more volatile the environment, the more leadership is required.”

However, I found her greatest insight was “When managing, one works within one’s sphere of formal authority; when leading, one influences and motivates outside and beyond, since many crucial stakeholders are external.” This would seem to me to be an excellent description of at least two hats that any CCO or compliance practitioner must wear. As a leader, you must focus on long-term thinking and planning. What is your one- or three- or five-year plan for your company’s compliance program? Have you planned this out? How about committing it in writing? If you answered yes to all the above, have you presented it to the audit committee or the full Board of Directors? If it is simply an aspirational document sitting on your desk, it is not moving the ball forward too much.

As a leader, have you gone out and visited your troops in the field? How have you worked with the business unit managers to help them achieve their sales goals from the compliance perspective? As a CCO, have you inspired any employees to #Dotherightthing, through the use of innovative social media techniques to spread the culture of compliance in your organization? As a leader in compliance, you are only limited by your imagination and that is certainly one way a CCO or compliance practitioner can lead — through imaginative innovation.

Yet there is another role for a CCO or compliance practitioner, and that is managing. Mangers work through process. Much of any company’s best practices compliance program is in process, such as internal controls. Compliance management should work through technology and other routines to create greater efficiencies around risk management.

If it is not clear that compliance is clearly a mix of both strategies, consider this from Ibarra’s piece, where she quoted Patrick Cescau, former Unilever chief executive and InterContinental Hotels Group chairman, who said, “It’s putting the strategy into action, embedding it in the fabric of the organisation and making it happen that is hard. For that you also need managerial qualities.” The compliance function must work to inspire and put the processes into place that allow prevention, detection and remediation if a violation occurs. Clearly there must be “rules and hierarchal relations that limit personal discretion,” but at the end of the day, employees must want to do the right thing. As a CCO, you need to be able to inspire employees with your vision of how compliance can be burned into the DNA of your organization.

In honor of Fred Thompson, I would ask “what is your plan?”

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business advice, legal advice or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The author gives his permission to link, post, distribute or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.