Compliance Expertise in the Boardroom

Posted on September 7, 2016 at September 20, 2016 by Michael Volkov 985 0

In this era of corporate accountability, regulators and prosecutors are looking for opportunities to hold board members, individually and collectively, accountable for corporate misconduct. The list of improper oversight, bordering on recklessness to deliberate intent, is well known in the Department of Justice. You can rest assured when presented with the right set of facts and evidence, the Justice Department will pull the trigger and charge a corporate board member with a criminal offense.

In response, many have advocated for improvement of corporate governance, increased training of corporate board members and specific guidance on the board’s obligations to oversee and monitor a company’s compliance program. No longer can companies rely on the old model of inserting outside counsel to make sure that the board embraces a defensive strategy aimed at avoiding litigation and risks. Instead, a new model is being crafted with the push from compliance advocates, prosecutors, shareholders and other key stakeholders that advances corporate accountability and responsibility for a company’s ethics and compliance program.

One important aspect of this new approach to corporate governance is to insist on appointing a board member with compliance expertise.

I have witnessed firsthand that companies that have a board member with compliance expertise usually have a more aggressive and effective compliance program. In this situation, a Chief Compliance Officer has to answer to the board for the company’s compliance program, while receiving the resources and support to accomplish compliance tasks.

Companies spend time and resources to nominate board members who bring a real value to the boardroom. The mix of board members reflects the company’s overall strategic priorities and focus for governance. For example, the nominating committee will locate a board candidate with financial reporting, audit and SOX expertise to manage the audit committee. Each board member should be considered for a strategic purpose and benefit.

A board member with a compliance background advances a company’s compliance program by multiple factors. It is an investment with significant benefits to the compliance program and the company overall. The board member can educate other board members on compliance issues, facilitate CCO presentations and communications to the board and improve the company’s tone at the top, as well as its ethical culture and other elements of a compliance program.

A requirement to include a board member with compliance expertise is fast becoming a governance best practice. While it is easy to brush aside compliance in favor of other significant topics and risks – cybersecurity, financial reporting, SOX – relegating compliance to a lower priority is a real and significant missed opportunity.

Chief compliance officers have to maintain a robust reporting relationship with the audit or compliance committee. A CCO cannot be afforded 10 or 15 minutes at the end of a quarterly meeting. Rather, a CCO has to be treated in a manner commensurate with the importance of compliance to the company’s operations. If there is no tone at the top, the CCO will probably be given a short slot at the end of the meeting.

A board member responsible for compliance with prior experience in compliance will ensure that the board devotes adequate time and attention to the company’s compliance program. No longer will the CCO have to devote energy and time to “educate” the board on the importance of compliance issues. The CCO will have a built-in support system and advocate for compliance issue on the board itself.

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Michael Volkov

Michael Volkov is the CEO of The Volkov Law Group LLC, where he provides compliance, internal investigation and white collar defense services. He can be reached at mvolkov@volkovlaw.com. His practice focuses on white collar defense, corporate compliance, internal investigations, and regulatory enforcement matters. He is a former federal prosecutor with almost 30 years of experience in a variety of government positions and private practice.

Michael maintains a well-known blog: Corruption Crime & Compliance which is frequently cited by anti-corruption professionals and professionals in the compliance industry.Michael has extensive experience representing clients on matters involving the Foreign Corrupt Practices Act, the UK Bribery Act, money laundering, Office of Foreign Asset Control (OFAC), export controls, sanctions and International Traffic in Arms, False Claims Act, Congressional investigations, online gambling and regulatory enforcement issues.

Michael has assisted clients with design and implementation of compliance programs to reduce risk and respond to global and US enforcement programs.

Michael has built a strong reputation for his practical and comprehensive compliance strategies.Michael served for more than 17 years as a federal prosecutor in the U.S. Attorney’s Office in the District of Columbia; for 5 years as the Chief Crime and Terrorism Counsel for the Senate Judiciary Committee, and Chief Crime, Terrorism and Homeland Security Counsel for the Senate and House Judiciary Committees; and as a Trial Attorney in the Antitrust Division of the U.S. Department of Justice.

Michael also has extensive trial experience and has been lead attorney in more than 75 jury trials, including some lasting more than six months. His clients have included corporations, officers, directors and professionals in, internal investigations and criminal and civil trials. He has handled a number of high-profile criminal cases involving a wide‐range of issues, including the FCPA and compliance matters, environmental crimes, and antitrust cartel investigations in countries all around the world.

Representative Engagements

Successfully represented three officers of a multinational company in two separate criminal antitrust investigations involving a criminal antitrust investigation in the District of Columbia and the Southern District of New York.

Defended pharmaceutical company before the Food and Drug Administration and Senate Finance Committee relating to application for approval of generic drug.

Conducted internal investigation which exonerated company against allegations of false statements in submissions to the FDA and against improper conduct alleged by Senate Finance Committee.

Represented company before the US State Department on alleged violations of ITAR which lead to voluntary disclosure and imposition of no civil or criminal penalties.

Advised several multinational companies on compliance with anti‐corruption laws, and design and implementation of anti‐corruption and anti‐money laundering compliance programs.

Advised hospitals, pharmaceutical companies and medical device companies on compliance issues relating to Stark law and Anti‐Kickback law and regulations.

Conducted due diligence investigations for large multinational companies for anti‐corruption compliance of: potential third party agents, joint venture partners and acquisition targets in Europe, Africa, Asia and Latin America.

Represented individual in white collar fraud case in Alexandria, Virginia and secured dismissal of criminal charges and expungement of criminal record.