Ringo, Sir Paul and an Effective Compliance Program

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

Sometimes the universe converges in ways that are beyond my simple comprehension. This past weekend was one of them. It began a few months ago when I saw an advertisement from StubHub that showed Ringo Starr playing in Houston on October 10 and Sir Paul McCartney playing in New Orleans on October 11. I figured if the two surviving members of the greatest rock and roll band in the history of the world were going to play on two consecutive nights, it was a sure sign from the Oracle of Rock ‘n Roll that I was intended to attend both, lest I tempt a fate worse than going against an entity nearly as powerful as the Oracle of Delphi. Moreover, the Friday concert coincided with the birthday of my little sister, who happened to both be in town and one of the planet’s biggest Beatles fans, making the convergence complete.

I also learned two completely new and unrelated facts this weekend. The first is that a native of Liverpool, England, is called a “Scouser.” That comes from my Liverpudlian friend Pam, who also introduced me to the Liverpool Football Club. The second is that my wife is a closet Mr. Mister über fan and rocked out as a teenager to this group in the early days of MTV. On reflection, that is perhaps the odder convergence.

While there is clearly a reason Ringo Starr tours with true musical all stars and Sir Paul McCartney has been raised to the peerage for his musical prowess, in many ways the Ringo Starr concert was the bigger revelation. I had wondered how Ringo would fill out an entire concert. He did it by surrounding himself with musicians fabulous in their own right. They included: Steve Lukather, former lead singer from Toto, on vocals, lead and rhythm guitar; Gregg Rolie, former keyboardist from Santana and Journey, on vocals, organ and keyboards; Richard Page, former lead singer from Mr. Mister, on vocals and bass guitar; and finally, best and certainly not least, Todd Rundgren, on vocals, lead and rhythm guitar, bass guitar, percussion, harmonica and, occasionally, even keyboard.

So, in addition to Ringo singing his standards of Photograph, It Don’t Come Easy, Yellow Submarine and (of course) With a Little Help From My Friends, we also got to hear songs first released by Santana, Toto, Mr. Mister and some great Todd Rundgren hits. The group clearly loved playing and jamming with each other. Further, these other groups’ songs were great fun to hear and as those acts may never reunite, I would not otherwise have the chance to hear them performed lived.

Sir Paul McCartney: you really do not have to say much more. His concert did not exceed my expectations because they were about as high as expectations could have been. He seriously rocked out for over three hours, playing everything from the earliest Beatles songs up to a ballad for his latest wife. I cannot remember ever attending a concert where everyone one in attendance knew the words to every song, but we all did and we all sang them all the way through the entire show.

What is the compliance angle to all of this? Just as there is more than one way to put on a great concert, there is more than one way to have an effective compliance program. This continual message from the Department of Justice (DOJ) came again earlier this month through remarks by Assistant Attorney General for the Criminal Division, Leslie R. Caldwell, at the 22nd Annual Ethics and Compliance Conference, where she made clear that while the FCPA 10 Hallmarks of an Effective Compliance Program is one set of guidelines for an effective compliance program, there is no “one-size-fits-all” compliance program. She laid out another way to think through, review and analyze your compliance program. 

1. High-level commitment. A company must ensure that its directors and senior management provide strong, explicit and visible commitment to its corporate compliance policy. Stated differently, and again, “tone from the top.”
2. Written Policies. A company should have a clearly articulated and visible corporate compliance policy memorialized in a written compliance code. Again, employees need to know what to do–or not do–when faced with a tough judgment call involving business ethics. Companies need to make that as easy as possible for their employees.
3. Periodic Risk-Based Review. A company should periodically evaluate these compliance codes on the basis of a risk assessment addressing the individual circumstances of the company. Companies change over time through natural growth, mergers and acquisitions.
4. Proper Oversight and Independence. A company should assign responsibility to senior executives for the implementation and oversight of the compliance program. Those executives should have the authority to report directly to independent monitoring bodies, including internal audit and the Board of Directors, and they should have autonomy from management. Compliance programs needed to be funded; they need to have resources. And they need to have teeth and respect within the company.
5. Training and Guidance. A company should implement mechanisms designed to ensure that its compliance code is effectively communicated to all directors, officers and employees. This means repeated communication, frequent and effective training, and an ability to provide guidance when issues arise.
6. Internal Reporting. A company should have an effective system for confidential, internal reporting of compliance violations. I know that many companies have multiple mechanisms, which is good.
7. Investigation. A company should establish an effective process with sufficient resources for responding to, investigating and documenting allegations of violations. What this means on the ground will depend on the company. A sophisticated multinational corporation obviously will be expected to have more resources devoted to compliance than a small regional company.
8. Enforcement and Discipline. A company should implement mechanisms designed to enforce its compliance code, including appropriately incentivizing compliance and disciplining violations. Further, the response to a violation must be even-handed. People watch what people do much more carefully than what they say. When it comes to compliance, you must both say and do.
9. Third-Party Relationships. A company should institute compliance requirements pertaining to the oversight of all agents and business partners. This cannot be emphasized strongly enough.
10. Monitoring and Testing. A company should conduct periodic reviews and testing of its compliance code to improve its effectiveness in preventing and detecting violations. Kick the tires regularly. As I said, compliance programs must evolve with changes in the law, business practices, technology and culture.

Caldwell also emphasized that as important as the compliance program itself is the implementation, which is reviewed and evaluated by the DOJ. When the DOJ investigates a case, they look at the messages about compliance that are given to employees; they look at what employees are told in their day-to-day work. This means the DOJ will look at emails, chats and recorded phone calls. They will interview witnesses about the messages they received from their supervisors and management to determine if they received messages about compliance or about making money at all costs.

Another consideration for the DOJ is incentives. The DOJ will examine the incentives that a company provides to encourage compliant behavior – or not. This means that if a company is actually encouraging compliance, if its values are to be ethical and within the law, this message must be conveyed to employees in a meaningful way. If not, it is likely that the DOJ will not view the compliance program as credible. Interestingly, Caldwell said that sometimes the effective implementation of a compliance program means standing apart from the other companies in your industry.

Just as Ringo and Sir Paul ably demonstrated, there is more than one way to put on a great concert. They both assessed their strengths and weaknesses and used that information to put great bands around them to highlight their strengths. The same is true in the world of Foreign Corrupt Practices Act (FCPA) compliance. The key is to review and assess your compliance risks and then manage them. And, as always, document, document, document whatever you do so that if a regulator comes knocking, you can demonstrate evidence of the above.

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.