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When Organizations Lack Real Commitment to E&C

Every Chief Compliance Officer wants to be on the same page as the C-Suite and board of directors when it comes to a commitment to ethics and compliance. Without experience working inside the organization, however, it is difficult to tell the difference between a company that truly values the E&C program and one that simply talks the talk. So, what’s a CCO to do when he discovers all those promises were empty?

This article was republished with permission from Michael Volkov’s blog, Corruption, Crime & Compliance.

“Honesty is the best policy – when there is money in it.” – Mark Twain

Compliance professionals encounter a diverse range of corporate personalities in their work. To be sure, compliance officers have to rely on their abilities to analyze, lead, persuade, understand and motivate different functions in a company to contribute to the company’s ethics and compliance function. In doing so, compliance officers have to develop important psychological skills (e.g., reading and understanding what colleagues really mean when speaking to each other).

I do not mean to suggest that professionals are dishonest with each other in the business world. But the line between acceptable and unacceptable is drawn differently in a variety of organizations.

For example, in a company with a weak ethical culture that is operating along the edge of legality in order to increase quarterly financial results, a compliance professional has to be careful not to “alarm” colleagues as to his/her ethics and compliance intentions. In other words, a compliance officer has to avoid being perceived as someone who could “rock the boat.” In this situation, the company’s culture is ruled by business and financial needs; ethics and compliance will play only a secondary role in the overall operation of the company.

A more common scenario occurs when a compliance professional works in a company where the CEO has created a “happy talk” culture, where everyone speaks positively to each other, where risks are glossed over and where the company believes that it will always be financially successful. The company does not directly acknowledge nor address significant issues, but blithely creates an environment where one person or a small number of individuals without full consideration and analysis of alternatives may handle issues. Others at the company adhere to “happy talk,” encouraging each other and providing positive statements that reinforce each other and the overall culture (to the extent there is a real one), but ignoring real and substantive challenges facing the company.

The CEO and the senior management team have a responsibility to identify potential issues, analyze them and address them – or empower others to do the same. When a CEO operates as a figurehead and not as a leader, a company’s overall performance is at risk. I have observed these situations on a number of occasions. For compliance officers, such an environment is challenging.

A compliance officer working in a “happy talk” environment may be initially duped into believing the CEO and senior managers’ statements of commitment to ethics and compliance. In fact, such “happy talk” may encourage a CCO to act, plan and implement significant compliance initiatives.

Unfortunately, the CCO relying on “happy talk” statements will quickly find out that such statements are empty promises when he seeks to implement changes and/or seek resources (people and money) to build an effective ethics and compliance program.

All too often, a CCO is encouraged by a CEO and senior managers to move forward on compliance requirements, to present alternative proposals and to develop support within the organization only to ultimately fail to secure approval and necessary resources to implement the proposal. Inevitably, the CCO seeks explanations from each of the so-called “allies” and they each point a finger at each other, directing the CCO to talk to the other executive to clarify and seek affirmation of support. Round and round the CCO goes until he or she finally realizes that the CEO and the senior executives have spun him.

This is not a far-fetched scenario. I have observed this precise occurrence on a number of occasions. Once the CCO realizes what is occurring, he starts to polish his/her CV and look for an escape route to another company compliance position.

It is sad, but true – the corporate governance world is filled with examples of companies that do not follow honesty as the best policy. If only such a maxim were more common.

Michael Volkov

Michael Volkov

Michael-Volkov-leclairryanMichael 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 [email protected].  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.
  • Represented company before Congress and Executive Branch in effort to modify Justice Department regulations concerning use of federal funds.
  • Advised and assisted World Bank in review of global corruption policies, enforcement programs and corruption investigations and prosecutions.

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