Day: August 7, 2023

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The Ethics Experts

Episode 153 – Ilse De Vocht & Germaine Huka

In this episode of The Ethics Experts, Nick welcomes Ilse De Vocht (Director of Compliance) & Germaine Huka (Global Ethics and Compliance Business Partner (Director)) of Galapagos. Ilse has over 25 years of experience in pharma industry in Compliance and Finance. She joined Galapagos in 2023 to set up a compliance framework for the commercialization across Europe of its first medicine. Prior to that, she worked at Takeda and AstraZeneca, driving all elements of a compliance program across mainly Europe. Germaine started her career as a litigation lawyer, and moved into Compliance & Ethics after a few years and has never looked back. She has worked across different industries including Defence & Aerospace, Medical Devices and Pharmaceuticals & Biotech.
https://www.linkedin.com/company/glpg/
https://www.linkedin.com/in/ilsedevocht/
https://www.linkedin.com/in/germaine-huka-3253751a3/

Categories
Blog

Incentivizing Compliance

In today’s business landscape, fostering a culture of ethics and compliance is more crucial than ever. It not only ensures legal adherence but also promotes trust, integrity, and long-term success. One powerful tool in achieving this cultural shift is the strategic use of incentives. In this blog post, we will explore the significance of incentivizing ethical behavior within organizations, the role of human resources (HR) in designing effective incentive structures, and how data-driven insights can drive a culture of compliance and integrity.

The Department of Justice’s 2023 ECCP underscored the importance of incentives and rewards in promoting ethical conduct. It asks companies to consider the implications of their incentives and rewards on compliance and ethical behavior. Furthermore, it encourages organizations to provide specific examples of actions taken, such as promotions or awards denied, due to compliance and ethical considerations. This guidance highlights the significance of incentives in driving a culture of ethics and compliance.

When it comes to incentivizing ethics and compliance, the first thought that often comes to mind is financial rewards. While these can indeed send a strong message about the importance of compliance, it’s important to recognize that incentives go beyond monetary compensation alone. In fact, non-financial incentives can be equally effective in driving ethical behavior.

One powerful non-financial incentive is public recognition of ethical behavior. Acknowledging employees who consistently exhibit integrity and compliance can be a powerful motivator for others to follow suit. Whether it’s a simple pat on the back, an ethical award, or a t-shirt identifying an employee as engaging in ethical behavior, these gestures can go a long way in reinforcing the importance of doing business the right way.

To truly embed a culture of ethics and compliance within an organization, incentives should be integrated into the hiring and promotion process. HR plays a pivotal role in this aspect, ensuring that compliance evaluations and rewards are part of an employee’s discretionary bonus. By making compliance performance a key factor in promotion decisions, companies can send a clear message that ethical behavior is valued and rewarded.

Human resources professionals are experienced in implementing incentives and can effectively measure and incentivize behavior. By leveraging data-driven insights, HR can identify key metrics to evaluate compliance performance and align incentives accordingly. This approach ensures that the right type of behavior is driven throughout the organization, reinforcing a culture of compliance and integrity.

From these general guidelines, I have developed six key principles for developing and delivering incentives into your compliance regime.

The Power of Supporting Systems. Compliance incentives alone may not be sufficient to drive desired behavior. To make these incentives stick, it’s crucial to establish a compliance support system that operationalizes pro-compliance incentives at different levels within the organization. These systems reinforce the importance of compliance and make it visible to employees, ensuring consistent commitment throughout the company.

Incentives Must Be for All. Compliance incentives to be implemented at all levels of the company, from senior management to lower-level employees. It’s essential to recognize that compliance professionals and internal audit staff play a vital role in promoting compliance within the organization. By acknowledging their efforts and providing tangible incentives, companies can highlight the significance of compliance and make it an integral part of the company’s DNA.

Global Consistency. In addition to fairness in your incentive program, compliance incentives should be consistent for employees both within and outside of the United States. Global enforcement of the compliance program not only ensures fairness but also enhances the credibility of the incentive system. By treating all employees equally, regardless of their location, companies foster a culture of compliance and ethical business practices.

Designed to Endure. Creating your incentive program to endure is crucial to ensure the longevity of compliance incentives, especially during financial downturns. A counterweight acts as an institutional mechanism that enforces a continued focus on nonfinancial goals, such as compliance. It prevents compliance incentives from being discarded when other goals take precedence. By incorporating a counterweight into the incentive system, companies can maintain their commitment to ethical practices, even in challenging times.

Compliance Incentives Alignment. You must align your compliance incentives to work in an oblique manner, rather than following a linear approach. This means integrating compliance goals into employees’ daily tasks and responsibilities, making it a natural part of their work. By consistently emphasizing compliance as part of the company’s DNA, organizations can foster a culture where ethical practices are valued and rewarded.

Support Systems. Support systems are critically important for the success of compliance incentives. These systems should be in place even during downturns or cutbacks to support compliance and ethical business practices. They should reinforce the importance of compliance and provide employees with tangible incentives to engage in ethical behavior. By documenting compliance actions, companies can also demonstrate their commitment to regulators if necessary.

Incentivizing ethics and compliance is not just a tick-the-box exercise; it is a powerful tool for driving cultural change within organizations. By integrating incentives into the hiring and promotion process, HR professionals can reinforce the importance of ethical behavior. Data-driven insights enable organizations to measure and incentivize compliance effectively. Whether through financial rewards or non-monetary gestures, incentives play a vital role in promoting a culture of ethics and compliance. Let’s embrace the power of incentives and work towards building organizations that prioritize integrity, compliance, and long-term success.

Always remember, compliance incentives do not have to be elaborate or novel; they need to be consistent and aligned with the company’s values. By implementing enduring compliance incentives and creating a counterweight, you can ensure that ethical behavior remains a priority, even in challenging times. Build a culture of compliance and reap the benefits of an ethically driven organization.

Categories
FCPA Compliance Report

FCPA Compliance Report – Fighting Forced Labor with Supplier Due Diligence

Welcome to the award-winning FCPA Compliance Report, the longest-running podcast in compliance. In this episode, Tom welcomes Ragini Bhalla, head of content and PR for Creditsafe, focusing on the North American region, and Steve Carpenter, Country Manager for Creditsafe in Canada. Their discussion centers around a new Canadian law designed to combat human trafficking forced labor, and child labor within supply chains. Throughout the conversation, they shed light on the practices of various multinational corporations, emphasizing the need for cohesive anti-slavery reporting and measures across different jurisdictions. It becomes evident that addressing these critical issues requires collaboration and comprehensive efforts from all parties involved.

A key to compliance with ethical sourcing and compliance with this new Canadian law is through a company’s Supply Chain. Companies must ensure their supply chains are free from forced labor and child labor, and Credit Safe provides services to help. The Canadian Forced Labor Law and the UK’s Modern Slavery Act are steps toward making companies accountable for their actions, but governments must also work with countries like India, Bangladesh, and China to create real change. Non-compliance can lead to fines, customer trust loss, and potential stock dips, and due diligence checks and audits are necessary for companies to protect the integrity of their supply chains. Ethical sourcing is a complex issue requiring collaboration between governments, companies, and experts.

 

Creditsafe is in a unique position to assist companies comply with laws making illegal human trafficking, forced labor, and child labor. In this podcast, you will learn how to investigate your suppliers in a way that enhances your business operations. Once again, this demonstrates that effective compliance leads to more effective business processes, leading to greater profitability.

 Key Highlights

·      Fighting Forced Labor

·      ESG Supply Chain Auditing

·      Canadian Compliance Law

·      Reputational Risk of Non-Compliance

·      Ethical Sourcing

Resources

Ragini Bhalla on LinkedIn

Steve Carpenter on LinkedIn

Creditsafe

Tom Fox

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Facebook

YouTube

Twitter

LinkedIn

Categories
Trekking Through Compliance

Trekking Through Compliance: Episode 67 – The Empath

 

In this episode of Trekking Through Compliance, we consider the episode The Empath, which aired on December 6, 1968, and occurred on Star Date 5121.5

In this episode, the Vions attempt to see if a planet of empaths is worth saving by forcing one of their people to choose between her life or an Enterprise crew landing party.

Compliance Takeaways:

1.     What is a gap analysis?

2.     Who should be on your investigation team?

3.     What is the Board of Directors’ role in hiring?

Resources

Excruciatingly Detailed Plot Summary by Eric W. Weisstein

MissionLogPodcast.com

Memory Alpha

Categories
31 Days to More Effective Compliance Programs

One Month to More Effective HR in Compliance: Day 5 – Role of HR in Incentivizing Compliance

Welcome to the August edition of One Month to a More Effective Compliance Program. In the month of August, 2023 we will consider the role of Human Resources in a best practices compliance program.

In this episode, Tom Fox explores the role of HR in implementing effective compliance programs within companies. The episode focuses on the importance of incentivizing compliance and ethical behavior through both financial and non-financial incentives. The Department of Justice’s guidance emphasizes the need for positive incentives, such as personal evaluations, promotions, and rewards for ethics and compliance leadership. The podcast discusses various avenues for implementing incentives, including cash bonuses and non-compensation rewards like t-shirts or ethical awards. It emphasizes the role of HR in driving the right behavior through incentive structures and warns against solely promoting based on financial targets. Overall, the podcast highlights the significance of HR in creating a fully operationalized compliance program that fosters an ethical work environment.

 Three key takeaways:

  1. The DOJ 2023 ECCP specifically calls out incentives for doing business ethically and in compliance.
  2. HR can lead the efforts around incentives.
  3. Incentives go beyond financial rewards.

For more information, check out The Compliance Handbook, 4th edition, available on LexisNexis.com.

Categories
Daily Compliance News

Daily Compliance News: August 7, 2023 – The Face, The Music Edition

Welcome to the Daily Compliance News. Each day, Tom Fox, the Voice of Compliance brings to you compliance-related stories to start your day. Sit back, enjoy a cup of morning coffee, and listen in to the Daily Compliance News. All, from the Compliance Podcast Network. Each day we consider four stories from the business world, compliance, ethics, risk management, leadership, or general interest for the compliance professional.

  • Albemarle makes FCPA settlement reserve. (WSJ)
  • Catching pandemic fraudsters. (NYT)
  • Wells, SocGen to settle messaging app violations. (WSJ)
  • Ex-Allianz manager to face $7bn criminal fraud claim. (Reuters)
Categories
Adventures in Compliance

Adventures in Compliance – Compliance Lessons from The Man with the Twisted Lip

Welcome to a review of all the Sherlock Holmes stories which are collected in the work, “The Adventures of Sherlock Holmes.” The appeared in the Strand Magazine from July 1891 to June 1892. Over 12 episodes, I will be reviewing each story and mine them for leadership, compliance and ethical lessons. In this episode, we consider “The Man with the Twisted Lip” which was originally published by the Strand Magazine in December 1891.  

Summary

The story begins when Watson, called out by a friend Mrs. St. Clair, finds himself in an opium den in the East End of London. While attempting to extract his friend, he encounters Sherlock Holmes in disguise. Holmes is there on a different case involving Neville St. Clair, Mrs. St. Clair’s husband, who was reported missing under mysterious circumstances.

Mrs. St. Clair had seen her husband at a second story window of the opium den, distressed and quickly pulled away from the window. When she rushed to find him, the only people in the room were the landlord and a dirty, disfigured beggar known as Hugh Boone. Despite Boone’s rough exterior, he is known for his eloquence and wit.

Despite no evidence of foul play or indication of St. Clair being there, Mrs. St. Clair insists her husband was in the room. Holmes takes up the case and starts investigating, finding St. Clair’s clothes in the room, but no sign of the man himself.

Boone is arrested and put in a cell, where Holmes observes him closely. Eventually, Holmes discovers that Boone and Neville St. Clair are the same person. St. Clair, a respectable man with a previously high-paying job, had been leading a double life as the beggar Boone. He discovered that he could earn more money begging while disguised as the disfigured Boone, so he maintained this deception to support his family’s comfortable lifestyle.

St. Clair is extremely relieved to be found out, as he was tired of the lie but didn’t know how to get out of it without damaging his family’s reputation. In the end, it is decided that Boone’s ‘disappearance’ would be maintained to protect the family, and St. Clair vows to abandon his alter ego for good.

Compliance Lessons

1.     Honesty and Transparency: The character Neville St. Clair disguises himself and leads a dual life, which eventually leads to misunderstandings and a temporary downfall. In leadership, being open, transparent, and honest is crucial. Leaders who hide important facts or issues from their teams can create mistrust and a lack of confidence.

2.     Understand Different Perspectives: As a beggar, Neville St. Clair was able to understand a different section of society that he normally would not interact with. A good leader must strive to understand the different perspectives within their team, the broader organization, and the external market. This enhances decision-making and ensures that everyone feels heard and valued.

3.     Adaptability: Despite his odd choice, St. Clair displayed a high degree of adaptability by successfully leading a double life. In leadership, circumstances often change rapidly, and the ability to adapt quickly and effectively is vital. Good leaders can handle uncertainty, make necessary adjustments, and guide their teams through changes.

4.     The Importance of Brand: St. Clair manipulated his appearance to fit into different roles. While this is not advisable ethically, it does underscore the impact of a leader’s image on their followers. Leaders need to be mindful of how their behavior, attitude, and professionalism influence others.

5.     Resilience: Despite the hardships he encountered in his double life, St. Clair demonstrated resilience. Leaders often face challenges and obstacles. The ability to bounce back, remain positive, and continue moving forward is a key leadership trait.

6.     Integrity: The absence of integrity in St. Clair’s actions highlights the importance of this trait in leadership. Leaders must maintain high ethical standards and act in a way that is consistent with their words.

Resource

The New Annotated Sherlock Holmes

Categories
All Things Investigations

All Things Investigations: Episode 33 – Trump January 6th Indictment with Kenyen Brown and Kevin Carroll

In this episode of All Things Investigations, host Tom Fox discusses the legal intricacies surrounding the Donald Trump indictments with legal experts Kenyen Brown and Kevin Carroll. Tearing apart the indictment against the former President, the conversation illuminates the reality of a country grappling with the unprecedented indictment of its former Commander-in-Chief. They dive deep into the evidence, the potential repercussions, and the broader implications for the legal profession and democracy itself.

Kevin Carroll and Kenyen Brown are partners at Hughes Hubbard & Reed. Kevin is a partner in the Washington, D.C. and New York offices of Hughes Hubbard & Reed in the White Collar & Regulatory Defense and Anti-Corruption & Internal Investigations practice groups. Former U.S. Attorney Kenyen Brown is a partner in the Washington, D.C. office of Hughes Hubbard & Reed in the White Collar & Regulatory Defense and Anti-Corruption & Internal Investigations practices.

 

You’ll hear Tom, Kenyen and Kevin discuss:

  • The indictment against Donald Trump centers around “prolific lies” used to defraud the United States citizens and election officials, aiming to overturn the 2020 election results. This has legal implications far beyond insurrection.
  • The evidence collected against Trump is expansive, including public statements, internal campaign emails, attorney-client privilege documents, voicemails, and audio recordings.
  • There’s potential for more evidence that can prove the charges brought against Trump, as the indictment itself was written in plain English, suggesting transparency and inclusivity for all concerned citizens.
  • The indictments were carefully formulated to avoid charges of sedition or insurrection, focusing instead on a set of charges that come with very serious sentences.
  • Some of the unindicted conspirators may potentially flip on Trump and provide crucial testimony against the former president. However, the roles of distinguished members of the legal profession in the alleged coup d’etat raise concerns about ethics training and professional discipline at the bar.
  • The likely trial date for this case is expected to be around six to ten months in the future, depending on the course of pretrial motion practice and the scope of the issues being relitigated.
  • The upcoming trial could potentially be the most important in American history, hence all counsel should be given adequate time to prepare.
  • Kevin explains that the oath to the Constitution, not to the Commander-in-Chief, holds deep importance for him and his peers. This oath suggests that the co-equal branches of the government, including the federal judiciary and Congress, deserve equal loyalty.
  • The troubling presence of veterans and a small number of active-duty personnel at the January 6 riot, was deeply disappointing to Kevin. 
  • Kenyen says, as a prosecutor, it is a great honor to represent the United States of America. He emphasizes the weight of the responsibility and the seriousness with which he took his duties of candor and good stewardship of information.
  • The fact that the National Guard was not deployed to aid the Capitol police during the riot, given that only the president can order their deployment in the District of Columbia, suggests that this decision was part of an attempt to pressure Congress and Vice President Mike Pence. President Trump may find it difficult to convince the public of the legitimacy of his actions.

 

Resources

Hughes Hubbard & Reed website

Kevin Carroll on LinkedIn

Kenyen Brown on LinkedIn

Categories
Corruption, Crime and Compliance

How to Build a Compliance Compensation System

The DOJ is advocating for increased consequences for individuals who engage in misconduct or fail to exercise proper oversight, via the implementation of compliance compensation programs that include financial penalties. Companies need to develop incentives and penalties in a balanced manner to maintain ethical performance, while ensuring the potential for accountability. A crucial aspect of enforcing these policies is the execution of robust clawback provisions as part of the executive’s contract and bonus terms. These clawbacks can act as a deterrent for misconduct, and their enforceability largely depends on the clarity of their language, among other things. In this episode of Corruption, Crime and Compliance, Michael Volkov explores compliance compensation systems and their role in corporate governance in detail. 

You’ll hear Michael talk about:

  • Clawback provisions are important rules that determine how executives’ contracts and bonus terms can be enforced. Companies have a responsibility to execute robust clawback provisions to ensure accountability and deter misconduct.
  • Compliance programs are becoming increasingly vital to global companies as they grapple with complex legal and economic risks. These programs are crucial in reinforcing compliant behavior and promoting positive corporate citizenship.
  • The DOJ has emphasized the importance of compensation systems and consequence management in corporate compliance programs. Not being proactive in reviewing these systems is considered a serious mistake that requires urgent attention and correction.
  • DOJ’s focus has expanded towards consequence management, seeking to escalate penalties for those involved in misconduct. Companies are required to implement compliance compensation programs focusing primarily on clawbacks.
  • Clawback policies, often limited to senior executives and specific conduct, need to be broadened in their scope and applicability. Notably, the Dodd-Frank Act mandates listed companies to have a written clawback policy for financial restatements resulting from accounting misconduct.
  • Compliance rewards act as a significant incentive for ethical behavior and compliance. Executives and managers who fulfill specific compliance requirements may become eligible for performance-related rewards.
  • Compliance compensation systems must be designed to hold individuals accountable for misconduct. Penalties, including retroactive discipline and financial penalties like clawbacks or deferred compensation systems, can be potent deterrents.
  • A comprehensive compliance compensation system requires careful crafting to minimize litigation and defense possibilities. It involves identifying the executives and managers to be included in the penalty system and determining the corresponding percentage penalties.
  • A company must balance its incentive structure, considering factors like large contingent payouts to executives and ethical performance requirements. Clarity in written policies and employment agreements fortify clawback provisions.
  • Collaboration between business, finance, legal, and HR is pivotal in the design and implementation of effective compliance reward and penalty systems.

 

KEY QUOTES:

“The DOJ wants to add to their risk calculation, and that’s requiring companies to implement compliance compensation programs that include financial penalties against those actors who engage in misconduct, or supervisors that fail to rein in their underlings or conduct proper oversight to ensure compliance.” – Michael Volkov

 

“Companies have to isolate and weigh incentives and bonus structures to make sure that they can still target accountability penalties commensurate with the risk posed by the executive if he or she engages in misconduct.”  – Michael Volkov

 

“The key determinant of clawback enforceability is whether the company has insisted on execution of robust clawback provisions as part of the executive’s contract and bonus terms.” – Michael Volkov

 

Resources:

Michael Volkov on LinkedIn | Twitter

The Volkov Law Group