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Corruption, Crime and Compliance

Steve Naughton on Compliance and Compliance Education Program at Loyola School of Law

How can we build a culture that motivates people to do the right thing? In this episode of Corruption, Crime and Compliance, Michael Volkov and guest Steve Naughton, explore crucial questions about fostering ethical cultures within companies and practical steps compliance leaders can take to transform performance. Steve shares insights from his journey, detailing the evolution of compliance leadership roles and offering a glimpse into PepsiCo’s growth in this area during his tenure as Chief Compliance Officer. For those considering careers in compliance, he emphasizes that expertise in this field can be developed without a law degree. 

Steve Naughton currently oversees Compliance and Enterprise Risk Management programs at Loyola University Law School. He previously served as Pepsi’s Chief Compliance Officer, guiding the growth of their compliance program over 8 years. He is passionate about making sure compliance functions can work independently.

You’ll hear Michael and Steve discuss:

  • Steve began his career at major law firms before going in-house to manage litigation and M&A deals during pivotal moments at Quaker Oats and Snapple.
  • PepsiCo’s iconic GC Larry Thompson asked Steve to build a new compliance program starting with just 3 people. Over 8 years, Steve grew Pepsi’s program from 3 to over 40 employees with global reach.
  • Larry saw compliance as preventative and empowered Steve with independent reporting to the Board. Steve remarks, “[Larry] viewed [compliance] as much more preventative than reactionary … his take on compliance has always been, to the extent that we can prevent something or to the extent that as soon as we detect it, we’ll go in and check it out instead of waiting till everything was fully investigated.”
  • Pepsi has been on the World’s Most Ethical Companies list for 15 years in a row, showcasing its success in following ethical practices.
  • Pepsi has never faced serious enforcement actions, and this is attributed to turning ethical practices into a value-add for the business.
  • Not every company has the resources or leadership seen at Pepsi, making it challenging to bring others along in the compliance profession.
  • Steve emphasizes the importance of a risk-based approach in compliance and recommends developing a strategic five-year plan to address top risks progressively.
  • He encourages companies to be disciplined and follow a plan, citing the Department of Justice’s emphasis on showing work prospectively, not retroactively, to defend actions and maintain a strategic plan.
  • Michael and Steve discuss the challenges of implementing change in compliance programs, emphasizing the importance of building a team and garnering support from other functions.They recommend a realistic 3 to 5 year timeframe for implementing changes.
  • Cultures where people feel safe speaking up are foundational to compliance. This can aid in preventing and addressing ethical lapses and compliance challenges.
  • Steve cites examples from Wells Fargo, Volkswagen, General Motors, and Boeing. In these organizations, where you would expect people to be skilled and ethical, employees often didn’t speak up. This was because they thought their concerns wouldn’t be listened to, or the culture didn’t encourage open communication.
  • Compliance is not just about following rules; it’s about changing the culture in companies. We need to think differently and work towards making a culture where doing the right thing is not just accepted but encouraged. 
  • Steve runs a highly respected compliance curriculum at Loyola University which has prepared many future Chief Compliance Officers. However, compliance expertise doesn’t strictly require legal training.

KEY QUOTES

“ I think where he [Larry Thompson] was a visionary on compliance was the entire idea, two of them really. The first of which was that he viewed it as much more of an independent function. …And then the second thing is that I think he really looked at it as, ‘Okay, how do we go out and make sure that we’re taking these steps to prevent the problems that you might see otherwise?’ ” – Steve Naughton

“…the Department of Justice has said in no uncertain terms between the Monaco memo and otherwise, show your work. You can’t be doing it retroactively. Show your work prospectively. Show us what you’re thinking as you’re going along, not only to defend what you’re doing but also to have a plan that you work against.” – Steve Naughton

“You have to have a plan in place, but you also have to have as a parallel track this idea, let’s make sure that we’ve got the right culture and we’re trying to build the right culture.” – Steve Naughton

Resources:

Steve Naughton on LinkedIn | Loyola School of Law | Email

Michael Volkov on LinkedIn | Twitter

The Volkov Law Group

Categories
All Things Investigations

All Things Investigations: Episode 42 – The EU Corporate Sustainability Due Diligence Directive with Nicolas Tollet

This episode of All Things Investigations explores the recent EU Corporate Sustainability Due Diligence Directive that could transform compliance programs and corporate governance globally. Tom Fox and Nicolas Tollet analyze the Directive’s provisions mandating human rights and environmental risk management across company value chains. Nicolas explains how the law builds on France’s pioneering 2017 Duty of Care legislation and its impact on corporate accountability for both EU and non-EU multinationals.

Nicolas Tollet is a Partner at Hughes Hubbard. He previously served as Vice President for Compliance at Technip, an oil and gas service firm. With over 20 years of experience in compliance and internal investigations, he has worked on significant cases like Alcatel, TSKJ, and Lava Jato. Nicolas has expertise in monitorships, having been involved in the first one imposed on a French company by the DOJ and the SEC. He helps companies worldwide with compliance programs, audits, and M&A due diligence.

You’ll hear Tom and Nicolas discuss:

  • The new EU Directive on Corporate Sustainability Due Diligence will require companies above certain revenue thresholds to implement human rights and environmental compliance programs, not just for their operations but across their entire value chain.
  • France has been at the forefront of such legislation with its 2017 Duty of Care law. The EU directive builds on this, with more expansive requirements and penalties of up to 5% of worldwide turnover for non-compliance.
  • The directive explicitly links human rights risks to corruption risks, recognizing their interconnection. It has the potential to drive even broader risk coverage than typical anti-bribery programs.
  • By mandating due diligence across the value chain, the directive will necessitate contract terms like audit rights as standard procedure. Financial institutions may also need to evaluate the human rights impacts of clients they fund.
  • The directive allows each EU country to determine how to specifically transpose and enforce the law’s obligations. This could lead to a complex web of overlapping inspection regimes applied to multinationals.
  • Even companies not based in the EU will fall under the law if they meet certain revenue thresholds in Europe. Non-EU companies should tap French expertise since France is about 6 years ahead in implementing similar mandates.
  • Required public sustainability reporting adds another layer reinforcing the need for concrete compliance actions. 
  • While the US led historically on anti-corruption compliance, the EU is now at the vanguard of expanding into human rights, environment, and sustainability. France in particular has established itself as a leader in advancing corporate compliance expectations.

KEY QUOTES

“There is a direct link within the directive between human rights compliance and anti-corruption compliance, which the compliance community in the world has been seeing for years now.” – Nicolas Tollet

“So we shouldn’t expect one member state to be reluctant to enforce the legislation. The EU will make sure that every member state issue and then enforce the legislation in each country.” – Nicolas Tollet

“Fortunately, we are still linked in how we work in the business field, and we have to take both into account. So there is a certain pride indeed, because there is real expertise in France now on compliance, but it’s mixed between the French and the American compliance community, I would say. So it’s working together that we’ve managed to improve compliance.” – Nicolas Tollet

Resources:

Hughes Hubbard & Reed website 

Nicolas Tollet on LinkedIn

EU Directive on Corporate Sustainability Due Diligence: Navigating the New Landscape of Corporate Accountability

Categories
Adventures in Compliance

The Memoirs of Sherlock Holmes – The Adventure of The Greek Interpreter

Welcome to a review of all the Sherlock Holmes stories which are collected in the work, “The Memoirs of Sherlock Holmes.” They appeared in the Strand Magazine from December 1892 to December 1893. Over the next 12 episodes, I will be reviewing each story and mine them for leadership, compliance, and ethical lessons.  In this, we look at the story The Adventure of the Greek Interpreter. 

The intriguing world of Sherlock Holmes, particularly in “The Adventure of the Greek Interpreter,” offers a wealth of leadership lessons for compliance professionals. Tom Fox draws parallels between Holmes’ traits of courage, empathy, integrity, persistence, and continuous learning, and the essential qualities needed by leaders in the compliance sector. Fox’s perspective, shaped by his extensive compliance experience, emphasizes the importance of these traits in navigating the complex and often challenging landscape of compliance. He highlights the need for courage in decision-making, empathy towards employees and stakeholders, unwavering integrity, persistence in the face of adversity, and a commitment to continuous learning. Join Tom Fox in this episode of the Adventures in Compliance podcast as he delves deeper into these leadership lessons from the legendary detective, Sherlock Holmes.

 Key Highlights:

  • The Story
  • Leadership Lessons
  • The first appearance of Mycroft Holmes

Resources:

The New Annotated Sherlock Holmes

Connect with Tom Fox

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Categories
FCPA Compliance Report

FCPA Compliance Report – Ryan Lougheed on Teamwork and Communication: Lessons from Esports and GRC

Welcome to the award-winning FCPA Compliance Report, the longest-running podcast in compliance. In this episode, Tom Fox welcomes Ryan Lougheed, Director, of Product Management at Onspring.

Ryan Lougheed has over twelve years of experience in the Governance, Risk, and Compliance (GRC) field, currently serving as the director of a platform at Onspring, a SaaS GRC platform and business process automation platform. Drawing from his background in esports, Lougheed believes that teamwork and communication are crucial in both the GRC space and the world of esports. He emphasizes the importance of effective and efficient communication, especially in high-stress situations, and believes that these skills can be carried over to a compliance-focused career.

In the context of esports, Lougheed explains that communication is vital in a team of five players and that professional esports organizations provide resources such as physical trainers and sports psychologists to support their players’ communication skills. He also notes that the esports industry is evolving, with larger companies creating brands around individual streamers and organizations acting as agents to help grow the streaming culture. Join Tom Fox and Ryan Lougheed on this episode of the FCPA Compliance Report podcast to delve deeper into the importance of teamwork and communication in GRC.

 Key Highlights

  • GRC Collaboration and Communication
  • Streamlining compliance with Onspring’s centralized platform
  • Streamlining Communication in High-Stress Compliance Situations
  • Leveraging Esports Skills for GRC Success

Resources

Ryan Lougheed on LinkedIn

Onspring

Tom Fox

Instagram

Facebook

YouTube

Twitter

Categories
Daily Compliance News

Daily Compliance News: December 11, 2023 – The Coach Class Travel Edition

Welcome to the Daily Compliance News. Each day, Tom Fox, the Voice of Compliance, brings you compliance-related stories to start your day. Sit back, enjoy a cup of morning coffee, and listen 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.

  • The 10th Conference on State Parties on Corruption. (Transparency International)
  • There is no business-class travel for PwC, as it’s not green enough. (FT)
  • Nasdaq settles Iran sanctions violations. (WSJ)
  • Why the GOP doesn’t want diverse law firms. (WaPo)
Categories
Blog

Nicholas Latham on Implementing Frameworks for Effective Risk Management in Organizations

I recently had the opportunity to visit with folks from Diligent. We look down the road at key issues in 2024 in a podcast series sponsored by Diligent entitled Compliance Professionals Adapting to Change: Industries, Regulations, and Beyond. I could chat with Nicholas Latham, Renee Murphy, Jessica Czeczuga, Yee Chow, and Alexander Cotoia. Over this series, we discussed compliance communications in regulated industries, managing conflicts of interest at the Board level, the Board’s role in compliance training and communications, navigating the current ESG landscape, and professional growth and mentorship in compliance. In this first blog post, we discuss accounting and risk management frameworks.

One of the key topics discussed in the episode was the importance of risk assessment frameworks in identifying and mitigating organizational risks. Latham highlighted two widely used frameworks, the COSO Framework for Internal Controls and ISO 31,000, which both provide a comprehensive approach to risk management. These frameworks help organizations establish effective communication processes and gain a holistic view of risk across different departments.

The COSO Framework for Internal Controls focuses on enterprise risk management. It emphasizes the need to assess an organization’s control environment, determine risk appetite, and identify crucial risks for the business’s success. Information and communication processes, including training and monitoring activities, are built around these assessments to ensure effective risk management.

We next discussed the relevance of the “Single Pane of Glass” concept, often associated with the COSO Framework for Internal Controls. This concept provides a unified view of an organization’s operations and risk management, flattening hierarchical structures and promoting transparency. By implementing this approach, executives and leaders can comprehensively understand what is happening across the organization rather than just within individual departments.

We noted the challenges associated with compliance communication issues, particularly in e-communications. Latham emphasized the importance of setting the tone at the top, with executive leadership emphasizing the criticality of compliance and its impact on the organization and its customers. Training plays a crucial role in ensuring compliance, but Latham noted that the amount and frequency of training in today’s environment may not be sufficient. He stressed the need for organizations to step up their training efforts and be prepared for increasingly stringent regulatory scrutiny.

Monitoring e-communications poses a significant challenge due to the sheer volume of interactions. Latham suggested leveraging artificial intelligence (AI) to analyze a larger communications sample and identify potential risks. This approach could help organizations identify improper processes, training gaps, or script issues that may contribute to compliance breaches.

As a compliance professional, your understanding of risk assessment frameworks, such as the COSO Framework for Internal Controls and ISO 31,000, highlights the importance of comprehensive risk management practices. The “Single Pane of Glass” concept and the challenges associated with compliance communication issues provide valuable guidance for organizations navigating the complex risk and compliance landscape. As regulatory scrutiny continues to increase, compliance professional’s expertise will continue to serve as a valuable resource for organizations seeking to enhance their risk management practices and ensure compliance in an ever-evolving technological landscape.

Ready for Purpose-Driven Compliance? Diligent equips leaders with the tools to build, monitor, and maintain an open, transparent ethics and compliance culture. For more information and to book a demo, visit Diligent.com

Join us tomorrow when we consider conflicts of interest at the Board of Directors.

Categories
Sunday Book Review

Sunday Book Review: December 10, 2023 The Top History Books Edition

In the Sunday Book Review, I consider books that would interest the compliance professional, the business executive, or anyone who might be curious. It could be books about business, compliance, history, leadership, current events, or anything else that might interest me. Over the month of December, we will review some of the best books reported by the Financial Times, in various categories. In today’s edition of the Sunday Book Review, we consider some of the top business books from 2023 as listed in the Financial Times.

  • The Case for Good Jobs by Zeynep Ton
  • How Big Things Get Done by Ben Flyvbjerg and Dan Gardner
  • Right Kind of Wrong by Amy Edmondson
  • Blood in the Machine by Brian Merchant

Resource

FT’s Best Books of 2023-Business

Categories
10 For 10

10 For 10: Top Compliance Stories For The Week Ending December 9, 2023

Welcome to 10 For 10, the podcast that brings you the week’s Top 10 compliance stories in one podcast each week. Tom Fox, the Voice of Compliance brings to you, the compliance professional, the compliance stories you need to be aware of to end your busy week. Sit back, and in 10 minutes hear about the stories every compliance professional should be aware of from the prior week. Every Saturday, 10 For 10 highlights the most important news, insights, and analysis for the compliance professional, all curated by the Voice of Compliance, Tom Fox. Get your weekly filling of compliance stories with 10 for 10, a podcast produced by the Compliance Podcast Network.

You can check out the Daily Compliance News for four curated compliance and ethics-related stories each day, here.

Connect with Tom 

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LinkedIn

Categories
Kerrville Weekly News Roundup

Kerrville Weekly News Roundup: December 9, 2023

Welcome to the Kerrville Weekly News Roundup. Each week, veteran podcaster Tom Fox and his colleagues Andrew Gay and Gilbert Paiz get together to go over a couple of their favorite stories from the past week from Kerrville and the greater Hill Country. Sit back, enjoy a cup of morning coffee, and listen in to get a wrap-up of the Kerrville Weekly News. We each consider two of our favorite stories and talk about the upcoming weekend’s events, which we will enjoy or participate in.

In this episode, Tom and Andrew discusses the following stories that caught their attention over the past week:

  • Water Dispute with the City of Kerrville
  • New anti-human smuggling initiative by the Kerr County Sheriff’s Office
  • The church holiday walk
  • Christmas trees distributed by Kristy Vandenberg

Resources

Tom Fox on LinkedIn

Gilbert Paiz on LinkedIn

Andrew Gay on LinkedIn

Texas Hill Country Podcast Network

The Lead

Kerrville Daily Times

Categories
31 Days to More Effective Compliance Programs

One Month to a More Effective Compliance Program Through Data Analytics: Day 6 – Data Analytics and Business Decisions

In today’s rapidly evolving business landscape, compliance, enterprise performance management (EPM) systems, and data analytics play crucial roles in driving informed decision-making. Compliance program visibility and proper documentation are essential for managing data and ensuring regulatory compliance across companies of all sizes. EPM systems, also known as Enterprise Resource Planning (ERP) systems, are vital tools for financial planning and analysis. These systems go beyond basic accounting functions and offer features such as budgeting, forecasting, and strategic long-range planning. By using EPM systems, organizations can operate at a higher level, enabling medium to long-range planning and supporting informed decision-making.

The importance of compliance, EPM systems, and data analytics in business decision-making cannot be overstated. Compliance program visibility and documentation are crucial for managing data and ensuring regulatory compliance. EPM systems provide the tools for financial planning and analysis, supporting strategic long-range planning and informed decision-making. Data analytics allows businesses to uncover patterns and gain insights, but overcoming data silos is necessary to maximize its potential. By adopting cloud-based solutions and integrating systems, organizations can make the most of their data and drive informed decision-making. Balancing different factors and considering the impact on decision-making processes is key to successfully leveraging compliance, EPM systems, and data analytics in business.

 Three key takeaways:

1. Compliance program visibility and proper documentation are essential for managing data and ensuring regulatory compliance across companies of all sizes.

2. Having data is important, it is equally crucial to focus on how that data is being used.

3. Overcoming data silos is key to maximizing the potential of data analytics.

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