Every Board of Directors needs a true compliance expert sitting at the table. Almost every Board has a former CFO, former head of Internal Audit, or persons with a similar background, and often these are also the Audit Committee members of the Board. Such a background brings a level of sophistication, training, and SME that can help all companies with their financial reporting and other finance-based issues. So why is there, not such compliance SME at the Board level?
This requirement was set out in 2017 in the FCPA Corporate Enforcement Policy, where one of the criteria to be evaluated in a compliance program is “the availability of compliance expertise to the board.” Finally, the 2020 Update to the Evaluation of Corporate Compliance Programs, under the section entitled Oversight, posed the following questions What compliance expertise has been available on the Board of Directors?
The DOJ and Securities and Exchange Commission introduced this concept to the FCPA Resource Guide, 2nd edition. It means that when your company is evaluated by the DOJ, under the factors set out in the 2020 Update and the FCPA Corporate Enforcement Policy, to retrospectively determine if your company had a best practices compliance program in place at the time of any violation, you need to have not only the structure of the Board-level Compliance Committee but also the specific SME on the Board and on that committee.
Three key takeaways:
- Boards must have compliance expertise.
- Government regulators and shareholder groups have both called for greater compliance expertise on the Board.
- Compliance expertise at the Board works up and down as such expertise can be a resource to both the CCO and Compliance Department.
For more information check out The Compliance Handbook, 3rd edition, available from LexisNexis here.
