Tag: compliance

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Tone at the Top Week: Part 3 – Email as a Strategic Compliance Tool

We continue exploring how CEOs and senior executives are uniquely positioned to emphasize the importance of ethical behavior and adherence to compliance regulations. Today, we consider the humble email and how it can be one of the most effective ways to communicate this Tone at the Top on doing business ethically and in compliance. These written communications can formalize the company’s stance on compliance, ensuring that the message is clear, consistent, and accessible to employees at all levels.

Emails allow senior leadership to broadcast the company’s compliance goals and demonstrate that these goals are integral to the business’s strategic vision. Done correctly, they reinforce the notion that compliance is everyone’s responsibility and provide a continuous reminder of the company’s commitment to ethical behavior. Today, we will lay out five specific ways a CEO or senior executive can use emails to establish and maintain an appropriate tone at the top for a best practices compliance program.

  • Make Compliance a Regular Topic in CEO Communications

To ensure compliance is integrated into the company’s operations and not seen as an afterthought, it must become a consistent topic in CEO communications. When compliance is presented alongside other business goals, such as financial performance or growth strategies, it signals to employees that ethical conduct is integral to the company’s success. This matters because if doing business ethically and in compliance is only mentioned when something goes wrong, it reinforces the idea that compliance is reactive and only addressed in crises. You create a proactive compliance culture by incorporating compliance updates into quarterly or monthly CEO communications. This shows employees that compliance is as important as any other business objective.

Implementation

  1. Include a dedicated section on compliance in your regular CEO emails. Highlight the importance of staying compliant with industry regulations and company policies.
  2. Emphasize how compliance helps the company achieve its broad business objectives. For instance, explain how maintaining strong compliance practices can enhance the company’s reputation, build stakeholder trust, and create long-term value.
  3. Regularly update employees on the status of the compliance program—such as new initiatives, policy updates, or risk areas that the company is monitoring—demonstrating that compliance is part of the company’s ongoing strategic efforts.
  • Celebrate Ethical Behavior Through Recognition

One of the most impactful ways to promote a compliance culture is publicly recognizing and celebrating ethical behavior. Emails offer a convenient and highly visible platform to acknowledge individuals or teams who have supported the company’s compliance efforts. Recognizing these contributions boosts morale and sets a standard for others to follow.

This is significant because celebrating ethical behavior publicly sends a clear message to employees that compliance is valued and rewarded. It also reinforces that ethical decision-making is an achievement, not just a minimum expectation. This builds a positive association with compliance and motivates employees to take ownership of their role in the compliance program.

How to Implement

  1. Use your email communications to highlight specific examples of individuals or teams demonstrating exceptional commitment to compliance. Share what they did, why it mattered, and how their actions helped the company avoid risks or comply with regulations.
  2. If applicable, tie these recognitions to broader company values, showing how ethical behavior aligns with the company’s mission and goals.
  3. Consider establishing a regular “compliance champion” recognition in your emails to create an ongoing tradition of celebrating compliance successes.
  • Respond Promptly to Industry or Regulatory Changes

In today’s rapidly evolving regulatory landscape, staying ahead of industry changes is critical for maintaining compliance. When new regulations or legal requirements are introduced, the CEO needs to address these developments with the company quickly. This demonstrates that leadership is aware and engaged and helps employees understand how these changes impact their day-to-day responsibilities.

This is critical because the quicker a company adapts to regulatory changes, the less likely it is to fall out of compliance, reducing the risk of fines, penalties, or reputational damage. By issuing timely communications explaining how the company will adapt, the CEO sets a clear expectation that staying compliant is a priority.

How to Implement

  1. When new industry regulations or legal changes arise, send an email explaining what the changes mean for the company and what steps are being taken to comply.
  2. Provide specific guidance for departments or teams directly affected by the changes. For example, if new data privacy laws are introduced, explain what the legal team, IT department, or data-handling staff must focus on to ensure compliance.
  3. Emphasize that compliance with new regulations is not optional—it is critical to the company’s continued success and ethical standing in the industry.
  • Encourage the Reporting of Compliance Concerns

A key component of any successful compliance program is the ability for employees to raise concerns without fear of retaliation. Regularly reminding employees of the company’s whistleblower program and other reporting mechanisms demonstrates leadership’s commitment to fostering a safe and open environment.

This is imperative because employees must feel that their voices will be heard and their concerns will be addressed. The CEO reinforces that transparency and accountability are core company values by regularly encouraging employees to report ethical or compliance-related issues.

How to Implement

  1. Periodically remind employees of the available reporting channels, such as the company’s whistleblower hotline, ethics portal, or designated compliance officers.
  2. In your emails, emphasize that all reports will be taken seriously and that there is zero tolerance for retaliation against those who raise concerns in good faith.
  3. Share anonymized examples (if appropriate) of how the company has successfully addressed issues raised by employees, demonstrating that reporting leads to positive action.
  • Endorse Major Compliance Initiatives

A compliance program’s success hinges on visible support from senior leadership. By personally endorsing new compliance initiatives—policy updates, training sessions, or new risk management tools—the CEO lends credibility to the program and encourages employee engagement.

This is crucial because, as the CEO publicly supports a compliance initiative, it signals to the entire organization that the program is not just a legal requirement but a top priority for the company. Employees are more likely to participate in training sessions and adhere to policies if they know senior leadership is fully behind these efforts.

How to Implement

  1. Send a personal email when launching major compliance-related initiatives, such as a new code of conduct, mandatory training sessions, or policy updates.
  2. Explain why the initiative is important in your message and how it will benefit the company and its employees. Be clear that participation is expected and necessary for maintaining the company’s ethical standards.
  3. Follow up on the initiative’s progress in subsequent communications, reinforcing that the company is committed to maintaining compliance over the long term.

Emails offer a direct, personal, and effective way for CEOs and senior executives to establish and maintain an appropriate tone at the top for a best practices compliance program by making compliance a regular topic, celebrating ethical behavior, responding to regulatory changes, encouraging the reporting of concerns, and endorsing major compliance initiatives.

When done consistently, these email communications help build a strong compliance culture. Employees understand that ethical behavior is not just encouraged—it’s a fundamental part of how the company operates. As a result, compliance becomes integrated into daily business practices, reducing risk and fostering long-term success.

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Innovation in Compliance

Innovation in Compliance: Greg Shultz on Key Traits for Compliance Professionals: Connecting and Listening

Innovation comes in many areas and compliance professionals need to not only be ready for it but embrace it. Join Tom Fox, the Voice of Compliance, as he visits with top innovative minds, thinkers, and creators in the award-winning Innovation in Compliance podcast.

In this episode, Tom welcomes Greg Shultz, the founder of Conformitise, to take a deep dive into his journey in operationalizing compliance in some of the world’s largest companies. Shultz also advises into the essential skills required for a thriving career in compliance.

Emphasizing the importance of active listening, Shultz shares the significance of listening again before advising to foster a collaborative partnership with business teams. Forming personal connections is highlighted, particularly through face-to-face interactions with investment teams, which helps in understanding different personas and building strong relationships over time. Our discussion also touches on the evolving role of data analytics in the compliance field, stressing its criticality in managing global data and mitigating risk in today’s super funds landscape. This episode is a must-listen for anyone aiming to step into or advance within the compliance profession.

Key Highlights:

  • Introduction to Compliance Professional Skills
  • The Importance of Listening and Advising
  • Building Strong Relationships
  • The Role of Data Analytics in Compliance

Resources:

Greg Shultz on LinkedIn

Tom Fox

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Compliance Tip of the Day

Compliance Tip of the Day: How a CEO Can Set The ‘Tone at The Top’- Part 2

Welcome to “Compliance Tip of the Day,” the podcast where we bring you daily insights and practical advice on navigating the ever-evolving landscape of compliance and regulatory requirements.

Whether you’re a seasoned compliance professional or just starting your journey, our aim is to provide you with bite-sized, actionable tips to help you stay on top of your compliance game.

Join us as we explore the latest industry trends, share best practices, and demystify complex compliance issues to keep your organization on the right side of the law.

Tune in daily for your dose of compliance wisdom, and let’s make compliance a little less daunting, one tip at a time.

Today, we continue our look at how a CEO can lead with tone at the top for any compliance program.

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Blog

Tone at The Top Week: Part 2 – Ten Things A CEO Can Do

In corporate compliance, a guiding principle is the foundation for success or failure: Tone at the Top. This phrase encapsulates the role of senior executives—particularly the CEO—in setting the ethical standards, cultural expectations, and overall mindset toward compliance within an organization. Without a strong, consistent tone from leadership, even the most well-designed compliance programs will falter. However, the entire organization benefits when senior executives actively lead with integrity and prioritize compliance. In this post, we’ll explore the critical role of leadership in fostering a culture of compliance and list practical ways CEOs and other senior executives can demonstrate the appropriate tone at the top.

But Tone at the Top is more than just words. It is about action. What are 10 things a CEO or Senior Executive can do to demonstrate the right Tone at the Top?

1. Lead by Example

Senior executives must model ethical behavior in every aspect of their role. Employees watch how leaders act, especially in challenging situations. When executives consistently demonstrate integrity in decision-making, it reinforces the importance of organizational compliance. To quote the great Jimmy Johnson, “If you are going to talk the talk, you have to walk the walk.”

2. Communicate Clearly and Consistently

Regular, transparent communication about compliance and ethics is key. CEOs and senior executives should emphasize the importance of compliance in emails, internal memos, town halls, and meetings. Compliance messages should be woven into the fabric of all business communications, not just when issues arise.

3. Embed Compliance in Business Strategy

Compliance should not be an afterthought. Senior executives can demonstrate their commitment by ensuring compliance is part of the strategic business planning process. This means considering regulatory risks, ethical implications, and compliance requirements when setting business goals. Compliance must sit at the table and participate in the long-term planning and implementation of your organization’s business strategy. This includes mergers and acquisitions, assessing and planning for emerging risks, and disaster planning.

4. Empower the Chief Compliance Officer

The CEO should ensure that the CCO has direct access to senior leadership and the board of directors. The FCPA Resource Guide, 2nd edition, states, “DOJ and SEC also consider whether a company has assigned responsibility for the oversight and implementation of a company’s compliance program to one or more specific senior executives within an organization. Those individuals must have appropriate authority within the organization, adequate autonomy from management, and sufficient resources to ensure that the company’s compliance program is implemented effectively.” This shows employees that the compliance function has the full backing of the leadership team. The CCO must also have the authority to manage the compliance program effectively.

5. Allocate Adequate Resources to Compliance

An underfunded compliance program signals to employees that compliance is not a priority. CEOs should ensure a sufficient budget, personnel, and technological resources are allocated to the compliance function. This includes funding for training, audits, monitoring, and reporting tools. This  requirement also follows Hallmark 4 of the Ten Hallmarks of an Effective Compliance Program that CCOs must have adequate resources, stating “the amount of resources devoted to compliance will depend on the company’s size, complexity, industry, geographical reach, and risks associated with the business.”  However, ensure it is not simply budgetary resources but also qualified compliance personnel for your corporate compliance function.

6. Incorporate Compliance into Performance Metrics

Holding employees accountable for compliance should be integrated into the company’s performance metrics and reward systems. Senior executives should ensure compliance-related goals are part of annual performance evaluations and that ethical behavior is rewarded, not just financial performance. Doing business ethically and in compliance should also be incorporated into promotion evaluations. You cannot promote employees who ‘hit their numbers’ but those who work ethically, actively promote the values of the organization, and work to improve the organization’s overall compliance.

7. Deliver Compliance Training Personally

When senior executives participate in compliance training, it sends a powerful message. CEOs and other leaders can demonstrate their commitment by personally delivering training sessions or appearing in training videos. This can be the most powerful statement in many ways, as it reinforces the importance of compliance from the top down.

8. Take Swift and Decisive Action on Compliance Issues.

When compliance violations occur, how leadership responds speaks volumes. CEOs should act swiftly and decisively to investigate and address any issues. Employees need to see that no one is above the law and that compliance breaches will not be tolerated—regardless of an individual’s position in the company. This means justice across your organization and fairness in how consequences are meted out. If you fire employees in Brazil for cheating on their expense accounts, you must fire your top producer in the US for cheating on their expenses.

9. Encourage Open Dialogue and Reporting

Senior executives should actively encourage employees to report compliance concerns without fear of retaliation. The CEO can demonstrate this by promoting the company’s whistleblower program and fostering an environment of openness and transparency. Executives should also be approachable, signaling that compliance concerns will be taken seriously.

10. Align Compensation with Compliance

Executive compensation should reflect the company’s commitment to compliance and ethical behavior. CEOs can lead by example by linking their compensation to compliance performance metrics. This aligns with business success and the company’s commitment to doing things correctly. The same is true for consequences in the form of contractually agreeing to clawbacks and holdbacks of compensation, equity, or options for violations of a corporate compliance program.

Tone at the top is not a one-time initiative. It is an ongoing process that requires continuous attention and reinforcement from senior leaders. When a CEO and other executives lead by example, it sends a clear message that compliance is more than just a regulatory necessity—it’s a fundamental part of how the company does business.

For in-house compliance professionals, fostering this tone from the top is critical to building and sustaining an effective compliance program. It empowers employees to take compliance seriously, encourages ethical decision-making at all levels, and creates an environment where risks are managed proactively.

Ultimately, senior executives’ commitment to ethical leadership and compliance isn’t just good governance—it’s innovative business. By embedding compliance into the company culture through strong leadership, organizations can build trust with stakeholders, protect their reputations, and ensure long-term success.

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Compliance Tip of the Day

Compliance Tip of the Day: How a CEO Can Set The ‘Tone at The Top’- Part 1

Welcome to “Compliance Tip of the Day,” the podcast where we bring you daily insights and practical advice on navigating the ever-evolving landscape of compliance and regulatory requirements.

Whether you’re a seasoned compliance professional or just starting your journey, our aim is to provide you with bite-sized, actionable tips to help you stay on top of your compliance game.

Join us as we explore the latest industry trends, share best practices, and demystify complex compliance issues to keep your organization on the right side of the law.

Tune in daily for your dose of compliance wisdom, and let’s make compliance a little less daunting, one tip at a time.

Over the next several episodes, we will look at how a CEO can lead with tone at the top for any compliance program.

 

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Blog

Tone at the Top Week: Part 1 – The Mandate

The 2022 Monaco Memo emphasized that the key to every company is culture. The bottom line is that corporate culture matters, and a corporate culture that fails to hold individuals accountable and invest in compliance—or worse, thumbs its nose at compliance—leads to bad results.

From the enforcement perspective, the DOJ will assess companies’ ethical cultures. From the compliance perspective, the ethical tone of a company and accountability all start at the top and, most specifically, senior management. The 2020 FCPA Resource Guide, 2nd edition, stated, “Beyond compliance structures, policies, and procedures, it is important for a company to create and foster a culture of ethics and compliance with the law at all levels. The effectiveness of a compliance program requires a high-level commitment by company leadership to implement a culture of compliance from the middle and the top.” The 2023 Evaluation of Corporate Compliance Programs (ECCP) sets out the following inquiries to assist companies in understanding this requirement.

Conduct at the Top—How have senior leaders encouraged or discouraged compliance through their words and actions, including the type of misconduct involved in the investigation? What concrete actions have they taken to demonstrate leadership in the company’s compliance and remediation efforts? How have they modelled proper behavior for subordinates? Have managers tolerated greater compliance risks in pursuit of new business or greater revenues? Have managers encouraged employees to act unethically to achieve a business objective or impeded compliance personnel from effectively implementing their duties?

These requirements are more than simply the ubiquitous “tone-at-the-top,” as they focus on the conduct of senior management. The DOJ wants to see a company’s senior leadership doing compliance. The DOJ asks if company leadership has brought the right message of doing business ethically and in compliance to the organization through their words and concrete actions. How does senior management model its behavior based on a company’s values, and how is such conduct monitored in an organization?

This means you must document corporate decisions where a compliance solution was proposed but rejected. In other words, is there a business justification for moving forward with the action? How will the compliance risk be managed going forward if this action occurs? Similarly, compliance techniques should be documented to demonstrate that your compliance function has met the requirements of the final question.

In-house compliance professionals know an effective compliance program requires more than policies, procedures, and controls. It needs commitment from every level of the organization, starting at the top. Senior executives, especially the CEO, set the tone that trickles down through the ranks, influencing how employees perceive the importance of compliance. Why is tone at the top so essential? Consider the following:

  • Leadership Drives Culture: Employees take their cues from the behavior of senior leaders. If executives demonstrate a strong commitment to ethical practices and compliance, employees are more likely to follow suit. Conversely, that mindset will permeate the organization if leaders appear indifferent to compliance or cut corners.
  • Trust and Transparency: When senior executives consistently emphasize ethical behavior, transparency, and accountability, they build trust with employees, shareholders, and external stakeholders. This trust is critical in creating an environment where employees feel empowered to speak up about potential compliance concerns.
  • Mitigating Risk: A strong tone at the top can help an organization avoid costly regulatory fines, reputational damage, and legal penalties. It also creates an environment where potential issues are identified early and addressed promptly.
  • Sustainability of the Compliance Program: A compliance program can only thrive if integrated into the company’s everyday operations. The CEO and senior executives are key to embedding compliance into the organization’s fabric and ensuring its long-term sustainability.

The tone at the top is more than simply words. It is easy for senior executives to talk about compliance, ethics, and integrity. What matters, though, is action. Employees are quick to notice when words don’t match actions, and a disconnect between what leaders say and do can be toxic to the compliance culture. Senior executives must integrate compliance into the company’s DNA to demonstrate a commitment to compliance. It cannot be seen as a “box-ticking” exercise or a legal necessity; it must be embraced as a core value that drives business decisions. Below are 10 practical ways senior executives can lead by example and set the right tone at the top for a best practices compliance program.

Senior management must share these same values through operationalizing compliance going forward. Lynn Paine, in her seminal article, Managing for Organizational Integrity, laid out five factors that can be used as guideposts to not only set the right tone for senior management on doing business ethically and in compliance but it can also lay the groundwork for senior management to model appropriate behavior and then have it monitored by the company going forward.

  • Senior management must understand and effectively convey a company’s guiding principles to the workforce in various contexts.
  • The company’s leader must be committed and willing to act on the values. This means that management must not simply ‘overlook’ the transgressions of top producers.
  • A company’s systems and structures must support its guiding principles, and senior management cannot override these internal systems and structures without justification and Board approval.
  • A company’s values must be integrated into normal management decision-making and reflected in its critical decisions. Sometimes, a company must turn down a business if there are too many red flags, or its values and ethics will be violated by engaging in such behavior.
  • Managers must be empowered to make ethically sound decisions daily. This means senior management must fully support and back up such decisions.

In corporate compliance, a guiding principle is the foundation for success or failure: Tone at the Top. This phrase encapsulates the role of senior executives—notably the CEO—in setting the ethical standards, cultural expectations, and overall mindset toward compliance within an organization. Without a strong, consistent tone from leadership, even the most well-designed compliance programs will falter. However, the entire organization benefits when senior executives actively lead with integrity and prioritize compliance. Over the next week, we will lay out how an organization’s CEO and senior leadership can foster a culture of compliance by laying out practical ways CEOs and other senior executives can demonstrate the appropriate tone at the top.

Ed. Note: Some years ago, I asked a good friend what I could do with the blog posts to help them with their work as a CCO. They laughingly replied that they should put my blogs in outline and bullet point formats rather than in my lawyerly paragraph format so they could cut and paste my blog posts into memos that could be sent to senior management. So, for the rest of this blog post series, I will respond to this request and write blog posts using more outlines and bullet points. The heart of each blog post will find its way into a usable Memo for you and your compliance program.

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10 For 10

10 For 10: Top Compliance Stories For The Week Ending September 14, 2024

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.

  • Albanian ex-PM indicted for corruption. (Reuters)
  • The Bibi Files. (The Guardian)
  • NYPD Police chief resigns. (NYT)
  • Will South Africa leave the FATF dirty money list in 2025? (Bloomberg)
  • Google and Apple face billions in back taxes in the EU. (NYT)
  • Slovakia loses corruption battle. (Politico)
  • John Deere settles FCPA allegations.   (WSJ)
  • Ex-Glencore employees plead not guilty. (FT)
  • PCAOB requires audit firms to bring in outside experts to oversee audit quality. (FT)
  • Hong Kong now high-risk? (WSJ)

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Compliance Tip of the Day

Compliance Tip of the Day: Protecting Against Pre – taliation

Welcome to “Compliance Tip of the Day,” the podcast where we bring you daily insights and practical advice on navigating the ever-evolving landscape of compliance and regulatory requirements.

Whether you’re a seasoned compliance professional or just starting your journey, our aim is to provide you with bite-sized, actionable tips to help you stay on top of your compliance game.

Join us as we explore the latest industry trends, share best practices, and demystify complex compliance issues to keep your organization on the right side of the law.

Tune in daily for your dose of compliance wisdom, and let’s make compliance a little less daunting, one tip at a time.

In today’s episode, we provide 6 steps to help you remediate your contracts to remove illegal retaliation language and prevent such language from being inserted going forward.

For more information on the Ethico Toolkit for Middle Managers, available at no charge, click here.

Check out the full 3-book series, The Compliance Kids on Amazon.com.

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Blog

Addressing Pre-taliation

One of the most talked about subjects in corporate compliance is the issue of pre-taliation—an increasingly common enforcement target by the U.S. Securities and Exchange Commission (SEC). Matt Kelly and I did a recent podcast on the topic, and you can check out the recent episode of Compliance Into the Weeds for an audio discussion of the topic. Matt has blogged on the topic of Radical Compliance. This post will deeply dive into this issue and show why pre-taliation clauses in contracts, which inhibit whistleblowers from claiming financial rewards, are illegal and how compliance officers can effectively address this recurring problem.

What Is Pre-Taliation?

Pre-taliation refers to contract provisions that prevent or discourage employees from reporting potential misconduct to regulators. Typically, these clauses claim an employee forfeits the right to financial rewards associated with whistleblowing. While companies cannot directly prohibit employees from reporting wrongdoing, they attempt to introduce barriers that dissuade individuals from taking the financial risk of blowing the whistle. These clauses have a “chilling effect” on potential whistleblowers and are, quite simply, illegal under SEC rules.

The SEC’s recent enforcement actions against several corporations show that despite being a known violation, many businesses continue to use these clauses in their employment contracts. The fines may be relatively small, but the impact of these enforcement actions is clear: companies must remove pre-taliation language from all contracts, or they will face the consequences.

Recent SEC Enforcement Actions on Pre-Taliation

Last week, the SEC sanctioned seven companies for including pre-taliation language in their employment contracts. One major violator, Acadia Healthcare Corporation, was fined $1.4 million, while others, including TransUnion and IDEX Corporation, paid penalties ranging from $19,000 to $690,000. While these fines may seem minor compared to other enforcement actions, the real issue lies in the recurring use of these illegal clauses.

For the compliance professional, the key is that these contracts stated that employees were free to report potential violations to regulators. Still, they included an additional clause that employees had to forfeit any right to claim whistleblower rewards. This approach violates SEC whistleblower provisions designed to incentivize whistleblowers with financial rewards for bringing misconduct to light.

Why Do Companies Use Pre-Taliation Clauses?

Companies continue to use such clauses to prevent them from going to the SEC or other regulators. Including pre-taliation language is an intentional tactic designed to scare employees into silence. These clauses are legally dubious, but they can effectively discourage employees from whistleblowing if they are unaware of their legal rights. The logic is simple: why risk your career and financial livelihood to report misconduct without potential financial reward?

In some cases, these companies may also be testing the boundaries of the law if regulators do not prioritize enforcement. However, as the SEC’s actions have shown, this is a serious miscalculation, as it is clear that using such clauses is intentionally trying to prevent employees from exercising their federal rights.

Addressing Pre-Taliation: A Compliance Officer’s Roadmap

How can compliance officers avoid falling into the same trap as Acadia Healthcare and others? Here’s a practical roadmap for compliance professionals tasked with eliminating pre-taliation clauses from their companies’ contracts:

  • Conduct a Contract Review

The first step is to conduct a comprehensive review of all employment contracts, both current and historical. This is easier said than done, particularly for large organizations with decentralized operations. As Matt Kelly pointed out, the challenge lies in the sheer volume of contracts and the number of people involved in drafting and approving them. Contracts may come from various teams—HR, legal, commercial, and even procurement—so identifying all instances of pre-taliation language requires a coordinated effort across multiple departments.

  • Establish Clear Contract Policies

The next step is establishing clear and enforceable policies about what can and cannot be included in contracts. This policy should be enterprise-wide and include specific language that prohibits the inclusion of pre-taliation clauses. Not only does this create a standard for new contracts, but it also sets a clear precedent for remediating older contracts that may still contain illegal language.

This policy should also include specific guidelines for all contracts, not just employment agreements, as pre-taliation clauses can sometimes slip into customer contracts, vendor agreements, and third-party relationships. For instance, earlier this year,  J.P. Morgan was penalized for including pre-taliation language in its customer contracts, which stipulated that customers had to notify the company before reporting misconduct to regulators.

  • Collaborate with Legal and HR Teams

A cross-functional approach is critical to solving this issue. Compliance officers must work closely with the legal and HR teams to implement contract policies correctly. HR plays a key role in drafting employment contracts, while the legal department ensures the language complies with regulatory standards. Without close collaboration, tracking down all the contracts that need to be updated or ensuring that future contracts are compliant will be nearly impossible. The idea that there is a magical person in the company who can fix this problem is a myth. Addressing pre-taliation requires a team effort involving multiple functions and a strong commitment to enterprise-wide remediation.

  • Provide Employee Education

Another important step is to educate employees about their rights under whistleblower laws. Pre-taliation language works best when employees do not understand that these clauses are illegal. By informing employees of their rights, compliance officers can undermine the chilling effect these clauses are designed to create. Employees should know they are legally entitled to report misconduct to regulators and cannot be penalized.

  • Establish a Remediation Plan for Older Contracts

Once all pre-taliation clauses have been identified, the next step is to establish a remediation plan. This may involve contacting former employees who signed contracts with illegal language and current employees who must be informed that their contracts have been updated. While this can be a complex process, it is essential for maintaining the integrity of the company’s compliance program.

  • Monitor for Future Violations

Finally, compliance officers should establish ongoing monitoring to ensure that pre-taliation language doesn’t slip into future contracts. This can be done by including contract reviews as part of regular compliance audits or by implementing automated tools to flag problematic language. By proactively monitoring contract language, compliance officers can prevent future violations and ensure that their company complies with SEC regulations.

A Simple Fix but a Complex Process

Addressing pre-taliation clauses may seem straightforward, but as Matt Kelly pointed out, it can be highly complex. With multiple stakeholders involved and various contracts to review, it truly takes a coordinated, enterprise-wide effort to eliminate these illegal provisions.

For compliance officers, the message is clear: do not wait for the SEC to come knocking. Review contracts, establish clear policies, and educate employees about their rights. By taking these steps, compliance officers can ensure that their companies are compliant and foster a culture where whistleblowers feel empowered to come forward. With the new DOJ Whistleblower Financial Incentive Program, it is only a matter of time before the DOJ comes knocking.

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Compliance Tip of the Day

Compliance Tip of the Day: Podcasting for Compliance Training

Welcome to “Compliance Tip of the Day,” the podcast where we bring you daily insights and practical advice on navigating the ever-evolving landscape of compliance and regulatory requirements.

Whether you’re a seasoned compliance professional or just starting your journey, our aim is to provide you with bite-sized, actionable tips to help you stay on top of your compliance game.

Join us as we explore the latest industry trends, share best practices, and demystify complex compliance issues to keep your organization on the right side of the law.

Tune in daily for your dose of compliance wisdom, and let’s make compliance a little less daunting, one tip at a time.

In this episode, we explore how you can use the audio podcast format to facilitate your compliance training regime.

For more information on the Ethico Toolkit for Middle Managers, available at no charge, click here.

Check out the full 3-book series, The Compliance Kids on Amazon.com.