Tag: M&A

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Sunday Book Review

Sunday Book Review: September 8, 2024 Books on M&A Edition

In the Sunday Book Review, Tom Fox considers 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.

In today’s edition of the Sunday Book Review, we look at four books on Mergers and Acquisitions.

  1. “Agile M&A: Proven Techniques to Close Deals Faster and Maximize Value” by Kison Patel
  2. “Valuation: Measuring and Managing the Value of Companies” by Tim Koller, Marc Goedhart, and David Wessels 
  3. “Masterminding the Deal: Breakthroughs in M&A Strategy and Analysis” by Peter Clark and Roger Mills
  4. “Creating Value from Mergers and Acquisitions: The Challenges” by Sudi Sudarsanam

Resources:

The Best Mergers and Acquisition Books that You’ll Actually Want to Read by Kison Patel in DealRoom.com

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

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Daily Compliance News

Daily Compliance News: August 27, 2024 – The Just Say No 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.

In today’s edition of Daily Compliance News:

  • Saying No: Art or Science? (FT)
  • Nippon Steel’s purchase of US Steel is in peril. (NYT)
  • Why is Illinois so corrupt? (Chicago Tribune)
  • Don’t marry immigrants (at least in Texas). (Reuters)

For more information on the Ethico ROI Calculator and a free White Paper on the ROI of Compliance, click here.

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Blog

Compliance Lessons on Mergers and Acquisitions from Star Trek: The Ultimate Computer

Last month, I wrote a blog post on the tone at the top, exemplified in Star Trek’s Original Series episode, Devil in the Dark. Based on the response, some passionate Star Trek fans are out there. I decided to write a series of blog posts exploring Star Trek: The Original Series episodes as guides to the Hallmarks of an Effective Compliance program set out in the FCPA Resources Guide, 2nd edition. Today, I will continue my two-week series by looking at the following Hallmarks of an Effective Compliance Program laid out by the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) in the FCPA Resources Guide, 2nd edition. Today, we look at lessons learned about mergers and acquisitions. Mergers and acquisitions (M&A) are complex and often high-stakes endeavors that require meticulous planning, due diligence, and a robust compliance framework. The importance of these factors is vividly illustrated in the episode The Ultimate Computer. This episode, while set in a futuristic and fictional context, offers valuable lessons for compliance professionals navigating the intricate processes of M&A. This blog post will explore the parallels between the episode’s narrative and the real-world compliance challenges in M&A.

In “The Ultimate Computer,” the USS Enterprise is selected to test the M-5 Multitronic Unit, an advanced computer system designed to autonomously control the ship’s functions. Dr. Richard Daystrom’s system aims to revolutionize space exploration by removing the need for human crews. However, as the test progresses, the M-5 begins to act unpredictably, viewing real-life training exercises as actual combat and attacking other Federation ships. The episode culminates in a dangerous scenario where Captain Kirk and his crew must wrest control back from the M-5, highlighting the perils of over-reliance on untested technology and the critical need for human judgment.

Lesson 1. The Importance of Thorough Pre-Acquisition Due Diligence

One of the most glaring issues in “The Ultimate Computer” is the failure to conduct thorough pre-acquisition due diligence on the M-5 before deploying it in a high-stakes scenario. Dr. Daystrom’s confidence in his creation led to an oversight in properly assessing the risks associated with the M-5, resulting in catastrophic outcomes.

In the context of M&A, due diligence is paramount. Compliance professionals must ensure that the acquiring company thoroughly investigates the target company’s compliance landscape, including its legal obligations, regulatory history, and potential liabilities. This process involves more than just a surface-level review; it requires a deep dive into the target company’s operations, culture, and historical compliance with relevant regulations. As a compliance professional, you should develop a comprehensive due diligence checklist that includes specific compliance-related areas such as anti-bribery, anti-money laundering, data protection, and industry-specific regulations. Engaging external experts to assist in areas where the target operates in complex or unfamiliar regulatory environments can also be beneficial.

Lesson 2. Risk Management and Contingency Planning

M-5’s unexpected behavior underscores the importance of risk management and contingency planning. The Enterprise crew was unprepared for the system’s malfunction, leading to a scenario where they had to improvise under extreme pressure. In M&A transactions, the risks associated with integrating a new entity are significant. Compliance professionals must proactively identify potential risks, such as cultural clashes, regulatory breaches, or undisclosed liabilities, and develop strategies to mitigate these risks. This includes creating contingency plans to address any issues during the integration process.

Your compliance function should implement a robust risk management framework as part of the M&A strategy for post-acquisition. This framework should include regular risk assessments, scenario planning, and establishing a crisis management team to address unexpected challenges. Having a clear plan ensures that your organization can respond quickly and effectively to any issues that emerge during or after the transaction.

Lesson 3. The Role of Human Oversight

The Ultimate Computer is a cautionary tale about the dangers of overreliance on technology without adequate human oversight. While the M-5 was designed to improve efficiency, it ultimately became a liability because no mechanism was in place to monitor and override its actions when it began to malfunction. This lesson could not be more timely in the age of ChatGPT and AI in compliance.

While technology and automation can greatly assist in managing the transaction’s complexities, human oversight remains indispensable. Compliance professionals must ensure adequate controls and monitoring systems to oversee integration and detect issues early. Your M&A policy should establish clear oversight mechanisms, including regular audits, compliance monitoring, and continuous engagement with key stakeholders. This oversight should extend to all aspects of the integration process, ensuring that both the acquiring and target companies adhere to the agreed-upon compliance standards and practices.

Lesson 4. Adapting to Unforeseen Challenges

The crew’s ability to adapt to the M-5’s unexpected behavior was crucial to averting disaster. Captain Kirk and his team demonstrated flexibility and quick thinking, ultimately allowing them to regain control of the Enterprise. M&A transactions often involve unforeseen challenges that require adaptability and quick decision-making. Compliance professionals must be prepared to adjust their strategies in response to new information or changing circumstances. This could involve revising integration plans, addressing unexpected regulatory issues, or recalibrating risk management approaches.

Compliance professionals need to discuss adapting to unforeseen challenges more. You must work to build flexibility into your M&A compliance strategy by creating a dynamic integration plan that can be adjusted as needed. Encourage open communication across all levels of the organization to ensure that any issues are identified and addressed promptly. Maintaining an agile mindset also allows your team to respond effectively to challenges, minimizing disruption and ensuring a smoother integration process.

Lesson 5. The Ethical Implications of Integration

Dr. Daystrom’s fixation on the success of the M-5 led him to overlook the ethical implications of its actions, such as the loss of life. This highlights the importance of considering the ethical dimensions of decisions, particularly in high-stakes situations. Ethical considerations are central to the success of any M&A transaction. Compliance professionals must ensure that the integration process upholds the highest ethical standards, particularly regarding employee treatment, customer relations, and regulatory compliance. This involves assessing the ethical culture of the target company and ensuring that it aligns with your organization’s values.

In addition to compliance considerations, you should integrate ethical considerations into every stage of the M&A process. This includes conducting an ethical audit of the target company during due diligence, communicating ethical expectations clearly to all employees, and establishing a code of conduct that reflects the combined entity’s commitment to ethical behavior. Ensuring ethics are at the forefront of the integration process helps build trust and fosters a positive organizational culture.

The Ultimate Computer offers a powerful narrative on the importance of diligence, risk management, human oversight, adaptability, and ethical considerations in high-stakes scenarios. These lessons directly apply to the world of mergers and acquisitions, where the stakes are equally high, and the potential for unforeseen challenges is significant.

For compliance professionals, the key takeaway is the need for a comprehensive and proactive approach to managing M&A transactions. By prioritizing thorough pre-acquisition due diligence, implementing robust risk management strategies, maintaining human oversight, staying adaptable, and upholding ethical standards, compliance teams can navigate the complexities of M&A with confidence and success.

In the fast-paced and ever-changing landscape of mergers and acquisitions, the lessons from The Ultimate Computer remind us that while technology and innovation are valuable tools, they must be complemented by sound judgment, ethical considerations, and a commitment to continuous improvement. Integrating these principles into your M&A strategy can help ensure your organization survives and thrives after a merger or acquisition.

Join us tomorrow as we conclude our blog post series on the Hallmarks of an Effective Compliance Program by considering the requirement for a Root Cause analysis from the Star Trek episode The Corbomite Maneuver.

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Compliance Tip of the Day

Compliance Tip of the Day: The Clash of Cultures

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 consider the role of compliance in the clash of cultures in a company, particularly through a merger.

 

For more information on the Ethico ROI Calculator and a free White Paper on the ROI of Compliance, click here.

To check out The Compliance Handbook, 5th edition, click here.

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Blog

Navigating Culture in Mergers and Acquisitions: A Strategic Approach

Mergers and Acquisitions (M&A) are often perceived as primarily financial transactions. However, the real success of these endeavors usually hinges on a less tangible but equally crucial factor: organizational culture. In the landscape of M&A, the traditional focus on financial synergies and operational efficiencies can overshadow the importance of cultural alignment. Culture, often viewed as a soft asset, is a pivotal element that can make or break the integration process. The webinar emphasized that assessing culture is not just a feel-good exercise but a critical step in ensuring the long-term success of the merger.

Why Cultural Fit Matters

One of the key takeaways from the webinar was the concept of cultural fit. While financial metrics are crucial, they don’t capture the essence of how well two organizations can work together. ETHOS, a company’s underlying character and values, plays an important role. A good cultural fit can foster synergy beyond financials, enhancing cooperation and reducing friction during integration.

On the flip side, a poor cultural fit can lead to misunderstandings, conflicts, and even the eventual failure of the merger. The importance of this alignment cannot be overstated, as it directly impacts employee morale, retention, and overall productivity. All of this means that any acquiring entity needs to understand the company and its culture at the point of closing and merger.

The Role of Leadership

Leadership plays a crucial role in navigating cultural integration. Effective leaders recognize the importance of culture and actively work to align their teams toward common goals. They are instrumental in setting the tone for the newly formed organization and ensuring cultural integration is as smooth as possible.

The Culture Audit™: A Strategic Tool

To effectively assess and integrate cultures, the webinar introduced The Culture Audit™. This tool evaluates various dimensions of organizational culture, including ethics, trust, safety, stress, and accountability. By systematically assessing these areas, companies can gain actionable insights into potential cultural mismatches and areas for improvement.

Pre-Acquisition Assessment

The Culture Audit™ is a pre-acquisition assessment tool that treats culture as an asset that can be measured and evaluated. This assessment provides a comprehensive view of the target company’s cultural landscape, enabling acquirers to make informed decisions about the merger.

Integrating Findings into the Valuation

Incorporating cultural findings into the overall valuation and assessment process allows companies to create a more holistic view of the acquisition. This approach highlights potential risks and uncovers opportunities for creating additional value through cultural alignment.

Actionable Insights for Integration

The insights derived from a culture audit can guide the integration planning process. Companies can develop tailored strategies to facilitate a smoother transition by understanding the cultural dynamics. This involves:

  1. Culture Assessment: Conducting a thorough culture audit to identify strengths and areas for improvement.
  2. Culture Strategy: Developing a strategic plan to address cultural gaps and align values.
  3. Implementation: Executing the cultural integration strategy with clear objectives and milestones.
  4. Monitoring: Continuously assess the integration process and make necessary adjustments.
  5. Improvement: Using data-driven insights to refine and enhance the cultural integration strategy.

DOJ M&A Safe Harbor

An added benefit of a thorough cultural assessment is the potential to leverage the DOJ M&A Safe Harbor. Using the culture audit, companies have up to six months to disclose issues and twelve months to remediate and integrate, providing a clear timeline and framework for addressing cultural challenges.

The Safe Harbor policy continues the DOJ’s push for voluntary corporate self-disclosure. Monaco outlined efforts by the DOJ to increase the benefits to companies that voluntarily disclose corporate misconduct rather than those companies that decide not to disclose misconduct. The key for the acquirer company to obtain the “carrot” DOJ is dangling and poses questions as to the “stick” the DOJ might wield if a self-disclosure does not achieve safe harbor or, more broadly, if an acquirer fails to identify misconduct in the acquisition process, either pre or post-closing. This new Mergers & Acquisitions Safe Harbor Policy demonstrates that the DOJ’s interest is to avoid discouraging companies with ethical, solid cultures and compliance programs from acquiring companies with ineffective compliance programs and toxic cultures.  On the contrary, the DOJ seeks to incentivize an acquiring company to uncover and remediate timely misconduct uncovered during the M&A process.

Conclusion

In the realm of M&A, culture should never be an afterthought. By prioritizing cultural assessments and leveraging tools like The Culture Audit™, companies can enhance their integration strategies, reduce risks, and ultimately drive the long-term success of their mergers and acquisitions. For those interested in exploring this further, Sam Silverstein and his team offer consultations and a behind-the-scenes look at how The Culture Audit™ can be implemented effectively. Embrace the power of culture in M&A to unlock new synergies and achieve sustainable growth.

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Blog

Transforming Culture: Part 1 – From Merger to Culture Toxicity

Boeing is not the first company to find itself amid a massive scandal. You can think of Siemens’ bribery and corruption scandal, the VW emissions-testing scandal, the Wells Fargo fraudulent accounts scandal, or any other myriad of corporate scandals where culture failed and created a toxic culture. The question for any organization in such a situation is how to transform its culture. Currently running on the Culture Crafters podcast on the Compliance Podcast Network is a 5–part of podcast series with myself and Sam Silverstein, the most trusted voice in America on accountability.

Over this companion, 5-part blog post series, we look at how a company in the depths of such a toxic culture can begin to make a culture comeback by planning and taking concrete steps to turn around and rebuild its culture. In this concluding Part 5, we explore the dynamism of culture, assessing culture through The Culture Audit™ (the sponsor of this blog post series), putting together a plan to remediate your culture and implementing that plan, and conclude with why ongoing monitoring and continuous improvement are so critical for a true culture transformation. In Part 1, we consider the steps that led Boeing to the current state of its corporate culture.

Boeing’s cultural miasma led to the 737 MAX crisis, which has tarnished the company’s reputation and raised doubts about its future in the commercial airline industry. Yet the company’s slide into cultural toxicity began long before the 737 MAX disasters. From these pre-pandemic disasters, the company now finds itself in one of the worst places in recent memory for a company’s reputation.

The slide began with the merger with McDonnell Douglas back in 1996. This led to a shift in leadership, which transformed the company’s culture by prioritizing stock performance over quality. This emphasizes the importance of cultural due diligence in mergers and acquisitions, with the need to evaluate existing cultures, plan post-merger integration, and uphold a robust culture within the acquiring firm. The significance of workplace culture was highlighted as a pivotal factor influencing stakeholders, from employees to customers, impacting talent retention, productivity, and overall profitability.

The culture that permeates an organization’s operations plays a pivotal role in determining its outcomes. A toxic culture characterized by shortsightedness, a profit-over-quality mentality, and a lack of ethical standards can have catastrophic consequences for the organization as a whole. Such cultures often prioritize immediate gains at the expense of long-term sustainability, leading to compromised quality, ethical dilemmas, and damaged stakeholder relationships.

The merger with McDonnell Douglas in 1997 marked a turning point for Boeing. A shift towards a culture focused on stock performance and short-term gains took precedence over a culture of engineering excellence. This shift strayed from Boeing’s legacy of quality and engineering excellence, resulting in significant setbacks like the 737 MAX crisis. The Boeing situation underscores the importance of upholding a culture that values integrity, quality, and long-term success to avoid such catastrophic outcomes.

 Mergers and acquisitions are complex processes that extend beyond financial considerations to encompass cultural integration. The compatibility of organizational cultures is a critical factor that can significantly impact the success or failure of such strategic decisions. To mitigate risks and facilitate a smooth transition, assessing cultural alignment, creating a clear roadmap for integration, and ensuring a strong, cohesive culture in the new entity are essential steps that leaders must prioritize during mergers and acquisitions.

In the context of mergers and acquisitions, culture synergy is critical, and indeed, the Boeing-McDonnell Douglas merger is a cautionary tale. The takeover of Boeing by McDonnell Douglas’s leadership brought about a cultural shift that veered away from Boeing’s core values, leading to subsequent challenges. Organizations embarking on such endeavors must pay close attention to cultural compatibility and actively work towards fostering a unified culture built on shared values and objectives. All of this underscores the critical role of culture in shaping the success of strategic business decisions like mergers and acquisitions.

The bottom line is that the best cultures are always the ones where senior leadership at the top always asks, how can we improve this culture?” This emphasizes the need for organizations to continually prioritize ongoing efforts to enhance their workplace culture. Action follows belief. This underscores the notion that an organization’s outcomes are rooted in its beliefs and values. Companies like Boeing can drive positive actions and results by fostering a culture that prioritizes quality and safety.

When you create a fantastic workplace culture, it goes home with your people. It impacts their spouses. It affects other businesses in the community. This serves as a poignant reminder of the far-reaching influence of workplace culture on individuals and broader societal interactions.

With this unique narrative, Boeing demonstrates the profound impact of leadership on culture and the overall organizational environment. Yet this sets the stage for exploring strategies to transform toxic cultures into thriving, ethical ones for CEOs and organizational leaders seeking actionable insights. I hope you will join us for the rest of the blog posts this week, in which we show how a company can transform its culture.

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Blog

New DOJ M&A Safe Harbor Policy

We continue our review of DOJ initiatives from 2023 and what they may portend for the compliance professional in 2024 and beyond. In October 2023, Deputy Attorney General Lisa Monaco announced a new policy regarding M&A. It is a Mergers & Acquisitions Safe Harbor policy that encourages companies to self-disclose criminal misconduct discovered by an acquiring company during the acquisition of a target company. Under the policy, the acquiring party will receive a presumption of criminal declination if it promptly and voluntarily discloses criminal misconduct, cooperates with any ensuing investigation, and engages in appropriate remediation, restitution and disgorgement.

The Safe Harbor policy is a clear continuation of the DOJ’s push for corporate voluntary self-disclosure. Monaco outlined efforts by DOJ to increase the benefits to companies that voluntary disclose corporate misconduct rather than those companies that decide not to disclose misconduct. The key for the acquirer company to  obtain the “carrot” DOJ is dangling and poses questions as to the “stick” the DOJ might wield if a self-disclosure does not achieve safe harbor, or more broadly, if an acquirer fails to identify criminal misconduct in the acquisition process, either pre or post-closing. This new Mergers & Acquisitions Safe Harbor Policy clearly demonstrates the DOJ’s interest is to avoid discouraging companies with strong compliance programs from acquiring companies with ineffective compliance programs and/or a history of misconduct.  To the contrary, DOJ is seeking to incentivize an acquiring company to timely disclose misconduct uncovered during the M&A process.

The Key Policy Takeaways are as follows:

  • The acquiring company must disclose criminal misconduct within six months of the transaction closing date.
  • The acquiring company has one year from the closing date to fully remediate the misconduct, including remediation, restitution and disgorgement, where appropriate.
  • Both deadlines are subject to reasonableness and may be extended by prosecutors due to deal complexity and other factors.
  • Misconduct that threatens national security or involves ongoing imminent harm must be immediately disclosed.
  • Misconduct disclosed under the policy will not factor into present or future recidivist analysis for the acquiring company.
  • The acquiring company’s eligibility for a criminal declination will not be impacted by the presence of aggravating factors at the acquired company.
  • The target company can also qualify for self-disclosure benefits, potentially including a declination, if there are no aggravating factors at the target company.
  • The policy does not impact civil merger enforcement.
  • The policy does not apply to misconduct that is otherwise required to be disclosed, already public or otherwise known to the DOJ.

Under this new Mergers & Acquisitions Safe Harbor, which applies across the Department of Justice, companies that promptly and voluntarily disclose criminal misconduct with the Safe Harbor period, and then cooperate with the resulting investigation, engage in timely and appropriate remediation and pay applicable restitution and disgorgement, will receive a presumption of a declination. Once again, the key deadlines are as follows:

  • Companies must disclose misconduct discovered (whether pre-or post-acquisition) at the acquired entity within six (6) months from the date of closing.
  • Companies will then have one year from the date of closing to fully remediate the misconduct.

The 6 month and one-year deadlines are subject to modification depending on the specific circumstances and complexity of the transaction.  The acquired company can also qualify under the Mergers & Acquisition Safe Harbor Policy for voluntary self-disclosure benefits.  Interestingly, DOJ clarified that any misconduct disclosed under the Safe Harbor Policy will not implicate or be counted in any future potential recidivist analysis.

As with most new DOJ policy initiatives, these concepts have been around for some time. As far back as 2008, the DOJ in Opinion Release 08-02 laid out safe harbor concepts in mergers and acquisitions. This Opinion Release was followed by the FCPA Resource Guide, 1st edition, released in 2012 which brought these concepts forward. However, many defense counsel decried the lack of certainty in both of these initiatives. Now under this new Mergers & Acquisition Safe Harbor Policy, the benefits are laid out in black and white.

The DOJ has made clear that under this new Mergers & Acquisition Safe Harbor Policy organizations that do not perform effective due diligence or self-disclose misconduct at an acquired entity will be subject to full successor liability. DOJ’s objective is clear — they do not want to penalize companies with strong compliance programs from acquiring companies with weak compliance programs when they conduct proper due diligence and discover and self-disclose misconduct. With this new policy, the DOJ is encouraging companies to conduct robust pre-acquisition due diligence and post-acquisition integration. Compliance must have a prominent seat at the deal table if an acquiring company wishes to effectively de-risk a transaction.

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31 Days to More Effective Compliance Programs

31 Days to a More Effective Compliance Program: Day 1 – What 2023 Brought to Compliance

2023 was a very significant year for every compliance practitioner and compliance program. While there was a paucity of corporate enforcement actions under the Foreign Corrupt Practices Act (FCPA), there were significant announcements from the Department of Justice (DOJ) that directly impacted compliance professionals and compliance programs.

The first came in January, and it was an update to the Evaluation of Corporate Compliance Programs (2023 ECCP). Next, we heard speeches about the increased focus on clawbacks and other areas of consequence management. In October, Deputy Attorney General (DAG) Lisa Monaco introduced a new Mergers & Acquisitions Safe Harbor Policy in October. Finally, in late November, Acting Principal Deputy Assistant Attorney General Nicole M. Argentieri Delivered remarks at the 39th International Conference on the Foreign Corrupt Practices Act (FCPA) on the use of data analytics in a compliance program and DOJ expectations going forward.

The 2023 ECCP brought forward several new initiatives laid out in the 2020 Update to the Evaluation of Corporate Compliance Programs, including additions and deletions.

In October 2023, Deputy Attorney General Lisa Monaco announced a new policy regarding M&A. It is a Mergers & Acquisitions Safe Harbor policy that encourages companies to self-disclose criminal misconduct discovered by an acquiring company during the acquisition of a target company.

In November, Nicole Argentieri, Acting Assistant Attorney General for the Criminal Division, speaking at the ACI National FCPA, reported that the DOJ is stepping up its own use of data analytics to identify instances of corporate misconduct and will boost its cooperation with overseas law enforcement to bring more anti-corruption cases as well. The DOJ and SEC are increasingly focusing on data analytics for corporate compliance, signaling higher expectations for larger companies. Both agencies have successfully utilized data analytics in various areas, such as securities and healthcare fraud, and are actively improving their own capabilities in this field. She made several important points for all compliance professionals, which will be significant going forward into 2024 and beyond.

Three key takeaways:

1. 2023 was a key year for the DOJ’s evolution in its views on compliance programs.

2. Clawbacks, incentives, and consequence management have become more important.

3. The new DOJ safe harbor initiative for M&A raises many questions.

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Blog

What 2023 Brought to Compliance

2023 was a very significant year for every compliance practitioner and compliance program. While there was a paucity of corporate enforcement actions under the Foreign Corrupt Practices Act (FCPA), there were significant announcements from the Department of Justice (DOJ) which directly impact compliance professionals and compliance programs.

The first came in January and it was update to the Evaluation of Corporate Compliance Programs (2023 ECCP). Next we heard speeches about the increased focus on clawbacks and other areas of consequence management. In October, Deputy Attorney General (DAG) Lisa Monaco introduced a new Mergers & Acquisition Safe Harbor Policy in October. Finally, in late November Acting Principal Deputy Assistant Attorney General Nicole M. Argentieri Delivered remarksat the 39th International Conference on the Foreign Corrupt Practices Act (FCPA) on the use of data analytics in a compliance program and DOJ expectations going forward.

The 2023 ECCP brought forward several new initiatives laid out in the 2020 Update to the Evaluation of Corporate Compliance Programs, include additions and deletions. It also incorporated many of the concepts from the 2022 Monaco Memo. We begin with a review of the new incentives, both financial and non-financial; consequence management; messaging apps and provide a summary for the compliance professional.

In March there were two days of speeches from the DOJ which added to the compliance complexity for 2023 and beyond.  The speeches were made by Deputy Attorney General (DAG) Lisa Monaco (2023 Monaco Speech) and Assistant Attorney General Kenneth A. Polite, Jr. (Polite Speech) and they previewed a number of initiatives by the DOJ which every compliance professional needs to study in some detail. These new initiatives included: (1) The Criminal Division’s Pilot Program Regarding Compensation Incentives and Clawbacks; (2) Evaluation of Corporate Compliance Programs; and (3) Revised Memorandum on Selection of Monitors in Criminal Division Matters.

In October 2023, Deputy Attorney General Lisa Monaco announced a new policy regarding M&A. It is a Mergers & Acquisitions Safe Harbor policy that encourages companies to self-disclose criminal misconduct discovered by an acquiring company during the acquisition of a target company. Under the policy, the acquiring party will receive a presumption of criminal declination if it promptly and voluntarily discloses criminal misconduct, cooperates with any ensuing investigation, and engages in appropriate remediation, restitution and disgorgement.

The Safe Harbor policy is a clear continuation of the DOJ’s push for corporate voluntary self-disclosure. Monaco outlined efforts by DOJ to increase the benefits to companies that voluntary disclose corporate misconduct rather than those companies that decide not to disclose misconduct. The key for the acquirer company to  obtain the “carrot” DOJ is dangling and poses questions as to the “stick” the DOJ might wield if a self-disclosure does not achieve safe harbor, or more broadly, if an acquirer fails to identify criminal misconduct in the acquisition process, either pre or post-closing. This new Mergers & Acquisitions Safe Harbor Policy clearly demonstrates the DOJ’s interest is to avoid discouraging companies with strong compliance programs from acquiring companies with ineffective compliance programs and/or a history of misconduct. To the contrary, DOJ is seeking to incentivize an acquiring company to timely disclose misconduct uncovered during the M&A process.

In November, Nicole Argentieri, Acting Assistant Attorney General for the Criminal Division, speaking at the ACI National FCPA reported that the DOJ is stepping up its own use of data analytics to identify instances of corporate misconduct, and will boost its cooperation with overseas law enforcement to bring more anti-corruption cases as well. The DOJ and the Securities and Exchange Commission (SEC) are increasingly focusing on data analytics for corporate compliance, signaling higher expectations for larger companies. Both agencies have successfully utilized data analytics in various areas, such as securities and healthcare fraud, and are actively improving their own capabilities in this field. She made several important points for all compliance professionals which will be significant going forward into 2024 and beyond.

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Great Women in Compliance

Great Women in Compliance: Audrey Harris – The Woman in the Arena

Audrey Harris, this week’s guest, shared a quote with us that is very meaningful to her. It is from Theodore Roosevelt, about “The Man in the Arena. Since this is #GWIC, we have expanded this to the women in the arena. That is the woman who is actually in the arena, not the critic or the person who waits to offer suggestions or say what can be done better after the hard calls are made and who strives to do the work and…spends herself on a worthy cause; who at the best knows, in the end, the triumph of high achievement, and who at the worst, if she fails, at least fails while daring greatly, so that her place shall never be with those cold and timid souls who neither knows victory nor defeat.”

Audrey Harris is the woman in the arena. She is Managing Director, of  Global Anticorruption, Compliance, Ethics & Non–Financial Risk at Affiliated Monitors, Inc., was formerly at two world-class law firms, and has also been a Chief Compliance Officer. She has made hard decisions in real-time and now helps organizations do the same.

In this episode, Lisa and Audrey talk more about what the woman in the arena does and why Ethics and Compliance Officers are truly the people in the arena. Audrey will also provide insight on the most recent US Department of Justice statement, whether it really is the “Monaco Memo 3.0,” and her views about what is significant in the memo and the guidance it provides.

 The arena for GWIC next week is US Thanksgiving, so we are off but will see you with a great episode on November 29.

The Great Women in Compliance Podcast is on the Compliance Podcast Network with a selection of other Compliance-related offerings. GWIC is also sponsored by Corporate Compliance Insights, where we have a page where you can hear every episode. If you are enjoying this episode, please rate it and/or provide a review.

Corporate Compliance Insights is a much-appreciated sponsor and supporter of GWIC, including affiliate organization CCI Press publishing the related book; “Sending the Elevator Back Down, What We’ve Learned from Great Women in Compliance” (CCI Press, 2020). If you enjoyed the book, the GWIC team would be very grateful if you would consider rating it on Goodreads and Amazon and leaving a short review.  Don’t forget to send the elevator back down by passing on your copy to someone who you think might enjoy reading it when you’re done, or if you can’t bear parting with your copy, consider it as a holiday or appreciation gift for someone in Compliance who deserves a treat.

If you enjoyed the book, the GWIC team would be very grateful if you would consider rating it on Goodreads and Amazon and leaving a short review.  Don’t forget to send the elevator back down by passing on your copy to someone who you think might enjoy reading it when you’re done, or if you can’t bear parting with your copy, consider it as a holiday or appreciation gift for someone in Compliance who deserves a treat.