Compliance 2010 – What’s Next?

I am attending the Global Ethics Summit 2010, hosted by Dow Jones and Ethisphere. Here are my notes, live from this session:

“New challenges abound amid advancing best practices, not to mention the continually escalating rate of enforcement both by U.S. regulators and overseas officials. What’s on the horizon for compliance? This roundtable discussion comprised of leading ethics and compliance officers will share their insight into what’s next, how to be prepared, and their own seasoned advice on how corporate executives can keep their organizations from making headlines for compliance or ethics transgressions.”

  • David G. Barry, Managing Editor, Financial Information Services, Dow Jones & Company
  • Grace Renbarger, Chief Ethics and Compliance Officer, Dell Computer
  • Haydee Olinger, Corporate Vice President & Global Compliance Officer, McDonald’s
  • Peter Jaffe, Chief Ethics and Compliance Officer, AES
  • Genie Gavenchak, Senior Vice President, Chief Compliance and Ethics Officer & Deputy General Counsel, News Corporation

Peter lead off. He is looking ahead for continuous improvement. They have an existing program that they think is solid. They have good relationships internally and wants to have even better relationships. They are also looking to better adapt to local cultures.

Grace pointed out that they were dealing with the economic downturn in 2009 by focusing closer in internal fraud issues. With a potential recovery in 2010, they are looking for better global compliance with a flat budget. Dell as a company is looking to put integrity and ethics at the forefront of its business.

McDonald’s is looking to stay ahead of the trends and regulations. Social media, privacy and HR issues will be important in 2010. They leverage their outside law firms to help with training. In foreign markets they own more restaurants, as opposed to franchise, so they want to set the tone for future franchisees.

News Corp. is looking at how to best operate in difficult foreign markets. They want the message that they will not play the old game. But at the same time they need to operate in those countries. (Disclosure: News Corp is one of the largest tenants of my company.)

Federal Sentencing Guidelines

The next question was the proposed amendments by the US Sentencing Commission. [Prior post: Proposed Amendments to Sentencing Guidelines] One panelist raised whether the effect of the amendments would be to make the general counsel the CCO. This would seem to be step back since many companies have been separating the GC and CCO functions. Most of the panelists report to the general counsel, but have lots of contact with their boards and CEOs.  One panelist really disliked the incorporation of document retention issues into compliance and ethics practices.  The panel also pointed out that the are just minimum standards.

Foreign Corrupt Practices Act

Each of the panelists have increased their focus on FCPA issues.  Each mentioned that they were trying to standardize their practices across the world. Each has a closer focus on countries with higher levels of corruption. (Nobody was willing to point fingers at any particular country as being the most problematic.)  They have made their foreign operations and foreign partners aware that the FCPA applies to them, even though they are not in the US.

One panelist mentioned that they are moving from lawyer based training to internal programs with greater focus on internal practices, not the law. One key is how to do all of this awareness and training in a cost effective way. In-person training is the most effective, but also the most expensive. One of the keys is leverage. Focus on training the trainers and the tone from the top. The top is not just the CEO, but the head of local operations and middle management.

Social Networking Sites

The panel started with a statistic that 25% of companies have fired someone for what they did on a social media site. News Corp. has taken this head on, but also has the problem that they own MySpace and are a media company. The key is to set boundaries to prevent damage to the company and to clarify ownership of content. McDonald’s has over a million employees and at the same time trying to use social media proactively. A big focus is on trademark and intellectual property issues.

Compliance in Mergers and Acquisitions

The key is to be part of the acquisition diligence process to vet any issues ahead of time. Integration is a bigger issue. You need to unify the codes and investigation processes so they are standard across the organization. One issue is that smaller companies tend to have many of the compliance and ethics process in one person and one process. A bigger company has it broken out into separate components.

Citizens United, Corporate Campaigning and Pay to Play

Panelists said that they already have political donations and lobbying policies in place. There is more of a focus on pay-to-play. When interacting with the government as a contractor you need to be focused on the issue.

Top Issues for 2010

  • Overall government regulation.
  • No idea. There were so many curveballs in 2009 and there will likely be more in 2010.
  • Communication and education.
  • Organizational scorecard for compliance and ethics
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