Ethical Boardroom was kind enough to ask me to share my thoughts on what management techniques exist for promoting a cost effective FCPA or UK Anti-Bribery program across a global organisation. Clearly, there is no shortage within the compliance community of programs and writings addressing such platforms. Among the debate, you will find significant discussion about the “tone at the top,” what the reporting relationships should be among compliance, legal and financial personnel and extensive deliberation concerning the management of third party relationships. These debates are led by those in the compliance, legal and investigatory communities who have great practical and professional experience to address such concerns. Thus, for those looking at how to specifically implement and structure a compliance program, it is probably best to dive into those discussions, where you will find well-experienced thought leaders, information and recommendations. However, my goal today is to address strategy as the foundation of compliance.
If you are a Board member or C-Suite executive, I ask: Are you willing to take a step back in your business strategy, including sales forecasts in highly corrupt regions, in order to take a step forward in achieving meaningful anti-bribery compliance? In other words, are you willing to unwind sales and marketing practices and hold no sales projection sacrosanct in reviewing corporate strategy? If so, then you are serious about compliance as something more than “window dressing” to cover over questionable or contradictory business practices.
If your organisation is doing business in regions with “low integrity” reputations (and there are a number of good indexes to help you identify those), and you are experiencing elevated and consistent growth in year-to-year sales in those territories, then you might want to ask those responsible “How they are getting there?” as opposed to congratulating them for their “great work.” If you are looking at compliance from the Board level perspective, especially if you are on risk, audit or governance committees, hold off on the congratulatory tone when reviewing sales performance and ask “Are our teams confronting corruption in achieving this sales growth?” and “What are we doing to help them confront risk?” Even better, query “How are they achieving this kind of growth in such a corrupt region?”
Where in the discussion is “How are we rolling out our business strategies in high risk regions?”
Compliance is a Strategic Issue
As Philippe Montigny, (Founder and President, Ethic Intelligence) stated in a June 5, 2014 editorial, “Anti-corruption compliance is first and foremost a business issue which must be integrated not only into day-to-day operations, but also into business strategies.” Indeed, and in my experience, there is a lack of focus and concern among board members and corporate executives as to how those on the front line are reconciling an aggressive growth strategy with anti-bribery program. While it is appropriate to question legal and/or compliance personnel, “What are we doing to manage our third party relationships?” or “How are we structured organisationally to deal with compliance?” or even “Are our sales reps being properly trained?” I ask: where are the tough questions concerning business strategy as the primary foundation of compliance?
My concern is about what I do not hear. Where in the discussion is “How are we rolling out our business strategies in high risk regions?” or “How are we incentivising our sales, marketing and business development teams in corrupt territories?” Are you sending a message to your international front line managers, who are the ones confronting bribery, to remain “compliant,” while at the same time highly incentivising them with bonus compensation indexed to personal sales performance? If you are, then you are leaving it to your overseas personnel to figure out “What does management really want, compliance or sales,” as your sales teams can’t deliver compliance while achieving sales targets and bonus. In such a case, compliance and sales growth become zero-sum, they cannot exist together.
More simply stated, when the “official” corporate message as well as training focuses on the “means” of compliance, but incentive compensation plans and sales forecasts speak to the “ends” of winning above all else, then compliance becomes “bonus prevention.” No level of spending on third party management, reshuffling of the organizational chart, or compliance training, will reverse what is now a situation where front line international personnel are managing risk and sales issues on their own. That dynamic is dangerous for all involved, but all too common. Furthermore, as individual countries, even some in traditionally corrupt regions, are starting to take initiatives to combat corruption, you might be putting your employees in a situation where they are subject to local prosecution.
No more “high fives”
As Professor Mak Yuen Teen, (Associate Professor Accounting, NUS Business School, Singapore) stated in a recent blog (May 21, 2014) entitled “Plausible deniability and graft by MNC’s,” senior management needs to stop hiding behind business codes, anti-corruption programs and plausible deniability defenses and finally “address business practices, and how they reward, retain and promote their employees.”
As someone who spent the better part of my career living on the front lines of international sales and marketing, who confronted real-world corruption, and faced “real world” consequences, I challenge today’s readers, who have a responsibility to shareholders, employees, and their peers, to ask: “How are we confronting corruption and how are we achieving these sales targets in such low integrity regions?” Then, challenge appropriate executives across the organisation to sit down and talk with those in the field who are facing risk, look at how they are getting paid, analyse their sales targets, and start asking “how” they are achieving those sales plans.
If those conversations are disturbing, you have made a tremendous step towards really understanding the relationships between risk, reward, corruption and compliance. From there, you can start looking at your business strategies, and, where necessary, review and rewind. Accordingly, once your strategy, incentives, and anti-bribery ethics are all aligned and sending the same message, then you can go to your compliance and investigatory personnel and say “OK, here is the strategy, now give me your plan!” As Mr. Montigny stated, once strategy is properly in place, then you “are really serious about compliance,” even if it means taking that step back in sales.
Richard Bistrong spent much of his career as an international sales executive and currently blogs on FCPA issues from that perspective. Richard was the Vice President of International Sales for a large, publicly traded manufacturer of police and military equipment, which included residing and working in the UK. Prior to that, he was the Executive Vice President (and founding family member) for one of the largest global manufacturers of bullet resistant armor for the police and military markets. In 2007, as part of a cooperation agreement with the United States Department of Justice and subsequent Immunity from Prosecution in the UK, Richard assisted the United States and other governments in their understanding of how FCPA violations occurred and operated in international sales. Richard’s cooperation, including covert cooperation, and as a cooperating witness, which covered five years, was one of the longest in US white-collar criminal investigations. In 2012, Richard was sentenced as part of his own Plea Agreement, and served fourteen-and-a-half months at a Federal Prison Camp.
Richard now blogs at www.richardbistrong.com about current anti-bribery compliance issues, drawing from his own perspective and experience to discuss trends and compliance challenges, especially as they might impact overseas sales and marketing organisations. He has a BA from the University of Rochester and an MA in Foreign Affairs from the University of Virginia, including studies at the Institute for European Studies in Vienna, Austria. He is a member of the Society of Corporate Compliance and Ethics. Richard resides in the New York Metropolitan area with his wife and has two children.
Richard can be reached via his blog, LinkedIn, or at Richardtbistrong@gmail.com. He frequently tweets about #compliance and #fcpa topics at @richardbistrong. He is also available to speak to groups (corporate or industry) about real-world compliance issues.