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The Biggest Compliance Mistake Lawyers Make

Posted in Ethics & Compliance

Guest bloggers: Eric F. Hinton is chief ethics and compliance officer at 7-Eleven, Inc. and Ted Banks is partner at Scharf Banks Marmor LLC.

Being a lawyer is fun. You get to do a lot of different things, and notwithstanding the lawyer jokes, it is a position of power and respect. Sometimes, lawyers are trapped by abstract concepts and training. This approach often shows up in preparing compliance programs, where the results can be disastrous.

In law school, we are trained to spot and analyze every issue, as well as anticipate every argument that the “other side” might present. We spend hours making sure every citation is not only correct, but follows an arcane and seemingly arbitrary format. This training is great for writing legal briefs. Does it help us deal with the real world of compliance though?

Compliance is generally used to describe helping people or companies obey the law. Lawyers often think the best way to ensure compliance is to tell employees the law and then order them to follow it. Also known as “re-teaching law school,” this approach is almost guaranteed to fail because an employee may not fathom big legal terms or care about the citation to a Supreme Court case.

There are two key ways to create an effective compliance program. First, do everything from the point of view of your target audience, starting with an employee. Think about what they do on a daily basis, both inside and outside of the workplace. What are they worried about? What should they be worried about? How do they communicate? What is the easiest way to reach them? How can they understand the compliance area in the context of their job function?

Compliance communications should focus on information relevant to an employee’s job. What do they need to be able to succeed? What do they need to know not to do? The company has an obligation to make sure that all employees are aware of what is required of them. Similar to any other company-wide training, compliance information should be disseminated in simple language that uses easily digestible, comprehensive examples.

Presenting compliance information that is relevant to each employee’s job will take some work. It means identifying what compliance risks are triggered by every job function and sending information that is only relevant to his or her job responsibilities. Of course, it is much easier to dump everything on everybody and some prosecutors might even be impressed with such a “thorough” approach. However, you need to make it easy for an employee to find information.

Requiring an employee to sift through a folder of policies to locate the ones pertaining to his or her job function is not realistic. Find the key points and make certain that employees know where to go (i.e. online, email or phone) to retrieve additional information. Also, consider getting assistance from professional writers.

This same principle applies to corporate codes of conduct. The company should establish its principles in a few pages and provide links to more detailed information. Ease of access is key. Creating an encyclopedia of every possible compliance issue might impress some lawyers, but it will not get the job done.

The second way starts with Chapter 8 of the Federal Sentencing Guidelines. The guidelines outline various key factors that should be part of an effective compliance program, including risk assessments, a knowledgeable board of directors and adequate compliance resources. A compliance program that meets every element of the guidelines is likely to detect and deter any wrongdoing. Should you be confronted with a prosecutor accusing the company (rather than a rogue employee) of wrongdoing, you want to be able to say “what more could we have done?”

Whatever is contained in a code or compliance policy is dependent on a corporate culture of compliance, where the employee knows that management stands behind it. Lawyers will find that management is more enthusiastic about simpler, realistic and understandable compliance programs.

Thus, do not be afraid to drop those footnotes and strip out the legalese. We think you will be happy with the results.