Communicating Compliance in an Era of Increased Regulatory Enforcement
HIGH STAKES
THIS ISSUE: COMMUNICATING COMPLIANCE IN AN ERA OF INCREASED REGULATORY ENFORCEMENT
The Era of Accountability has set the stage for sweeping reforms in the ways that regulators do business. From the financial services and defense contracting industries, to the manufacturers of everything from helicopters to toys, no company is immune to the reputational and compliance challenges that regulatory overhauls and investigations are likely to bring about.
In this issue, we examine the fundamental choices companies must make when publically responding to regulatory investigations…Gain insight on compliance strategy from David Jansen and Glenn Ware of the new PricewaterhouseCoopers Anti-Corruption Centre of Excellence…Identify the high-authority blogs covering regulatory issues…And look ahead to how the TARP era increases scrutiny of fraud and corruption across the board.
Crisis management often hinges on a single strategic decision - do we or do we not fight back and, if so, how aggressively? It’s a particularly germane decision when companies grapple with the public dimension of regulatory entanglements. On one hand, the company must protect its reputation. On the other, every press release, media interview, and blog post in its own defense can alienate regulators at a point in time when it might still be possible to minimize the fallout from their investigations.
An offense obviously communicates strength and confidence in your position. It may even convince regulators that their own political and personal goals will be disserved by pursuing an inquiry that the public perceives to be unfair, bureaucratic, and arbitrary. That public perception then influences the legislators who, in turn, oversee and fund the regulators.
But the risks of going on offense are considerable. Not only might it infuriate the regulators and intensify their zeal, an offense can generate unwanted public attention that would not otherwise have been aroused.
On the flip side, a defense buys time, allowing you to cooperate with regulators and perhaps earn their trust. The risk is that you cede control of the story to potential adversaries. That said, the abiding benefit of a defensive strategy is that it need not be permanent. If the situation deteriorates to a point where regulators seem uncompromisingly hostile, you can launch an offense then.
By contrast, the decision to go on offense is usually irreversible. It’s awfully hard to mend fences once you question the agency’s decisions in public.
A crisis team should do risk/benefit analyses at every juncture. Should you talk to the newswires? You will reach the broadest possible audience, but you won’t be able to control what they write. Should you limit your offense to your own blog and thereby maintain control? You will stay in control, but you may be perceived as proportionately less credible for doing so.
To make the decision for defense or for offense, you also need to understand who the regulators are and what they really want to accomplish. Understand that the professionals who staff these agencies are as talented as anyone in the private sector. As lawyers, they’re probably equal to your own legal counselors.
The regulators also believe in what they’re doing. They believe they are helping the public, and that can make them all the more resolute. Regulators often choose targets that allow them to send a deterring message – but they can only do that if the message is publicized. As such, media savvy is part of the regulators’ job description. Whether you opt for defense or offense, you will need to counter their media skills with some media savvy of your own.
Industry insight: David Jansen and Glenn Ware of the New PricewaterhouseCoopers' Anti-Corruption Centre of Excellence
David Jansen (a PwC partner and one of the leaders of its Anti-Corruption Services Group) and Glenn Ware (Managing Director of PwC’s Anti-Corruption Services Group) provide clients with advice to help improve compliance with global anti-corruption regulations and statutory regimes. They shared their insights on an era of increased regulatory enforcement with High Stakes™:
How should companies deal with competitive pressures in countries where it’s difficult to conduct business above the board? Don’t anti-corruption measures put responsible companies at a competitive disadvantage in these environments?
David Jansen and Glenn Ware: That uneven playing field has been one of the main drivers behind the OECD Treaty and the UNCAC Treaty, both of which are designed to encourage all countries to build an effective anti-corruption infrastructure. At the macro level, these treaties are the main vehicles for ensuring that responsible companies don’t end up on the short end of the stick – and we are now beginning to see that these treaties are working. It’s very encouraging to see how many countries are making the fight against corruption a top priority. The German prosecution of one of its own largest companies serves as a prime example.
On the contract-by-contract level, we obviously advise clients that bending to corruption is a very short-term game to play. Ultimately, it’s going to catch up with you. It’s a slippery slope. Once you start down it, you eventually get hit up for more and more money. In the end, it costs the company more. A well-designed compliance program (coupled with top-quality goods and services) often enable a company to do business in even the most challenging environments without having to pay the "corruption tax" – a fact that will make their bid prices lower and ultimately more competitive in the long run. The war is not over, however, and it can only be won if companies and executives never let their guard down.
Of course, responsible companies still have to get their feet in the door in these environments. We advise companies to communicate a total commitment to compliance from the very beginning – so that government officials know from the outset that a company is entering their market with a program of integrity and high-quality goods and services. The key is to send the message that you simply won’t engage in corrupt behavior.
Sometimes, even if you have quality goods, you’re going to confront corruption no matter what you do. But we’ve seen very recent studies that show that, after 90 days of maintaining a full-compliance message, you can break through the demand cycle for bribes and enter the marketplace.
Finally, companies also have to understand what tools are available to them in the local economies they are seeking to penetrate. For example, the U.S. Embassy is there to help guide them as to whom to deal with and whom not to deal with.
Obviously, the Foreign Corrupt Practices Act is the 900 lb. gorilla in the room. What are some of the other anti-corruption measures that companies need to be aware of?
David Jansen and Glenn Ware: The Foreign Corrupt Practices Act has to do with cross-border transactions. But commercial fraud and bribery can happen in a domestic context too. In these instances, mail and wire fraud are considered to be the major workhorses of the U.S. Attorney’s Office.
In 2009 and 2010, we’re going to see a lot of interest in mail and wire fraud because of the prominence of the federal bailout plan. It’s a top priority of both the Congress and the White House to know how that money is being used or misused. On top of investigations related to TARP funding, we will likely see more Madoff- and Sanford-style investigations as well.
The regulations and fraud statutes that fall under the U.S. Code have been well worn by U.S. attorneys who are very good at prosecuting those alleged to be non-compliant. So companies need to be wary of corruption in any place it might rear its ugly head.
Are there branding opportunities for companies that build an anti-corruption culture? How can companies articulate leadership in this area and what audiences need to be hearing those messages?
David Jansen and Glenn Ware: From our standpoint, having a program of integrity is no different than “green” marketing. Companies that do business with integrity are most successful if they incorporate the integrity message in their business development practices.
It adds to the quality of your products. It adds to the quality of your business line. If you’re going to make an investment with integrity – and one that has the protection of an effective compliance program – then that’s something your client base is going to want to know.
Of course, if you do more than $5 million worth of business a year with the U.S. government, recent changes to the federal acquisition regulations require you to have compliance programs in place…Who isn’t going to be a government contractor in the very near future?
We see the need for effective compliance programs in the appointment of a Special Inspector General for TARP funding as well. That person is going to be saying, “Tell us what you did with your funding and give us supporting documentation. We want to see that you know how to spend this money, that you’re doing so wisely, and that you can account for every penny.”
The only way you’re going to be able to do that quickly and responsibly is if you have a program in place that can capture that information and ensure that the money is used as intended.
As myriad industries face the prospect of major regulatory initiatives, the blogosphere provides the information and insight needed to stay a step ahead of the game. In today’s environment, ensuring compliance requires total access to the latest developments as well as an understanding of evolving best practices along with lessons to be learned from the mistakes of others.
Here’s a look at the regulatory and compliance blogs you should be following:
FCPA Blog
The FCPA Blog highlights daily developments in regulation related to the Foreign Corrupt Practices Act. Authored and edited by members of Cassin Law LLP, this blog provides information on the companies facing regulatory action as well as strategies for ensuring compliance and dealing with investigations.
This blog, which takes its name from the Sarbanes-Oxley Act, provides the latest news and case studies related to management and compliance with federal business reporting requirements. Sox First Blog is a must-read for anybody who deals with accounting and reporting for a public company under the purview of the SEC or other federal regulatory bodies.
Governance Focus
Governance Focus deals with corporate and board governance, ethics, compliance, and social responsibility. With multiple posts each day, it is an excellent resource for corporate governance professionals as it provides tools for staying up to date on new developments, analyzing best practices, and understanding the implications of regulatory changes.
Business Law Prof Blog
Part of the Law Professors Blog Network, this blog covers issues related to the intersection of law and business, particularly with regard to compliance and regulation. Posts concentrate on the effects of changes in regulatory policy as well as providing examples of companies that have successfully, or unsuccessfully, followed the letter of the law in their business practices.
The Filing Cabinet
The Filing Cabinet closely follows all issues involving SEC compliance, Sarbanes-Oxley developments, executive compensation, and ever-changing securities rules. Published by Compliance Week, this blog provides invaluable insight for anybody dealing with compliance and regulatory issues. While you’re at it, check out the other Compliance Week blogs at www.complianceweek.com/blog/.
With almost a trillion dollars in TARP funding already appropriated, there is immense government interest in seeing that taxpayer dollars are spent responsibly and ethically. The TARP Special Inspector General, the SEC, the Department of Justice, and the Congress won’t hesitate to launch investigations at the first whiff of corruption – and it won’t just be the companies accepting TARP funds that end up in their sights.
Opponents of the President’s stimulus package will also be looking to highlight corruption related to stimulus funding as a means to score political points – meaning that any and everyone working with TARP or stimulus funding is a potential poster child.
When the government knocks, answer strategically…
Opponents of the President’s stimulus package will also be looking to highlight corruption related to stimulus funding as a means to score political points – meaning that any and everyone working with TARP or stimulus funding is a potential poster child.
When the government knocks, answer strategically…
Be transparent. If you have nothing to hide, prove it by ensuring that regulators and legislators have full access to any materials or people they deem significant to the investigation.
Seek a partnership with the government on any practical steps that can be taken to solve the problem – and talk about such collaboration as often as possible.
Transform ordeal into opportunity. The investigative event need not be all about avoiding punishment. It could, rather, be all about showing leadership if the company takes the initiative by implementing the reforms that define a new way forward.
PwC’s anti-corruption leaders speak about their new initiative and the services it provides for private and public sector entities alike.
In this age of seemingly incessant high-profile scandals and ensuing apologies, David Bartlett takes a look at the three components of an effective apology strategy.
Gene Grabowski, who appeared on ESPN’s Mike and Mike in the Morning to discuss the A-Rod fiasco, discusses why the Yankee slugger’s press conference following steroid allegations raised more questions than it answered.
Larry Smith talks to an FCPA compliance expert about what’s coming next and how companies can effectively communicate during an FCPA investigation.
Gene Grabowski analyzes how EMS helicopter manufacturers can best protect their reputations after a series of high-profile accidents.
When news cycles are measured in minutes rather than hours, rapid responses to crisis are absolutely essential to winning the communications battles.To help ensure success in the Court of Public Opinion, Levick Strategic Communications presents the Crisis Communications Desktop Reference. It is a fully searchable, downloadable desktop resource covering more than two-dozen topics of urgent concern to business. It provides, with a click of the mouse, the strategic guidance you need at the moment a crisis strikes. Download the complementary Crisis Communications Desktop Reference today.
Making Your Point
Making Your Point, a new book by Levick Senior Vice President David Bartlett, examines the fundamental strategic considerations driving effective communication. It defines that key component called “emotional intelligence.” It provides the simple powerful tools to make a point in person, prepare and deliver effective speeches and presentations, get messages across in a media interview, and communicate during crises. Making Your Point is an easy-to-use communications guide for professionals and non-professionals alike. Order your copy today.
Making Your Point, a new book by Levick Senior Vice President David Bartlett, examines the fundamental strategic considerations driving effective communication. It defines that key component called “emotional intelligence.” It provides the simple powerful tools to make a point in person, prepare and deliver effective speeches and presentations, get messages across in a media interview, and communicate during crises. Making Your Point is an easy-to-use communications guide for professionals and non-professionals alike. Order your copy today.
Stop the Presses: The Crisis and Litigation PR Desk Reference – now in its second edition – is a survival manual for corporate leaders, board members, lawyers, and communications specialists. This book provides the dos and don’ts of crisis planning and communications and articulates the essential strategic guidelines for navigating myriad bet-the-company issues. Order your copy today.Future High Stakes™ issues
Labor and Employment:
Outsourcing jobs is the latest among many recent communications challenges for management – especially if newly elected politicians pursue their agendas.
Outsourcing jobs is the latest among many recent communications challenges for management – especially if newly elected politicians pursue their agendas.
Energy:
With a newly-empowered President and Congress looking to make good on its green promises, how can energy companies position themselves at the forefront of sustainability?
With a newly-empowered President and Congress looking to make good on its green promises, how can energy companies position themselves at the forefront of sustainability?
Patent & IP Litigation:
High-profile intellectual property cases threaten to sink stock prices. How can companies protect themselves in the wake of a negative ruling?
More to come:
High-profile intellectual property cases threaten to sink stock prices. How can companies protect themselves in the wake of a negative ruling?
More to come:
- Antitrust
- Board or Board Member Liability
- Coming to America
- Diversity
- Education
- Executives Behind Bars
- Food
- Global Capital Markets
- Intellectual Property
- Internal Communications
- Internal Investigations
- Monetizing Moments
- Money Laundering/Money Transfers
- New Media/Social Networking
- Product Liability
- Professional Services Crises
- Public Equity
- Whistleblowers
- Reputation Management – Celebrity
- Reputation Management – Corruption
- Reputation Management – SEC Investigations
- Tourism
- Trade
Next month in High Stakes: INTERNAL COMMUNICATIONS IN A HIGH-STAKES ENVIRONMENT