2013 Global Ethics Summit What’s Next? 2013’s Global Challenges in Ethics and Compliance March 5, 2013
U.S. Department of Justice and Securities and Exchange Commission Risk-Based Approach • Particular focus on risk-based approach to potential anti-corruption issues • Insight developed from new FCPA Guidance issued by DOJ and SEC. Regulators will inquire whether company made a good faith effort to identify and address key risks • Addressing key risks in this regard (i.e. Anti-corruption and other relevant areas) include identifying third parties/suppliers in high-risk regions and knowledge/expertise of individual in compliance position. • Recent example came from HSBC money laundering issues and identifying Mexico as low-risk region.
Lessons from Walmart • Continuation of discussion around risk-based approach to compliance programs. • Address allegations of wrongdoing head on and benefits are received from self-disclosure. • The structure of the compliance program, and reporting lines of chief compliance officer are important (more in later slides). Chief Compliance Officer must be sufficiently educated and have proper reporting line in order to properly investigate allegations of wrongdoing and address key issues within organization.
How can Global Companies Stay Ahead of Anti-Corruption Requirements in Age of “Big Data” • Use data to your advantage such as through readily available lists and DPS databases to vet both supply chain and distribution chains. • Understand new risks around social media – employees sharing information, or consuming information improperly • Risks/challenges move beyond traditional regulations such as HIPAA, and other industries that increasingly store sensitive information
Role of Human Rights Violations in Light of Sweatshop Discussions • Third party, supply chain and distribution chain is particular risk for human rights violations • Apple/Foxconn brought particular focus on labor issues, and is taking lead in this area such as by joining the Fair Labor Association.
Evolution of Compliance Function • One of the key elements to success for Compliance officers is to have authority commensurate to the responsibilities, and in a related theme, sufficient independence. • Compliance should have independence from legal function, and this will increasingly be the case at large corporations moving forward. • Compliance officers will report to any one number of managers, rangingi from the Board to Risk Managers to Legal. Explanation of the value of these reporting lines. • Compliance officers must involve Boards in ethics and compliance matters for reasons including increased director liability.
Culture of Compliance • Proper techniques to demonstrate a strong culture of compliance to regulators. • Role of Tone from the Middle in creating global culture of compliance, which includes mid-level managers properly trained and communicating key compliance policies. • Compliance officers must be sufficiently interested in building the proper culture. Level of stress of compliance officers at all levels is increasing according to recent study which results in both compliance professionals quiting the role and decreased attention to efforts.
Lessons from Texas Instruments • Successful methods for eliciting supplier feedback to Dodd-Frank Act conflict minerals questionnaires; • Email requests • Experiences in getting suppliers to respond to question set in a reasonable amount of time • Multiple requests/follow-up necessary • Set date allowing time for delays • No penalty is applied • Lack of response would decrease scoring in CETRAQ, our supplier scorecard • Surprises during three year‘s of TI preparation • The amount of work required; • Number of resources required