To disclose or not to disclose… that is the question. Definitely a thorny issue which Compliance Officers have to deal with. From my standpoint, I am seeing more voluntary disclosures hitting the press – here Maxwell and here Analogic, which is a good thing. Right?
Personal Disclosure – I have never been inside a Compliance Officer’s shoes when he or she is being chewed out by the CEO, so my opinion may not count for much. But what I have observed over the last few years being around corporate FCPA investigations is the following:-
1. We will investigate, prioritize and disclose potential violations that are brought to the Compliance Team’s attention: what this means is that most companies have an investigation process in place and when they find something wrong and potentially serious, for the most part they will voluntarily disclose. Clearly, this begs the question what is “serious”, but most companies I would hope will not deliberately try to hide blatant stuff.
2. I don’t want to know what I don’t need to know: this is really about proactive monitoring or going out and finding potential violations. We work with a few companies in highly regulated industries where this is a must, but for most companies it is a step too far – ie I don’t want to uncover stuff that I don’t need to know about. This does not mean that these companies have blinders on, simply that they are doing what is necessary from a compliance and enterprise risk perspective. They feel they no not need to go the extra 9 yards.
3. Cover my backside principle: this is about policies, processes, employee training, ‘walking the walk’, ‘top down approach’, etc. It’s what all good Compliance Teams do: they enforce and remind employees, partners, etc about good business practices. Often this is driven by past experiences – has the company been investigated by the authorities before, have they had whistle-blower incidents, etc?
4. Who is the target? The company or the Executive: this is probably the one dynamic that has changed the most in the last 2 years. The charges are becoming personal, in that CEO’s (SEC charges CEO $20M in fraud case) or Compliance Officers are being charged for violations, resulting in possible jail time. No longer is it simply the company that stands to be charged.
Of course each company is different, but the underlying theme is reputation risk – enterprise and personal. Voluntary disclosure provides an avenue for ‘coming clean’, for putting some level of ‘positive spin’ out of a bad situation and hopefully ultimately saving the company money in fines, etc. To all Compliance Officers – are you feeling the disclosure heat? Or is it still business as usual? I would love to hear your views.