Day 1- The Role of Human Resources in Operationalizing Compliance
This month, I will consider the role of Human Resources (HR) in operationalizing a best practices compliance program. I have long advocated for a greater role of Human Resources (HR) in a compliance program. Indeed, one sign of a mature Foreign Corrupt Practices Act (FCPA) compliance and ethics program is the extent to which a company’s HR Department is involved in implementing a solution. While many practitioners do not immediately consider HR as a key component of a FCPA compliance solution, it can be one of the lynch-pins in spreading a company’s commitment to compliance throughout the employee base. HR can also be used to ‘connect the dots’ in many divergent elements of a FCPA compliance and ethics program.
Even more importantly is the operationalization of compliance into the fabric of the business. One of the key indicia of compliance program effectiveness is how thoroughly each separate corporate discipline incorporates compliance into its everyday job functions. An active and functioning compliance program will literally be alive in each department in an organization.
HR has as many touchpoints as any other corporation function with employees. From interviews to onboarding, through evaluations and performance appraisals, even to the separation process; HR leads many of the corporate touchpoints. Each one of these touchpoints can be used teach, educate and reinforce the message of doing business ethically and in compliance with laws such as the US Foreign Corrupt Practices Act (FCPA), UK Bribery Act or any similar legislation.
The Department of Justice Evaluation of Corporate Compliance Programs (Evaluation) listed four specific areas of HR touchpoints in a best practices compliance program, found under Prong 8, Incentives and Disciplinary Measures
Accountability – What disciplinary actions did the company take in response to the misconduct and when did they occur? Were managers held accountable for misconduct that occurred under their supervision? Did the company’s response consider disciplinary actions for supervisors’ failure in oversight? What is the company’s record (e.g., number and types of disciplinary actions) on employee discipline relating to the type(s) of conduct at issue? Has the company ever terminated or otherwise disciplined anyone (reduced or eliminated bonuses, issued a warning letter, etc.) for the type of misconduct at issue?
Human Resources Process – Who participated in making disciplinary decisions for the type of misconduct at issue?
Consistent Application – Have the disciplinary actions and incentives been fairly and consistently applied across the organization?
Incentive System – How has the company incentivized compliance and ethical behavior? How has the company considered the potential negative compliance implications of its incentives and rewards? Have there been specific examples of actions taken (e.g., promotions or awards denied) as a result of compliance and ethics considerations?
When you consider the number of touchpoints, HR has in the employment life cycle, its role in facilitating the operationalization of compliance becomes clear. At each of these touchpoints, HR can take the lead in operationalizing compliance. Additionally, each touchpoint provides an opportunity for ongoing communications with a prospective employee, newly hired employee, seasoned employee or one moving up into the ranks of management about the need for ethical dealings and compliance with company values as set out in the Code of Conduct and operationalized in the compliance policies and procedures.
By using these touch points HR can demonstrated the shared commitment requirement found in Prong 2 of the Evaluation as well as provide ongoing communications as laid out in Prong 6. There are few other corporate departments which have so many employee touchpoints as HR. Every compliance practitioner should use HR to operationalize compliance through the variety of touchpoints and expertise available to a compliance professional through a corporate HR department. As a key first step, I would suggest that every compliance professional head down to your corporate HR department and have a cup of coffee with your functional equivalent. Find out not only what they do but how they do it and then explore how you can further operationalize your compliance program through these HR-employee touchpoints.
Over this next month, I will be considering the role of HR in all of these steps and more. Further, over the past 20 months there have been 3 Foreign Corrupt Practices Act (FCPA) enforcement actions which spoke directly to the role of HR and hiring in a compliance program. I will begin with these three cases and move through the employment lifecycle.
Three Key Takeaways