Where does “Tone at the Top” start. With any public and most private US companies, it is at the Board of Directors. But what is the role of a company’s Board in FCPA compliance? We start with several general statements about the role of a Board in US companies. First a Board should not engage in management but should engage in oversight of a CEO and senior management. The Board does this through asking hard questions, risk assessment and identification.
In a recent White Paper, entitled “Risk Intelligence Governance-A Practical Guide for Boards” the firm of Deloitte & Touche laid out six general principles to help guide Boards in the area of compliance risk governance. I have adapted them for the Board role around compliance.
All of these factors can be easily adapted to FCPA compliance and ethics risk management oversight. Initially it must be important that the Board receive direct access to such information on a company’s policies on this issue. The Board must have quarterly or semi-annual reports from a company’s Chief Compliance Officer to either the Audit Committee or the Compliance Committee. This commentator recommends that a Board create a Compliance Committee as the Audit Committee may more appropriately deal with financial audit issues. A Compliance Committee can devote itself exclusively to non-financial compliance, such as FCPA compliance. The Board’s oversight role should be to receive such regular reports on the structure of the company’s compliance program, its actions and self-evaluations. From this information the Board can give oversight to any modifications to managing FCPA risk that should be implemented.
There is one other issue regarding the Board and risk management, including FCPA risk management, which should be noted. It appears that the Securities and Exchange Commission (SEC) desires Boards to take a more active role in overseeing the management of risk within a company. The SEC has promulgated Reg SK 407 under which each company must make a disclosure regarding the Board’s role in risk oversight which “may enable investors to better evaluate whether the board is exercising appropriate oversight of risk.” If this disclosure is not made, it could be a securities law violation and subject the company which fails to make it to fines, penalties or profit disgorgement.
Three Key Takeaways