Training – protecting more than the company

We have written a lot about how to train local employees effectively. The arrest of four Rio Tinto employees in China underscores that training not only protects the corporation, but can also reassure and protect the local workforce. For multinationals operating in China, this may be a good time to refocus training efforts.

Whether or not the allegations against Rio Tinto are true, employees of multinational companies working in China are suddenly and understandably nervous. As a recent article in the New York Times indicates, business customs in China seem to have changed overnight, leaving employees wondering what they can and cannot do.  Employees of multinational companies in China are now worried about a number of traditionally customary business practices, including hosting meals for Chinese officials, for fear that they might face corruption charges. Focused, in-person training can provide detailed guidance and reassurance to local employees.  

In-person training can help employees distinguish between what is “customary and appropriate” and “customary and inappropriate”. It also allows for discussion and reinforces the corporate message that it is better to err on the side of caution in questionable situations. A discussion of local law requirements, company policy and hypothetical scenarios can help employees navigate the gray areas. While training won’t prevent a government enforcement action, it can make situations that would give rise to enforcement actions less likely.

 

Cost-Effective Anti-Bribery Compliance Strategies: Training Tip #2

Those conducting anti-bribery training often worry that they aren’t speaking to their audiences’ real concerns. They fear that employees will sit politely through two or three hours of training annually, convinced that the person presenting doesn’t really understand the local challenges and so can’t propose solutions. There are simple steps that can be taken to increase interaction with participants.

Because of the sensitive nature of anti-bribery training, many employees are reluctant to ask their questions in front of their colleagues. Most employees we’ve asked say they would prefer to pose their questions anonymously. It can be effective to offer two chances to ask questions. First, pass around cards and ask everyone to write one question that they hope the training will answer. At an appropriate break about half-way through the training, ask them to write a question based on what they’ve heard so far. The first round should be mandatory. Prior to the second round it can be helpful to give examples of the sorts of questions that usually come up: specific hospitality scenarios, like how to respond to the arrival of an uninvited spouse, or how the company expects employees to respond to requests for favors for customers, like contributions to favorite charities. By making the examples very practical, presenters can encourage employees to ask about the specific dilemmas they face. If the presenter is unfamiliar with the market, a call should be scheduled with management in advance to discuss recent trends or idiosyncrasies.

Although we hear a lot about regional differences and cultural sensitivities, the fundamentals of anti-bribery compliance don’t vary much. On the other hand, the details do. To the extent that a presentation incorporates rich local detail, it will resonate with its audience and elicit the sort of follow-up questions that can be enlightening for presenter and audience alike.

 

Training: When Americans are “International Consultants”

We asked in-house counsel and compliance officers to provide examples of issues that arose during in-person training that might not have been uncovered through any other form of training.  Most of the examples involved very specific questions about the scope of a definition:  is an employee of a partly-state-owned entity a government official?  Do gifts provided publicly at contract signing events, after the business has been awarded, need to be scrutinized for FCPA implications?

 

What follows is another example, provided by Vince O’Connor, Vice President for FCPA Compliance at L-3 Communications Corporation.

 

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“When I was appointed as the Compliance and Ethics officer, one of the many goals set for me was to train all “gatekeepers” (those involved in foreign activities) on the FCPA. One issue arose repeatedly.  When it came to defining international consultants there was some confusion as to whether a U.S. company located in the U.S. should be considered an “International Consultant”.  This is true in spite of the fact that our Policy states that an International Consultant is: “A person, partnership, association, corporation or other organization located in the United States or abroad, that is retained by the company to provide professional or technical advice relating to the international sale of the company’s products and services, to provide professional or technical advice relating to investments made by L-3 abroad, or to otherwise interact with foreign governments, political parties or foreign candidates for political office on behalf of the company.”

 

One employee asked during training about a consultant that advised his team on how to conduct business in several foreign countries.  When asked if the consultant ever traveled on behalf of the company to foreign locations the answer was “yes”.  When questioned further it turned out that the consultant frequently traveled to foreign countries with senior company officials and the visits included meetings with foreign government officials. Because the consultant was with a company official, the employee did not consider the consultant to be acting on behalf of the company.  One of the many dangers in this analysis is that the consultant may go back to the same foreign official without a Company official present, creating an impression that the consultant is representing the Company.  In fact, his very presence at the initial meeting may be sufficient for the government official to consider him a spokesman for the Company.

 

This issue, which represents a possible gap in an otherwise robust compliance program, would not have come to my attention if the employees in question hadn’t had a chance to ask their questions in a live training forum.”

 

 

 

 

 

 

Training the Ethical Audience

Employees who believe themselves to have a strong moral compass can be hostile to the suggestion that they need compliance training. Kate Atkinson of Miller & Chevalier describes this training dilemma and offers some suggested responses.

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“One of the more common challenges in anti-corruption training is how to train employees who believe that because they are ethical people, they will not get themselves or their company into trouble. These employees lull themselves and their companies into a false sense of security. In a sense, companies can overachieve on building a culture of ethics, and compliance can start to fall off, in small but important ways. In conducting compliance audits, it is not uncommon to find a pattern of compliance lapses alongside a high level of employee confidence in adherence to the program. Typically, those lapses appear in expense reporting, invoice review, contracts compliance, and third party due diligence and monitoring.

In these circumstances, training needs to wake up the audience and reinvigorate the compliance effort. Remind employees why compliance — all of the time, not some of the time — is critical. Set the stage by making clear that policies and procedures help the company and its employees bridge the gap between ethics and legal compliance, which overlap, but are not the same. Show how the program serves both as a real-time trip wire for potentially corrupt activity or other compliance failures, and as a record of the company’s compliance rigor should auditors or enforcement officials come looking with 20/20 hindsight. Delve into specific examples of lapses and near misses, and how those events if left unaddressed tend to multiply over time and create risk for the company and its employees. Thanks to active enforcement, there is always a case or two to help you illustrate the last stop on that slippery slope.”

 

Training: A European Perspective

Last week’s posting on anti-bribery training challenges generated a lot of interest. To follow-up, this week we will post a series of short pieces on training tips and challenges. We invited Jean-Pierre Méan to provide a European perspective. Jean-Pierre is the former General Counsel and Chief Compliance Officer at SGS, a leading international inspection company, and is now President of Ethic-Intelligence Switzerland. He has an extraordinary amount of experience managing these issues in some of the most challenging countries.

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Training is no doubt an essential element of any compliance programme. It would indeed be naïve to believe that disseminating a Code of Conduct necessarily means that those to whom it has been sent will read and understand it even though they may sign a document attesting to it. In order for a Code of Conduct to start to be effective, staff must be trained. In order for the message to remain alive, they have to be retrained at regular intervals.

But what is it exactly that has to be communicated? Those advocating a legalistic rules-based approach will argue that what should be conveyed in the training is a functional knowledge of the provisions of a Code of Conduct and related policies, such as the dollar limits applying to gifts made or received, while those favouring a values-based approach will want the training to transmit the underlying values, such as the likelihood that a gift will influence the recipient.

Not surprisingly, the values-based approach is prevalent in Europe where Codes of Conduct are essentially conceived as self-regulation tools of the corporate world, while the rules-based approach is prevalent in the United States where the main goal of compliance is to avoid or alleviate corporate criminal liability.

In order to be effective, training will have to incorporate both aspects. However, while the transmission of pure knowledge is unlikely to make much of an imprint if the underlying thinking is not assimilated, a good understanding of the values involved should enable staff to make correct decisions even if they do not remember the applicable rule. Indeed, those equipped with a solid ethical compass may not always make the right decision while operating in a grey area, but they will have no difficulty confronting difficult situations. By contrast, knowledge of the rules will not prevent major integrity failures in cases not covered by any (recognisable) rule.

 

Training: What Works?

Not long ago, at an anti-bribery conference in Chicago, the compliance officer for an American corporation told the crowd of fellow compliance officers, “You have to start out with the assumption that all marketing people are more or less criminals. You have got to pen them in with a set of rules as clear and sharp as barbed wire, or they will run wild.” The audience, almost entirely Americans, practically broke into applause.

In contrast, at a similar event in Europe, a participant asked in advance, “This isn’t going to be an American-style training session, is it? These people know right from wrong. They don’t need to be treated like criminals.”

So which approach is better?

This is an active debate in anti-bribery compliance circles: Should companies take a values-based or rules-based approach to training? These two approaches are often characterized as “ethics” versus “compliance.” A values-based or ethics approach assumes that employees want, and generally can be counted on, to do the right thing. Proponents of this style believe that there can never be enough rules to address every situation, and so an employer’s relationship with its employees must be based on trust. On the other side of the debate, proponents of the rules-based or compliance approach say that good employees need to know exactly where the line is so they can avoid over-stepping it, and that bad employees need to know at what point their behavior will be punished.

In reality, neither approach will work alone. Simply laying out the rules is a losing proposition because the issues and situations involved with bribery are too complex to render down to ten commandments— or a hundred. Furthermore, training that delivers a long, condescending list of dos and don’ts may work, but if the employees feel as if they are being scolded like naughty two-year-olds, it will inspire their contempt in return. On the other hand, appealing to the bright angels of everybody’s better nature will cause more than half of the crowd to cross their arms, roll their eyes and close their minds. There is also a real danger that poorly aimed training will compel participants, Goldilocks-like, to choose the option that is just right, overlooking subtleties and encouraging hypocrisy.

Another problem is that both of these approaches to training assume that a company’s employees are a community of like-minded individuals, sharing a single set of values, goals and risk-to-reward analyses. Like a school of fish, these employees are thought to swim collectively either toward safe water or away from danger zones. Such approaches ignore the diversity within a corporate community and, in so doing, miss the opportunity to speak to the different priorities of each employee. There should not be just two training styles, just as there are not just two kinds of employees.

Every company has some idealists in its ranks. These employees put their work life into the context of the greater community, even when the connections aren’t apparent to others. They are sincere in their commitment to good corporate citizenship and want their employers to go beyond what is strictly required of them–they want them at the front of the compliance pack. To launch into anti-bribery training with a list of rules and penalties is to squander the enthusiasm of this group. For this community, it is more effective to discuss the social, health and security problems that bribery spawns rather than to show slides of executives escorted out of court rooms in handcuffs. This group is concerned that bribery undermines fledgling democracies, enables smugglers to introduce potentially hazardous counterfeit pharmaceutical products into markets and makes it easier for criminals to ship guns, narcotics and people across international borders. It is important to inspire the idealists in your midst; they can be powerful supporters as you roll-out an anti-bribery program.

Another group of employees fall into the ethical majority. They may not be concerned about the global implications of their business strategies like the idealists, but this ethical majority certainly wants to know how those strategies will affect their company. This community prefers to work for a company with a good reputation. While idealists may want their employers to be at the front of any compliance pack, this group is content to have their company operating in the low-risk, low-profile, middle-of-the-pack. It is important for these employees to know how their marketing strategies, which may include wining and dining customers or sponsoring lavish events, can impact corporate reputation for good and for ill. In keeping with the ethics or valued-based approach to anti-bribery compliance training, these employees will understand the New York Times test: Would you be content to read about this conduct on the front page of the New York Times tomorrow? They need to hear how effective anti-bribery compliance can enhance the corporation’s standing in the community and, as a result, shareholder value.

A third group of employees is made up of the bottom-liners and box-checkers. They want to know what the rules are so they can shoulder up next to them and stay there. They want to do the absolute minimum necessary to stay on the right side of company policy and the law. They see little value in good corporate citizenship and prefer to leave ethical leadership to competitors, often assuming that it is an unnecessary expense and a drag on business. While they don’t set out to violate company policy or to violate any laws, they cut corners until tires are screeching. If your bottom-liners are in management positions, they’re probably sending the message to their teams that they must keep their eyes on the strict interpretation of the rules not because the rules have any inherent value, but because violations will incur the wrath of the law department or ethics office. These employees need to hear what the rules are with as much detail as can be provided. Finally, they need to hear that they will be held accountable for violations of these rules and encouraged to seek the advice of the department responsible for anti-bribery compliance when there is any doubt.

And finally, although it’s rarely discussed, all companies of any size have at least a handful of criminals—those who knowingly break the rules for their own ends. Here, a purely values-based approach is disastrous. These people will invariably participate in training at some point and won’t be moved by appeals to idealism, the likelihood of corporate reputational damage or even bright-line rules for business practices. Indeed, many trainers fear that the latter approach simply trains the criminals in more effective techniques to evade detection. This community–for as long as they’re with you–needs training that focuses on controls and consequences. These employees need to understand that the rules are enforced, that sanctions are imposed and, if true, that the company will offer up those who knowingly violate corporate anti-bribery policy to the enforcement agencies. These employees need to leave training asking themselves whether they look good in orange.

So how can anti-bribery training meet the varied needs of all these audiences? It isn’t as difficult as it sounds. Excellent training will address the priorities and goals, at least for part of the time, of each learner. Training should begin with a clear statement from senior management about the importance of the issue to the company. Opening remarks can weave together messages about good corporate citizenship in the global community and about the importance of the company’s reputation, while introducing the nightmarish alternative when companies get this wrong: Lengthy and expensive investigations, management distraction, disruption to business, roving compliance monitors, massive fines and, possibly, imprisonment. This should get everyone’s attention. Then the training should delineate the company’s rules and sanctions, discuss grey areas and direct employees to additional resources.

It’s often helpful, in closing, to align the company with the “good guys.” International crime of all kind requires bribery at some point: forged documents, smuggled goods, false certifications. Steering clear of these practices should be an easy sell to most of your audience. For the remaining few, well, hardly anyone looks good in orange.

This article was originally published by Alexandra Wrage in Ethisphere magazine in June 2008.

 

Toxic Transactions: Bribery, Extortion and the High Price of Bad Business

Last night in New York, at an event graciously hosted from his Director’s chair by Martin Weinstein of Willkie Farr & Gallagher, TRACE launched its new anti-bribery training DVD. OK, it’s a training DVD, but everyone got into the “red carpet” spirit while they watched clips from some of the 14 interviews. Produced by NBC’s Peacock Productions with much clanging of prison doors and occasional pole dancers (illustrating inappropriate hospitality), the DVD endeavors to make the topic lively and accessible.

Mark Mendelsohn of the Department of Justice and Cheryl Scarboro of the SEC talk about enforcement trends. Michael Mines of the FBI offers rare insight into the investigative tools available to that organization. Richard Alderman of the UK’s Serious Fraud Office speaks, well, briefly about their record on this issue. Mark Pieth and Nicola Bonucci provide the OECD’s perspective and Ngozi Okonjo-Iweala of the World Bank discusses frankly the cost of corruption to the developing world. Finally, Peter Solmssen and Brackett Denniston, General Counsels of Siemens and General Electric respectively, provide a candid in-house perspective.

Our thanks to everyone who appears in the DVD. This project was a lot of fun and will be, we hope, a timely addition to the antibribery training toolkit.

View a clip from the DVD here.