Employees Are Key to Compliance

By Pamela Babcock Apr 2, 2014
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NEW YORK—Compliance programs, particularly in global organizations, aren’t one size fits all. Successful programs are holistic, make the most of HR and other employee ambassadors, and get their tone from the top.

“Compliance is a people business," Andreas Pohlmann, chief compliance officer at SNC-Lavalin Group Inc., told attendees of the Global Ethics Summit on March 20, 2014. He said his job is to persuade people to comply and behave ethically. This task is easier if the right people—with the right values who are carefully vetted—are in place from the beginning.

Paraphrasing a quote from Warren Buffett, Pohlmann said that when hiring, organizations should look for three qualities.

“It’s integrity, it’s intelligence, and it’s energy—and if you don’t get the first [one], the other two will kill you,” Pohlmann said. “We’re talking about people, and this can go wrong: that we do not screen them and we do not monitor our associates sufficiently.”

Navigating Crises

During his session, Pohlmann and Daniel Trujillo, senior vice president and international chief compliance officer at Wal-Mart International, discussed steps to set up a comprehensive compliance program and how to manage the aftermath of substantial compliance crises. They covered ways to lead a company down a better path, though did not specifically address crises in their own organizations.

Pohlmann joined SNC-Lavalin, a $7 billion engineering and construction firm based in Montreal, in March 2013, after serving as chief compliance officer for Siemens AG, where he oversaw the creation and implementation of a compliance and corporate governance system. His mandate at SNC-Lavalin was the same.

The company was—and some would argue still is—mired in controversy. Among other things, its former senior executives were accused of multiple acts of corruption. In 2012, SNC-Lavalin disclosed that some senior executives had made or approved $56 million in questionable payments.

In April 2013, The World Bank Group debarred SNC-Lavalin for 10 years after its misconduct relating to a Bangladesh bridge project, as well as misconduct in another World Bank-financed project.

Variables that Get Overlooked

Pohlmann has worked in crisis situations with three companies over the past 30 years, and, according to him, “tone from the top” is key to making compliance work. Be skeptical of executives who pay lip service by saying, “Of course we want compliance, but bring us the business.”

When he joined Siemens and, later, SNC-Lavalin, the new CEOs told him this: “We only want clean business, and if you do not get clean business, we won’t take it.”

That, Pohlmann said, is evidence of having the right tone from the top: “They are serious about walking the talk.”

Wal-Mart Challenges

Trujillo joined the company in October 2012, amid a federal bribery investigation.

In a February 2014 Wall Street Journal article, Wal-Mart said it expects to spend more than $200 million in the next fiscal year on investigations related to potential foreign bribery violations. In 2011 the discount chain disclosed it was being investigated by the Justice Department and the Securities and Exchange Commission for potential violations of the Foreign Corrupt Practices Act, which bars bribery of foreign officials for business purposes.

Trujillo said that when facing compliance crises, “You need to understand what happened, why did it happen, and how are you going to live with it?” Look at what other companies are doing, too, he advised, rather than focusing heavily on what’s going on inside your organization.

Before joining the retail giant, Trujillo spent 15 years in the oil and gas industry. His first step at Wal-Mart was to learn the business and its culture and to benchmark how many compliance issues other companies had. Today, Wal-Mart addresses 14 in every market: anti-corruption, food safety, anti-money laundering, antitrust, pharmacy, labor and employment, environment, privacy, consumer protection, licenses and permits, health and safety, trade, product safety, and ethical sourcing.

Trujillo said compliance leaders need “to control, to detect and to react in the right way” when confronted with possible violations. Having more than a dozen compliance issues to monitor may seem like a lot, but this increases the likelihood “of being able to capture things at the right time and to be able to react with the right response,” he noted.

Analyzing Crises

Another challenge, according to Pohlmann, is determining whether trust violations are due to a few bad actors or more systemic issues.

He often hears it’s just a few “bad apples,” but that’s not always the case. When he was brought on at SNC-Lavalin, Pohlmann admits, he didn’t have time to do a thorough compliance risk analysis—it would have taken two to four months, given the business’s global nature.

“What we did was simply to assume it’s high risk and said, ‘Let’s implement a global compliance program,’” Pohlmann recalled.

Face-to-Face Training Key

Compliance training is crucial, Pohlmann said, particularly in potential trouble spots around the globe.

Electronic training is useful, but it’s also critical to have in-person classroom training and workshops for employees working in sensitive functions like business development, procurement and government relations, so they can explore topics such as the importance of resisting facilitation payments.

“You need to look into their eyes, you need to train them, you need to give a face to compliance, and you cannot do it by hiring external consultants,” Pohlmann emphasized.

He said the best companies train representatives from legal, HR and procurement to “create the right understanding about what is behind compliance and use them as ambassadors for compliance.”

Customize Programs

When designing or modifying a compliance program, figure out what’s relevant to your organization. Know your business, and understand its culture.

“There are great ideas out there, but some of them there are not going to work in every company,” Trujillo said.

Companies also have different risk profiles. Although programs should be tailored to your organization, it’s fine to borrow components from other companies “to come to the ideal solution,” Pohlmann added.

Make It Real for Employees

After a crisis, share lessons learned. Employees “want to understand what has happened and how we addressed those incidents and what it means for an organization,” Pohlmann noted. He told SNC-Lavalin colleagues, “We hopefully have left the crisis and are in a transition period, but be assured we cannot afford it a second time.”

“It’s important to get to the hearts and minds of our people so that ethics and compliance does not remain an abstract issue,” Pohlmann said. “After all, it is their company.”

Pamela Babcock is a freelance writer based in the New York City area.

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