Employment separation and layoffs can present some unique challenges for the compliance practitioner. Employees can use layoffs to claim that they were retaliated against for a wide variety of complaints, including those for concerns that impact the compliance practitioner. Yet there are several ways that operationalization will help to protect your company as much as possible.

The reasons for these actions are to allow you to demonstrate that any laid off employee was not separated because of a hotline or whistleblower allegation but due to your overall layoff scheme. However, it could be that you may need this person to provide your compliance department additional information, to be a resource to you going forward, or even a witness that you can reasonably anticipate the government may want to interview. If any of these situations exist, if you do not plan for their eventuality before you lay off the employee, said (now) ex-employee may not be inclined to cooperate with you going forward. Also, if you do demonstrate that you are sincerely interested in a meritorious hotline complaint, it may keep this person from becoming a SEC whistleblower.

Three key takeaways:

For more information, check out The Compliance Handbook, 4th edition here.

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What should a company do when it desires to hire a CCO? To do so, a company needs to fully understand and appreciate what it needs from such a position going forward. Unfortunately, many companies do not have this insight at the beginning of the recruitment process. The key company stakeholders need to understand the full hiring process. Obviously, this will include HR and others involved in the hiring process for a CCO for the company. It could include the CEO, COO, CFO, CISO, Head of IA and others. They may need to rethink their approach to focus on what they will ask the new hire to accomplish because typically there is a disconnect between what the company thinks it needs and what it really needs.

Tom highlights the importance of developing a comprehensive job profile. Maurice Gilbert provides insights on the topic, emphasizing the need for companies to understand their specific needs and risks when creating a job profile for the CCO position. The podcast also discusses the importance of involving key stakeholders, setting realistic expectations, and considering professional growth opportunities and an attractive package for potential candidates. By involving key stakeholders in defining the role of the CCO and seeking the assistance of a professional executive recruiter, companies can find the right fit for their compliance program's success.

Three key takeaways:

For more information, check out The Compliance Handbook, 4th edition here.

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One of the ways to operationalize compliance and to drive it into the DNA of an organization is through a performance review. Indeed, the 2023 ECCP stated:

Incentive System…Have there been specific examples of actions taken (e.g., promotions or awards denied) as a result of compliance and ethics considerations? Who determines the compensation, including bonuses, as well as discipline and promotion of compliance personnel?

Most HR experts will opine that properly executed performance appraisals are crucial to organizational productivity as well as the development of employee skills and employee morale. Moreover, they can serve a couple of different functions for a best practices compliance program. First, and foremost, they communicate to each employee their job performance from a compliance perspective.

Tom emphasizes the vital role of human resources in incorporating compliance into performance reviews and appraisals, ensuring it becomes ingrained in an organization's DNA. He discusses the need for concrete examples of actions taken as a result of compliance considerations to demonstrate the seriousness of compliance. Fox provides practical tips for conducting effective compliance employee appraisals, including giving constructive feedback and addressing compliance shortcomings. The episodes stress the continuous nature of performance appraisals and their impact on compensation and incentives within a compliance program. By conducting multiple appraisals throughout the year, compliance can be embedded into the company culture and compliance failures can be promptly addressed.

Three key takeaways:

For more information, check out The Compliance Handbook, 4th edition here.

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Another area where Human Resources can help to more fully operationalize compliance is in succession planning. Succession planning is just as important as governance, enterprise risk management and strategic oversight. In other words, it is just as important. Sadly, many companies fail to give it the attention it requires. A PricewaterhouseCoopers (PwC) survey, found nearly one-half of the more than 1,000 directors gauged reported dissatisfaction with their companies’ succession plans. Imagine what that number would be if they took into account the compliance aspect of succession planning. Some of the questions you might consider are the following. How did you fully operationalize compliance into the business unit that you managed? What controls did you put in place? And then what did you do when you found out about it?

Succession planning in compliance is a critical and ongoing process that should not be left until the last minute, according to Tom Fox in this podcast episode. With a focus on prevention, detection, and response to compliance issues, evaluation and engagement of the Board of Directors are crucial. The importance of transparency, communication, and fully operationalizing compliance into the business unit is emphasized. HR's role in assessing candidates' views on business ethics and inculcating compliance values is highlighted. Continuous controls monitoring and sophisticated tools can help ensure compliance programs evolve effectively. Overall, these episodes provide valuable insights into the importance of succession planning and continuous evaluation in maintaining a successful organization.

Three key takeaways:

For more information, check out The Compliance Handbook, 4th edition here.

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Companies have finally come to realize that institutional justice and fairness are perhaps the most basic tenet of any successful workplace. If employees believe they will be treated fairly, it will engender a level of trust that can work to not simply motivate employees but lead to a more successful workplace and, at the end of the day, a more profitable company. This encompasses the entire lifecycle of the employment relationship, from hiring through separation. It works in areas as seemingly disparate as compensation and incentives, discipline, promotion, and internal reporting.

One key aspect discussed is the need for a robust whistleblower reporting system that encourages employees to come forward with concerns without fear of retaliation. Discipline and clear disciplinary procedures are also highlighted as crucial for maintaining credibility and preventing compliance violations. The fair process doctrine is discussed, emphasizing the importance of consistent and fair administration of discipline and the inclusion of compliance in employee evaluations and promotions. The episodes also emphasize the need for fair and impartial internal investigations to maintain employee trust. Overall, HR is shown to be instrumental in promoting a culture of compliance and ethical behavior.

Three key takeaways:

For more information, check out The Compliance Handbook, 4th edition here.

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In the DOJ’s 2023 ECCP, Incentives and Disciplinary Measures it stated:

Incentive System – Has the company considered the implications of its incentives and rewards on compliance? How does the company incentivize compliance and ethical behavior? Have there been specific examples of actions taken (e.g., promotions or awards denied) as a result of compliance and ethics considerations? Who determines the compensation, including bonuses, as well as discipline and promotion of compliance personnel?

In this podcast episode titled "Sales Incentives and Compliance," Tom Fox explores the risks and consequences of misaligned sales incentives. Using the Wells Fargo scandal as an example, Fox discusses how a flawed incentive program can lead to compliance failures. He emphasizes the importance of aligning incentives with compliance goals and highlights the role of human resources in implementing effective compliance programs. The podcast warns that sales incentive programs can become high risk or even illegal if not properly designed and monitored. It concludes by emphasizing the significance of HR's involvement in creating a more effective compliance program and its impact on overall organizational success.

Three key takeaways:

For more information, check out The Compliance Handbook, 4th edition here.

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In this podcast series, host Tom Fox explores the growing emphasis on clawback provisions in compliance programs and employee compensation. The Department of Justice and Securities and Exchange Commission now prioritize holding individuals accountable for misconduct, making clawbacks essential for promoting ethical behavior. These provisions allow organizations to reclaim incentive or bonus funds from employees who engage in misconduct, serving as a deterrent and ensuring accountability. The SEC has issued guidance through a final rule that requires companies to develop policies for recovering incentive-based compensation in the event of accounting restatements, while also prohibiting indemnity insurance for executives. These episodes provide valuable insights into the evolving landscape of compliance and FCPA enforcement, emphasizing the importance of clawbacks in promoting ethical practices and compliance with regulations.

 Three key takeaways:

1. The DOJ now mandates clawbacks in a compliance program.

2. The SEC has passed a clawback rule apart from the Monaco Memo.

3. Your clawback program should be well-documented. 

For more information, check out The Compliance Handbook, 4th edition, available on LexisNexis.com.

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The lack of personal consequences for senior executives responsible for corporate malfeasance is explored in this podcast episode. Executives are incentivized to take excessive risks, knowing they won't have to pay any fines, while shareholders bear the brunt of penalties. Proposed solutions include the concept of "skin in the game," where executives contribute a portion of their compensation to a pool of money that can be used to pay penalties. Another suggestion involves forfeiting the performance bond of senior management in the case of large fines. A third approach suggests creating a contract that would enforce a reduction in pay for failures of corporate governance. These proposals aim to hold senior executives personally accountable for compliance failures and align executive compensation with compliance objectives. HR professionals play a crucial role in designing and implementing positive incentives to foster a culture of compliance and ethical conduct within organizations.

Three key takeaways:

1. Perverse incentives are named that for a reason; they really are bad.

2. How can you create positive incentives in your organization?

3. There is a business response to this legal issue. Employ it.

For more information, check out The Compliance Handbook, 4th edition, available on LexisNexis.com.

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In this podcast episode, Tom Fox highlights the importance of incorporating compensation systems into a company's compliance program. He discusses how the DOJ and SEC view monetary structures as a way to reinforce compliance and reward employees who adhere to compliance programs. Fox advises compliance practitioners to revise incentive systems to align with the goals of the compliance program, ensuring simplicity, alignment with company values, and immediate behavior change. He also emphasizes the need to align compensation programs with compliance goals and shares examples of how this can be done effectively. These episodes provide valuable insights into the role of compensation in promoting compliance and integrating compliance into HR practices, emphasizing the importance of transparency and immediate action in implementing effective compensation structures for compliance.

Three key takeaways:

For more information, check out The Compliance Handbook, 4th edition, available on LexisNexis.com.

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In these podcast episodes, Tom discusses the importance of incorporating incentives and support systems into a company's compliance program. He presents six core principles for effective compliance incentives, emphasizing the need for simplicity, visibility, and institutional mechanisms to ensure their longevity. Fox also highlights the role of human resources in implementing compliance programs and the positive impact it can have on organizations. By understanding and implementing these principles, companies can create a culture of compliance, reduce the risk of unethical behavior, and enhance their credibility.

1.     Compliance incentives don’t have to be elaborate or novel. 

2.     Compliance incentives need supporting systems if they are to stick.

3.     Support systems are needed to reinforce compliance incentives.

4.     Compliance incentives need a “counterweight” to endure.

5.     Compliance incentive alignment works in an oblique, not linear, way.

6.     Compliance incentive initiatives can be implemented at all levels.

Obviously, this list is not exhaustive. Yet it is now more important than ever that you demonstrate tangible incentives for your employees to gain benefits, both financial and hierarchical, through doing business ethically, in compliance with your own Code of Conduct and most certainly in compliance with relevant anti-bribery laws. It is also a requirement that such actions be documented so they can be demonstrated to the regulators, if they come knocking. 

Three key takeaways:

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