This post originally appeared in Tom Fox’s FCPA Compliance and Ethics Blog and is reprinted with permission
What is the gold standard for scientific minds? You might not do better than Albert Einstein who was born on this date in 1879. While most lay persons remember Einstein for his theory on special relativity, and his attendant mathematical calculation that mass and energy were equivalent and could be calculated with an equation, E=mc²; Einstein actually won his 1921 Nobel Prize for an earlier paper which theorized that light is made up of individual quanta (photons) that demonstrate particle-like properties while collectively behaving like a wave. The theory was an important step in the development of quantum theory.
Many compliance practitioners often wonder about how their Foreign Corrupt Practices Act (FCPA) compliance program might compare with companies which are believed to have gold-standard compliance programs. Yesterday, in an article in the FCPA Blog entitled Is This The World’s Best Compliance Disclosure?, Dick Cassin wrote about the recent disclosure by Baker Hughes Incorporated in its 2012 10K filing, relating to FCPA compliance. Once upon a time, way back in 2007, Baker Hughes had the largest FCPA fine in the history of the world ever, that being $44MM. It was also under a three-year Deferred Prosecution Agreement (DPA) and a corporate monitor. Baker Hughes not only made it out from under the DPA and monitor but it is now recognized as having a gold standard compliance program.
Baker Hughes bases its compliance program on three core concepts. The first is its “Core Values of Integrity, Performance, Teamwork and Learning”. The second is the standards contained in the company’s Business Code of Conduct. The third concept is the laws of the countries where it operates. The Baker Hughes compliance program is referred to within the company as “C2” or “Completely Compliant.” The “Completely Compliant” theme is intended to establish the proper Tone-at-the-Top throughout the company. Based upon this, company employees “are consistently reminded that they play a crucial role in ensuring that the Company always conducts its business ethically, legally and safely.”
The 10K went on to list some of the highlights of the Baker Hughes compliance program. They included:
There are three areas from the Baker Hughes disclosure which I wish to highlight as components that a small to medium sized company should be able to implement at a relatively low cost. The first is the compliance oversight committee. The oversight committee puts a ‘second set of eyes’ on the compliance issues it reviews, whether it is third parties or additional compliance issues. The second is more involvement from the HR function regarding screening of potential hires and screening of employees for promotion to positions which might expose them to additional corruption related to risks. I would add that you should also use such screening to help make selections for moving employees into senior management positions, where their tone and attitudes towards compliance can grow in importance.
The third area is the company’s embracing of compliance as a key corporate culture. You can call your program “C2” or “Completely Compliant”, like Baker Hughes does, or give another name to the program. However the key is to remind employees of the crucial role that they play ensuring that your entity always conducts its business in an ethical manner. Much like reminding employees that safety is everyone’s responsibility; you can and should remind employees that doing business within the parameters of your Code of Conduct and your compliance program is something they should recognize as their responsibility as well.
If you are a small to medium size company your FCPA risk profile may not warrant the gold standard compliance program that Baker Hughes has put in place. However you should endeavor to put a program in place based upon the risks that you assess as applicable to your company. The Baker Hughes program gives you some guidance as to what the gold standard is and some solid ideas of components that you might implement.
One last thing, the Chief Compliance Officer (CCO) of Baker Hughes is Jay Martin. Jay regularly speaks at compliance conferences across the country. He has been quite generous to give his experiences in going through the compliance process at Baker Hughes. I am sure that he would be willing to speak to you as well.
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He was most recently the General Counsel at Drilling Controls, Inc., a worldwide oilfield manufacturing and service company. He was previously Division Counsel with Halliburton Energy Services, Inc. where he supported Halliburton’s software division and its downhole division, which included the logging, directional drilling and drill bit business units.
Tom attended undergraduate school at the University of Texas, graduate school at Michigan State University and law school at the University of Michigan.
Tom writes and speaks nationally and internationally on a wide variety of topics, ranging from FCPA compliance, indemnities and other forms of risk management for a worldwide energy practice, tax issues faced by multi-national US companies, insurance coverage issues and protection of trade secrets.
Thomas Fox can be contacted via email at firstname.lastname@example.org or through his website www.tfoxlaw.com.
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