Media attention to corporate malfeasance and regulations tightening around the corporate environment generate many challenges for growing businesses in Ohio. Small or large, publicly traded or privately held, businesses must maneuver through hazardous terrain in order to comply with Federal Organizational Sentencing Guidelines, Sarbanes Oxley, Foreign Corrupt Practices Acts, as well as policies governing their particular field. An effective corporate compliance program serves as a vital tool that reduces business risk and helps create a streamlined organizational culture that keeps businesses healthy and competitive.

Corporate Responsibility

Under federal sentencing guidelines, a business’ failure to prevent or report crimes can trigger harsh fines, disgorgement of profits, imprisonment and embarrassing public disclosures that can damage company image[1]. Education on corporate compliance and ethics guidelines is imperative on all operational levels to make it effective, as a business can be held criminally liable for criminal acts carried out or aided and abetted by any one of its agents—from the lowest level employee to the highest board member. If a business is found not to have an effective compliance program, the government may place the business on probation and force it to adopt a government-authored program that is not only invasive, but may be costly and difficult to incorporate into the business culture. 

A Strong Compliance Program: Business Insurance

An effective corporate compliance program serves as insurance against criminal activity, and creates remedies to detected misconduct before they become reportable offenses. Under the sentencing guidelines, fines may be reduced where a business can prove it has an effective program in place and benefits are given to corporations who report offenses, and cooperate with authorities.[2] The revised federal sentencing guidelines not only defines an effective compliance and ethics program as one that exercises due diligence to prevent and detect criminal conduct, but one that also promotes a culture that encourages ethical conduct and a commitment to compliance with the law.[3] A new emphasis is placed on business cultures where every member of the organization is given responsibility and where all employees are invested in the new culture of accountability.

Tailoring an Effective Corporate Compliance Program

Courts and federal guidelines alike have made clear that the days when simply passing around an ethics policy was enough, are over. Businesses must take care that their compliance program isn’t just great on paper, but is workable—that it follows the legal guidelines while maintaining the distinct culture of the company. A too-detailed protocol may be too difficult to navigate while an overly general one may fail to direct employees to the correct channels when reporting possible violations, wasting time and money and defeating the purpose of the program. A compliance program must be tailored to the size, operational climate, and corporate vision of the business. Small and large organizations must maintain the same degree of commitment to ethical conduct, but smaller organizations may be able to meet those requirements with less formality.[4] For example, instead of having a distinct group overseeing corporate compliance, smaller business may be able to use available personnel and conduct training programs less formally during staff meetings.

Building an Effective Compliance Program

Whistleblowing.  Businesses must develop a system that directs employees to report prohibited conduct without fear of retaliatory action. Having a well-defined protocol helps create an environment of responsibility and accountability, and one that can remedy situations before they become reportable.

Record Retention. Litigation is costly, and where businesses waste much unnecessary expense is in meeting discovery obligations. New Federal and local Rules of Civil Procedure have placed emphasis on electronic data retention. A compliance program should include document retention and disposal policies, as well as email and computer usage policies to meet strict electronic discovery obligations.

Open Information Channels. In order to foster a culture of responsibility and accountability, from top to bottom, high ranking personnel have the responsibility to oversee procedural compliance. Education of employees should not be only through written materials, but in open dialogue and feedback, such as through training sessions.

Program Maintenance. An auditing system should be created that objectively measures the program’s effectiveness, its cost, and its compatibility to the business’ particular model. Due to ever-updated federal and state law, the supervision of experienced counsel is invaluable in maintaining a compliant and cost-efficient program.

Most businesses have a written ethics policy on hand, but to successfully implement, audit, and maintain a program is a process that may seem too costly for businesses and is often placed on the backburner. Ultimately the benefits of having such an effective prophylactic measure against government intrusion, fines, litigation, and even disgruntled employees far outweighs what cost it may take to maintain. What an effective compliance program offers businesses is peace of mind, and another way to streamline business and maintain a competitive edge.

The General Counsel Services Group at Walter and Haverfield have counseled small private ventures as well as Fortune 500 companies on business matters from start-up to wind-up. Our experienced attorneys are able to evaluate a company’s needs and build a corporate compliance program to safeguard their particular vision against government intrusion and litigation. We realize that a healthy business culture is one in which the organization aligns its actions with its articulated values, balances business risk and the cost of the policies it puts in place. This balance is something we can help you achieve.

About the General Counsel Services Group

Walter & Haverfield’s General Counsel Services Group provides public and private companies with small or no legal staff sophisticated and strategic legal counsel similar to that received from in-house counsel.  The service is provided with a controlled cost arrangement through a retainer agreement or alternative fee management and features the following:

• Led by a former general counsel of a Fortune 500 company with over 25 years experience in leading the legal functions.
• Includes a former general counsel with 26 years of experience in the health care/hospital industry.
• Senior attorneys with combined 60+ years of experience.
• Tailored to businesses of all sizes.
• Multi-industry experience.
• Recognition of costs versus benefits of legal services.

General Counsel Services integrates with all of our practice groups and offers across the board advice in real estate, mergers, acquisitions and divestitures, tax matters (for taxable and tax-exempt entities), environmental law, antitrust law, corporate governance, health law, intellectual property protection, labor and employment matters, governmental relations and other areas.  Industry experience includes medical devices, healthcare, broadcasting, construction, food brokerage, computer, automotive, machine tool, to name a few.

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