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Do the Right Thing

Pharmaceutical and life sciences companies have long been a popular target of government investigators in the US and Europe. Now, other countries are also following the trend – for example, China recently opened a far-reaching investigation into the activities of pharma companies within its borders.

Contractors are not immune to such challenges, as recent news reports have continued to highlight. Somehow, despite years of effort to perfect compliance policies and programmes, new investigations regularly engulf the industry. Chief executive officers and general counsels must be asking themselves, “Why does this keep happening to us?” Or, to put it differently, “After all the time and money spent on compliance, why do things keep going wrong?” 

To answer these questions, it is useful to start by refuting some common misconceptions about the causes of these kinds of scandals. Compliance breakdowns are rarely caused by a deliberate corporate strategy of deceit. In other words, few chief executives aim to get ahead by bribery, money laundering or cheating. 

Similarly, large corporations rarely lack legally accurate compliance policies. Indeed, the vast majority of large corporations have rules in place that expressly prohibit their employees or agents from engaging in illegal conduct. Instead, what causes most compliance programmes to breakdown is the failure to implement and track compliance with the policy. In short, it is the failure to make the compliance policy operationally effective.

Policy Training

In order for legal compliance policies to become operational, companies must train their employees on the policies; provide a means for employees to inquire about the policies; track their compliance; and investigate and respond appropriately to allegations of wrongdoing. It is in these later stages of compliance that most legal failures originate. For example, a policy that prohibits inappropriate gift-giving can only succeed if employees know what the policy does and does not allow. In the same way, employees meeting competitors in perfectly normal and appropriate circumstances can easily veer into anti-competitive behaviour if they do not understand the wider legal parameters. Compliance breakdowns are almost inevitable if even employees who want to do the right thing do not know exactly what that is, or who to ask when questions arise.

One part of the solution to this problem is regular online and face-to-face training. But training alone is not enough. Employees must have ready access to the information necessary to apply the policies in their day-to-day work. Companies must be able to track employees’ questions and actions related to the policies, so that management learns of potential problems or misunderstandings before small issues become scandals.

Effective Framework

Many people see this problem and observe that the solution is creating not just compliance policies, but a “culture of compliance”. They then state the truism that culture is set by the top of the organisation and, as long as the top models a culture of compliance, the company will follow. Obviously, an ethical culture and setting a good example are absolutely necessary to ensuring legal operations. There is no doubt that if employees perceive that senior management act unethically, they will follow suit. However, this does not mean that a good example alone will be enough to ensure ethical behaviour by lower-level employees. Instead, an effective compliance framework requires systems and processes that constantly remind and encourage people to do the right thing. A well-implemented compliance policy will both define and reinforce a good culture, not the other way around.

Of course, compliance has to target not only the bulk of employees who sincerely want to abide by the rules, but also the typically small minority who are prepared to ignore the rules for their own benefit – say, an amoral employee whose bonus depends entirely on performance. For these employees, it is all too easy for compliance to become victim to the allure of the next sale or a lucrative bonus. To address such risks, compliance must not only educate and exhort staff, it must track them as well.

Putting it Right

In practice, compliance programmes must leave the realm of the theoretical and exist very much in the day-to-day practical operation of the organisation. Staff must realise that the long-term health of the organisation depends as much on the success of its compliance programmes as on its sales. Employees must understand how the policies apply to their daily life and know how to implement them. The policies must also be accessible, both in the literal sense – can employees find them when they need to consult them? – and also in the figurative sense – do employees understand them when they read them?

The traditional approach to compliance – based on the existence of accurate but static policies that, in practice, languished on an intranet or gathered dust on a bookshelf – is in need of reform. This pressure comes not only from government investigators, but from employees themselves. Though everyone may dread the mandatory health, safety and compliance lectures, employees appreciate easy-to-use tools that help them respond appropriately and in a timely manner when compliance questions or issues arise.

Similarly, executives and boards are increasingly looking for tools to help them monitor and take appropriate actions to prevent compliance failures. Indeed, almost the only feeling worse for a corporate board than learning about a dawn raid by a government authority, is realising that no one in senior management had a clue about the problem that led to the raid. Technology provides the opportunity to improve employees’ ability to understand and interact with the compliance rules while, at the same time, granting executives and boards insight into what is really going on at the lower levels of the company.

New Approach

An innovative approach to compliance being pursued by a number of companies is the introduction of software applications that help simplify the day-to-day operation and implementation of compliance. The applications are available on smartphones, tablets or laptops, and make compliance policies come alive, by providing instant access to interactive information. Removing what many see as the barriers that often keep employees from reviewing compliance policies at a time when a mistake could prove devastating, the approach empowers employees and puts answers in the palms of their hands. Moreover, by providing instantly accessible and relevant information tailored to the employee’s specific question, it reduces the risk of staff is understanding complex policies that are, by necessity, written to cover many different situations.

Imagine the scenario where an overseas sales representative or third-party agent wants to give a gift to a business contact. Rather than consulting the company’s entire global anti-corruption policy – which might run to several pages – a simple application can provide a clear answer as to whether the rules allow him or her to give a gift to a particular person and, if so, what kind of gift may be appropriate. If the policy requires prior approval for the gift, the software application can make the process easy, efficient and, perhaps most importantly, trackable.

Indeed, it is the last point – the software’s ability to track employees’ requests and approvals – that most excites compliance professionals. Once implemented, a software-based compliance application allows them to make data-driven compliance decisions – something that, to date, even well-organised companies have struggled to achieve. This enables them to identify potential compliance hotspots before problems are allowed to fester, which means limited compliance budgets can be spent more effectively.

Moreover, since the data collected by compliance software applications remains in a secure database, it is also far easier to conduct internal investigations after the fact. Instead of forcing lawyers or investigators to trawl through employees’ emails to understand what requests and approvals were sought for suspect gifts, the applications make that data easily available in a searchable form, greatly reducing the cost of compliance investigations.

Positive Culture

Effective compliance programmes require an approach that is tailored to the needs, markets and risk profile of each individual organisation. Customised software tools designed to address the typical shortcomings of compliance programmes hold the promise of greatly easing compliance implementation and oversight. In the long run, this will not only preserve a company’s reputation, it will reduce the cost of such programmes. By embracing the opportunities presented by technological innovation – already being used successfully across other heavily regulated industries – coupled with a strong positive corporate compliance culture, pharma companies and their contractors will be in a stronger position to develop a preventative environment, where compliance can be assured on a global scale.

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Seth Berman is Executive Managing Director and UK Head ofStroz Friedberg, a risk management, investigations and intelligence company. He supervises digital forensic, internet investigative and electronic disclosure assignments for major corporations, law firms and government agencies involved in criminal, civil, regulatory and internal investigations. Seth was previously an Assistant Attorney in the Criminal Division of the US Attorney’s Office for the District of Massachusetts.

Seth Berman
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