Wal-Mart’s bribery scandal in Mexico wasn’t the fault of its compliance program but occurred because its compliance program did not have the support of senior management, according to Foreign Corrupt Practices Act (FCPA) attorney Thomas Fox in Houston.
“It does not matter how good a compliance program is; if senior management is not behind it, it will fall apart every time,” Fox told SHRM Online
on May 2, 2012.
According to an April 21, 2012, New York Times article
, in September 2005, a Wal-Mart lawyer received an e-mail from a former executive with Wal Mart de Mexico describing how Wal-Mart de Mexico paid bribes to obtain permits to build and operate stores. After Wal-Mart investigators corroborated the whistle-blower’s assertions, executives at Wal-Mart did nothing but try to cover up the allegations, the New York Times
Wal-Mart, the world’s largest private employer, criticized the New York Times
piece, noting in an April 24, 2012, release that the allegations in the story are more than six years old.
“Six months ago, we launched an aggressive investigation under the auspices and supervision of the Audit Committee of the Board of Directors into the issues contained in the article. We are working quickly to determine what happened and are committed to getting to the bottom of this matter,” the company stated. “We will not tolerate noncompliance with FCPA anywhere or at any level of the company.”Global Compliance Officer
Wal-Mart noted that it had created the position of global FCPA officer. “This position will have responsibility for compliance with the FCPA in every market around the world and will oversee five FCPA compliance directors based in the international markets.”
Fox expressed surprise that Wal-Mart didn’t already have a head global compliance officer, describing that as “an accepted minimum practice.”
The thinking on how to structure the global compliance officer position has changed in recent years, he added. “It’s key for the officer to directly report to the board,” Fox remarked.
He said that typically the global compliance officer used to be in a company’s legal department, but now the position frequently is in separate compliance departments. Someone other than the general counsel needs to dedicate more time than a general counsel has to focus on compliance, he explained.
The U.S. Department of Justice, which enforces the FCPA, “feels it’s important for the chief compliance officer to be at an executive level,” Fox said. “You want the officer to be co-equal with the general counsel.”
If there are bribes, the Justice Department will prosecute, and some might go to jail. If there is bribery, the FCPA requires that there be a record of the bribes. If there is no record of the bribes, and Fox said there never is, then there is a separate violation of the FCPA, which is a civil matter enforced by the Securities and Exchange Commission. Working with HR
The compliance officer should enlist the help of HR to ensure compliance with the FCPA, Fox said. “How the compliance officer uses HR is very important” in compliance, he remarked.
It’s not unusual for HR to handle the initial triage when there is an alleged FCPA violation, often over a company hotline. HR often conducts part of the investigation of allegations. But there is much HR can do on the front end to prevent unlawful bribery abroad.
“HR needs to do some components of training. HR does not have to know every in and out of the FCPA,” he said, but HR has the expertise in rolling out effective training programs.
Also, HR should incorporate a compliance component in hiring by conducting credit and criminal background checks to find out if the person does business ethically, he recommended (without mentioning a company’s obligation to ensure that its background checks don’t violate Title VII of the Civil Rights Act of 1964—a hot topic in light of recent guidance
from the U.S. Equal Employment Opportunity Commission).
When helping select individuals for senior management, HR needs to be sure that the person has not done anything that would violate the company’s code of conduct, he said.
HR should put a compliance component into the company’s bonus program, Fox recommended. For example, 20 percent of the bonus might be at stake if someone comes close to violating a code of conduct. “It’s subjective, but a lot of parts of bonuses are subjective,” he said. When bonuses are tied to FCPA compliance, employees are incentivized to comply.
In its release, Wal-Mart noted it was ramping up its FCPA compliance efforts, saying that in March 2011 it initiated a worldwide review of its anti-corruption program.
“We are taking a deep look at our policies and procedures in every country in which we operate,” Wal-Mart said. “This includes developing and implementing recommendations for FCPA training, anti-corruption safeguards and internal controls.”Allen Smith, J.D., is manager, workplace law content, for SHRM.