In today’s regulatory climate, it’s vital that a business follows all applicable laws and regulations. Corporate compliance is an important and effective method to ensure that happens. It involves the design, implementation and monitoring of policies, training, procedures and practices. The basic purpose of corporate compliance programs are to prevent violations of the law and train employees on regulations relevant to their jobs.
These programs also serve the purpose of implementing compliance procedures and monitoring for violations of said procedures. Without compliance programs and procedures, your company is open to a serious level of risk and legal liability.
If your company does not currently have a corporate compliance program, it is strongly suggested to speak with an attorney specializing in corporate compliance.
The Basics of Corporate Compliance
Code of Conduct – This sets the tone of the corporate compliance program throughout the entire company. It lays out the ethical principles of the company and the principles by which officers, management and employees conduct their operations.
Compliance Standards and Policies – These detail the expectations and rules for each of the key areas in the company’s corporate compliance program. These standards and policies form a framework for the entire corporate compliance program.
Compliance Procedures – These establish the daily requirements and practices through which the often complex standards and policies of the corporate compliance program are implemented, followed and enforced.
Primary Areas of Concern
A company’s corporate compliance standards, policies and procedures must address all the primary areas of concern for regulatory compliance to be considered protected. Below are the primary areas of compliance that need to be addressed by businesses in the United States.
Companies with publicly or privately traded securities must be compliant with SEC regulations and any other securities laws – or face legal consequences such penalties or litigation. These cover things such as appropriate disclosures, acceptable accounting procedures and the release of pertinent financial reports.
It is unlawful for a company to engage in anti-competitive behavior. Corporate compliance procedures surrounding antitrust laws address the vetting of potential mergers as well as acquisitions to make sure they are in compliance with the law. These procedures also must address the avoidance of activities that could be viewed as limiting the market or restricting trade. A common example of anti-competitive behavior to be avoided is price fixing.
Companies that interact with consumers (the public) must ensure they are treating consumers fairly. The main areas of concern for FTC compliance include advertising, retail and e-commerce practices, fraud, financing, and environmental laws and regulations.
While these federal regulations comprise the majority of the concern here, it is important for businesses to be aware of and compliant with state and local environmental laws and regulations. The primary issues in regards to compliance include pollution, waste management, energy management and water use.
Foreign Corrupt Practices Act
Any companies operating outside the United States are required to comply with the Foreign Corrupt Practices Act (FCPA). This prohibits bribery and it’s important that corporate compliance policies are written and executed in a way that prevents foreign employees or agents from using bribes. It is also important that these policies ensure all financial accounting procedures are clear.
Management of Facilities
All facilities of a company must be in compliance with any applicable codes, laws and regulations of the location in which they reside. These include but are not limited to: OSHA compliance, DOT compliance, zoning laws and ordinances and any other policies related to facilities management.
Compliance Program Training
In order for a corporate compliance program to be successful, it must have sufficient training programs to ensure all personnel are aware of their duty to follow compliance standards, policies and procedures. It is vital that all officers, employees, contractors and any third parties involved with the company understand any pertinent laws, regulations, corporate policies and the types of conduct prohibited. In order for the program to work, personnel must be aware of how to report violations of corporate compliance. A company’s training program will be under serious scrutiny in the event of a regulatory violation, so it is vital that all companies have strong training policies and procedures.
Monitoring and Auditing for Corporate Compliance
For corporate compliance goals to be achieved, there must be compliance monitoring and auditing conducted on a regular basis. These must be able to measure compliance accurately in real time to expediently detect and correct violations of policies. The monitoring aspect of this serves to recognize and fix gaps in compliance on an ongoing basis. Auditing is conducted on a yearly or quarterly basis to address any compliance issues missed by the regular monitoring programs.
Frequently Asked Questions
Are there potentially other areas of corporate compliance that a company should be concerned about?
- Yes. Every company is different and some companies will require compliance in areas that others won’t. One of the benefits of speaking with an attorney specializing in corporate compliance is that they can help you understand what areas of compliance your company should be concerned with.
Is a corporate compliance program really necessary for all companies?
- Yes. Regardless of size, what industry a company is in, or how far their reach is, all companies must have some sort of compliance program to ensure they are complying with any laws and regulations relevant to them.