Taking a Global Approach to Ethics and Compliance

While the ethics and compliance “movement” continues to gain traction in organizations around the globe, its origins can be traced to the United States. The 1986 Defense Industry Initiative, which was formed by 18 of the nation’s top defense companies to develop written codes of ethics for their employees, also fueled the growth of the ethics and compliance function in other industries.

The development and implementation of the Federal Sentencing Guidelines for Organizations in 1991 provided additional incentive for U.S. organizations to create ethics and compliance programs by establishing a uniform sentencing policy for individuals and organizations convicted of compliance-related felonies and serious misdemeanors.

However, it wasn’t until the start of the new millennium that organizations in other nations around the world began to place a stronger emphasis on ethics and compliance. Possible reasons include the proliferation of international business interests and activities that have fostered the growth of a more global-centric economy, ramped-up efforts to combat fraud and bribery perpetrated by U.S.-based business partners, and the need for closer scrutiny regarding how organizations were conducting business with other countries in general.

The Development of Ethics and Compliance Initiatives in Foreign Countries

Examples of relatively recent ethics and compliance laws and regulations that impact U.S. organizations conducting business abroad include:

  • Russian Federal Law on Personal Data (2006): Mandates that the personal data collected on Russian citizens must be processed and maintained on computer servers located with Russian borders.
  • International Standards Organization’s Compliance Management System Standard (2014): ISO 19600 provides guidelines for international organizations regarding the creation, maintenance and documentation of ethics and compliance programs.
  • U.K. Anti-Corruption Plan (2015): Intended to combine and centralize governmental, law enforcement and civil societal resources to combat bribery and corruption.
  • U.K. Modern Slavery Act (2015): Contains a provision which stipulates that organizations conducting business in the U.K. must document the steps they’re taking to prevent human trafficking.

Challenges U.S. Organizations Face When Conducting Business Abroad

In addition to ensuring compliance with ethics and compliance regulations, United States-based organizations face a host of additional challenges when doing business in in other countries:

  • Differences of opinion regarding critical ethics and compliance issues: U.S. organizations attempting to do business in other nations for the first time quickly discover that certain behaviors that are acceptable at home may be inappropriate or even illegal in the host country and vice-versa. For instance, the U.S. and European Union have extremely divergent views regarding information sharing and data privacy.
  • Attitude toward whistleblowing: Whistleblowing is not as strongly encouraged in many other nations as in the U.S., particularly when it comes financial incentives. The U.K. Financial Conduct Authority rejected the notion of the payment of “bounties” to whistleblowers, determining that the practice would encourage them to bypass the organization’s reporting system and make their claims to government entities.
  • Understanding cultural differences: U.S. organizations often face great difficulty when adapting to cultural differences and norms and how they impact conducting business in the host country.
  • Training issues: Consistent, effective ethics and compliance training becomes problematic in a global business climate, particularly when attempting to conduct face-to-face training of a diverse workforce that may be spread out around the world.
  • Reporting hotline implementation: Some organizations that attempt to extend their ethics and compliance reporting hotline services to their employees in other nations for reporting ethics and compliance violations find it more difficult to implement suitable hotline procedures and protocols.

Steps Your Organization Can Take to Improve Global Ethics and Compliance Performance

There are several steps your organization can implement in an effort to “globalize” your ethics and compliance programs:

  • Stay abreast of legal and regulatory changes: Regulatory changes can have a dramatic impact on your business and industry. One suggestion for staying compliant is to enlist the services of a local liaison in the host country who has a finger on the pulse on the regulatory and legal landscape.
  • Understand your organization’s obligations: Not every ethics and compliance guideline will directly impact the operation of your business in a foreign country. Attempt to identify the specific areas that affect your organization and make any necessary modifications. For instance, if you’re setting up a reporting hotline, make sure it complies with applicable privacy laws.
  • Keep an open mind: Adapting ethics and compliance programs and procedures to conform with regulatory and cultural differences is an ongoing process that requires flexibility. Make a point of requesting feedback from native-born employees, managers and business partners who likely have a better understanding of what constitutes ethical – or illegal – behavior in the host country. If something doesn’t appear to be working, don’t hesitate to make changes.
  • Develop and implement targeted E & C training initiatives: Provide specialized ethics and compliance training for all staff members who work with the foreign operation, whether they’re located stateside or abroad. If possible, enlist the services of managers or compliance professionals from the host country to conduct the training and/or provide input during the program development stage.

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