June 20, 2016

Understanding Your Role as a Compliance Advisor

Alan S. Gutterman

When companies run afoul of laws and regulations the publicity can be intense and the adverse reputational and financial consequences to the company are generally quite significant. The post-mortem brings the board of directors to “center stage” and judges, regulators, investors, and pundits in the financial press will all be asking whether the directors were paying attention, asking the right questions, adopting and enforcing appropriate policies and procedures, and making it clear that “compliance matters” when setting goals and allocating rewards. Simply put, while directors are not expected to fend off every act of misconduct by executives, employees, and agents of their companies, they are responsible for effectively discharging their own duties and responsibilities relating to compliance and ethics programs.

The core elements of directors’ compliance-related duties and responsibilities come from several sources including the Federal Sentencing Guidelines for Organizations, judicial rulings, the listing requirements of the major securities exchanges, regulatory guidelines, and the conditions imposed by regulatory agencies when settling enforcement actions. While attention to compliance problems is generally most intense for larger publicly owned companies, directors of firms of all sizes, including privately owned companies, should consider “compliance” to be a significant part of their jobs. All directors have a fiduciary duty to their corporations and to the stockholders who are actual owners of the corporation and that duty will almost certainly be breached if directors fail to act with care in developing and implementing compliance and ethics programs and as a result the corporation and/or its agents are found to be culpable of misconduct and/or unlawful activity.

While many companies have vested managerial responsibility for compliance issues in a chief compliance officer, as opposed to the general counsel, it is obvious that the development and implementation of an effective compliance and ethics programs should be driven by the legal team supporting the company, both in-house attorneys and outside law firms. Your role as an attorney relative to “compliance” will vary depending on where and how you practice law. All attorneys wishing to provide value to their clients in the compliance area should be familiar with the standards and guidelines referred to above and why each of them is important. This will allow them to converse openly and knowledgeably with directors and members of the senior management team. All attorneys should also be aware of the basic elements of a comprehensive compliance program: surveying the legal environment; compliance audits and risk assessments; “buy in” from the board of directors; written compliance materials; organizational culture; education and training; program monitoring and implementation; program audits; internal investigations and document retention programs. Beyond that, a specific attorney might find that the following fits his or her particular situation in the compliance arena:

  • You are the general counsel of a large organization that is involved in a range of business activities that expose it to multiple areas of law and regulation. You may even be the actual or de facto “chief compliance officer” of the organization. In this position you need to have a thorough understanding of the essential elements of any compliance program and you need to recruit and oversee qualified and experienced subject matter experts in various legal areas who can develop and administer focused compliance programs and provide support to the organization’s nonlegal compliance infrastructure.
  • You are the senior partner acting as outside general counsel to an organization. Your role should be to act as the principal advisor to the directors of the organization with respect to educating them on their compliance duties and obligations. You should be prepared to guide the organization through the preliminary steps on the road to creating a compliance infrastructure and make available subject matter experts from your firm to assist in developing and implementing compliance programs in key areas such as employment, antitrust, intellectual property, and products liability law.
  • You are a senior attorney providing substantive advice on issues in a particular area of law (e.g., an employment law expert who regularly answers questions from clients on their current human resources problems such as a claim of harassment or discrimination or handling a sticky termination scenario). While helping your clients “put out fires” is certainly valued, you can also help them become more efficient users of legal services and avoid potentially costly problems by building the expertise necessary to assist clients in developing compliance programs and related tools.
  • You are the head of a one-person law department. Your role with respect to counseling the directors and members of the senior management team is essentially the same as your counterpart at the large organization discussed above; however, your world is likely quite different because you do not have the luxury of hiring additional in-house lawyers to provide compliance program support. In this situation you need to understand the basic elements of compliance programs and select experts from outside law firms to assist in developing a customized compliance program in a cost-efficient manner. Your own skills and understanding of compliance programs will help you strike the right balance and manage the costs of relying on an outside law firm.
  • You are a solo practitioner with an active portfolio of business clients. Again, you need to have sufficient basic knowledge to have the “compliance discussion” with those clients; however, you won’t be able to offer support from other attorneys in your firm and you will need to develop a network of subject matter experts that you can call upon to provide assistance for your clients. Fortunately, there are many small boutique firms that specialize in one area and can be relied upon to provide compliance-related support. You’ll need to know the essential elements of compliance programs and be able to interview attorneys from these firms to ascertain whether or not they can provide the support that your clients will need.
  • You are a new associate or law department attorney. You didn’t take “compliance” in law school and it wasn’t something that was covered in bar exam review courses. In fact, compliance may not be well understood by your supervisors at the law firm or in the law department. Nonetheless, you can and should study the questions above and make “compliance” part of your own skill set. Ask your supervisor about compliance and seek out opportunities to help with developing compliance programs. Work on drafts of compliance policies and management briefings for clients. Better yet, volunteer to help with training programs. It’s the best way to learn the basic requirements in a particular area and practice explaining them to clients.

Law firms, bar associations, and law schools tend to organize around substantive areas of law – business organizations, antitrust, contracts, real property, labor law. As such, key skills that cut across areas of law, such as deal making and compliance counseling, often get lost. It is true that “compliance” cannot stand alone without reference to particular laws and regulations; however, effective compliance counseling is invaluable to clients.

Additional Resources

For other materials on this topic, please refer to the following. 

Business Law Section Program Library

Is Your Compliance Program Like Big Foot? (PDF) (Audio)
Presented by: Corporate Compliance
Location: 2015 Annual Meeting

Compliance Programs: Best Practices and Ethical Challenges (PDF) (Audio)
Presented by: White-Collar Crime
Location: 2014 Annual Meeting 

BLS Committee Newsletters

Compliance Officers and Personal Liability: Could this be the Riskiest Corporate Job?
By Ted Banks
Corporate Compliance Committee Newsletter March 2015

Alan S. Gutterman

Alan S. Gutterman is the Publications Chair of the Corporate Compliance Committee and can be reached at agutterman@alangutterman.com. He is the Director of the International Center for Growth-Oriented Entrepreneurship (www.growthentrepreneurship.org) and the Business Counselor Institute (www.businesscounselorinstitute.org). Readers interested in compliance-related materials developed and distributed by Mr. Gutterman should contact him at the address above and navigate to the “Compliance” page at the website of the Center. Mr. Gutterman has also prepared an extensive collection of practice tools for compliance advisors that are available in Business Transactions Solution (Chapter 221) on Thomson Reuters’ Westlaw platform.