The Metropolitan Corporate Counsel, a publication dedicated to legal issues relevant to corporate lawyers, recently interviewed Alfredo Avila, Assistant General Counsel at Monsanto about how they approach FCPA compliance for acquisitions.
Monsanto recently acquired a US-based company with a Turkish subsidiary, and found during the due diligence the sub had made inappropriate payments to Turkish government officials. In 2005, Monsanto disclosed their own inappropriate payments made to Indonesian government officials and submitted to a three year monitoring program as a result, and Mr Avila talks about how their prior experience has affected policies going forward, including for this latest acquisition.
On the subject of codes of conduct:
Codes of conduct and compliance policies are important but are only the first step in assessing a compliance program. Monsanto believes that the biggest deterrent against unethical behavior is strong leadership.
I agree that codes of conduct are but the first step in ensuring compliance with the FCPA and other anti-corruption legislation. As an internal auditor, you want to assess whether the code of conduct has been read and signed by every relevant employee of the organization, and ensure that the code is complete and addresses issues covered by the FCPA. Typically new employees will receive the code of conduct when they join the company. Keeping the documentation to prove that everyone has agreed to the code is critical.
Assessing leadership is a much tougher job for an auditor. You will get a sense throughout your meetings and communications with senior management of their commitment to ethical business practices, and from there form an opinion. Of course if you already know there were past incidents of non-compliance, leadership is called into question and probably requires more substantive audit procedures to ensure compliance since the preceding events.
On the topic of embedding compliance into policies:
We had to reevaluate our policies for petty cash, travel and entertainment, inventory, delegation of authority and so forth from the perspective of the document trail. It made us formalize some practices into policies and reevaluate policies to make sure we captured enough detail so that an independent third party could find all his inquiries answered within the four corners of a document. That forced us to reconfigure policies and also reconfigure our expense recording so that our documentation captured more information. While this takes a little bit more time on the front end, it answers many more questions on the back end and contributes to creating a transparent culture.
Preparation and retention of documentation related to expenses is key to proving compliance with the FCPA. Any payments made to government officials, if they’re legitimate, will have appropriate evidence. I like the part at the end about creating a transparent culture because culture plays a huge role in establishing ethical traditions that can prevent situations like the ones experienced by Monsanto and their acquisition.
Read the full interview for more.