Over the period of past 12 months some very basic legislations brought out to the fore role of Corporate Compliance professionals. The Companies Act, 2013 mandated setting up of compliance systems. It also legislated OECD principles of good governance, though India is not yet a member of OECD. Board of Directors role in the management of companies has assumed an ‘orbit tilt’ in favour of Compliance & Ethics not just because the laws mandate it because of the good governance imperative. The SEBI Insider Trading Regulations for the first time defined and mandated role of a “Compliance Officer”. RBI prescribed Compliance as a critical theme for banks’ board deliberations. Many other legislations including sector specific regulations brought out highly regulated regime of Compliance. On one hand, we all are grappling with overregulation, on the other hand some legislative initiatives have attempted to simply the effects of complexities that existed due to redundant laws, archaic practices such as notarial attestations. Impetus on “Make In India” forced a constructive dialogue on “Ease of Doing Business”.
Looking at recent global development such as the US DoJ memo of 9/9 popularly refereed as Yates Memo seeks accountability of the individuals in the companies that perpetrated wrongdoing. To quote from the Yates Memo: “There are, however, many substantial challenges unique to pursuing individuals for corporate misdeeds. In large corporations, where responsibility can be diffuse and decisions are made at various levels, it can be difficult to determine if someone possessed the knowledge and criminal intent necessary to establish their guilt beyond a reasonable doubt. This is particularly true when determining the culpability of high-level executives, who may be insulated from the day-to-day activity in which the misconduct occurs. As a result, investigators often must reconstruct what happened based on a painstaking review of corporate documents, which can number in the millions, and which may be difficult to collect due to legal restrictions.” 9/9 Memo is probably a game changer not only in the US but also across the globe. We are experiencing stricter enforcement regimes that are crossing the boundaries.
There are five myths around doing ethical business (a) “It is is never going to happen to me”; (b)” everyone does it so do I”; (c) “laws are so complex that it is impossible to comply with all laws” ; (d) “I am doing so much good for public that my goodness will outshine my wrongdoings”; and most prevalent myth is (e)”I am so well connected that I can get away”. All these and other myths have vanished.
In India, we are at crossroads today. While territorial boundaries have vanished, barriers and territorial jurisdictions remain. We are experiences classic conflicts of (a) Overregulation v/s deregulation; (b) Bottom-line Shareholder Profit v/s Triple Bottom-line focus; (c) Principle based Regulations v/s Rule based Regulations; (d) Comply or explain v/s Comply or Perish . For analysing compliance we need to understand that firstly we all live in complex normative systems. The complexity of the normative systems vary from society to society and from country to country. Each of the corporate executive has some knowledge of few applicable rules relating to the business. Thus, the normal question that an executive asks is “What ought I to do?” One needs to ask oneself “What does law require from me?” If you ask former question, though you may have general intention to comply your motivation to do specific acts of compliance do not result from requirements of system of normative behaviour. At corporate level we must thus understand subtle differences and drivers of norms, intentions, obligations, actions and consequences. Compliance with thousands of obligations result in performance of tasks which is obligatory according to laws, however intentions to comply may be evidenced by various actions including a policy based approach. Intentions and commitments to one-self goes hand in hand. These cannot be driven only by fear of consequences. Those who choose to comply due to fear of consequences or consequentialist choosers probably cannot bring about change in mind-sets or change in behaviour patterns. Once we accept the “Compliance by Choice” all the conflicts vanish. You are complying for right reasons. Once we adopt “Compliance by Choice” it follows that self-interests, intentions and motivations are inconsequential questions needing no answers.
“Compliance by Choice” converts difficulty of doing business to ease of doing business, it brings about sustainability, value creation, impact and power to the business of your company.
Over past 8 years, we at Legasis worked with 450 odd companies through C-Mission ( Compliance Mission) in setting up IT enabled compliance systems that focussed on creation of robust action items and task lists under complex legal systems ( including Indian legal system). We also attempted to create awareness about consequences of non-compliance. The dialogue about cost of non-compliance vs cost of compliance needs no further elaboration. We are now moving to “Compliance by Choice”. I am confident that all corporations will join us in our endeavour to create sustainable compliant environment because we want it and not because someone tells us. “Compliance by Choice” is probably our corporate existence for right reasons.