The $1.1 billion-dollar guilty plea and settlement by Swiss natural resource company Glencore International is sure to spark much commentary and debate. Glencore settled with the U.S. Department of Justice and the U.S. Commodity Futures Trading Commission for bribery and market manipulation conspiracies, in addition to similar settlements in the United Kingdom and Brazil. The terms require Glencore’s Chief Compliance Officer (CCO), along with its CEO, to certify that their anti-corruption compliance program is reasonably designed to detect and prevent violations of anti-corruption laws in any of the 35+ countries where Glencore does business. Seemingly, this is the first time such a requirement has been imposed by the DOJ on a CCO.
Critics have suggested that such a certification requirement is not only a bad idea generally, but a bad development for CCOs. They suggest it places an impossible burden on CCOs, pressuring them to either: (a) certify compliance programs without the access to the meaningful information necessary to assess their adequacy, thus subjecting them to the fines and imprisonment for false statements; or, (b) ultimately leave their jobs for refusing to certify.
If such certification requirements were routinely imposed for relatively lesser violations, they would not be as much of a practical concern for CCOs who are rigorously doing their job. Regardless, if the CCO certification requirement is indeed limited to the extreme offenders, it is harder to argue that its consequences are disproportionate. In reality, the actual consequences (intended or otherwise) of the CCO certification requirement are impossible to know until we see it in operation.
There are, however, tools used by some Compliance & Ethics and other departments going back to the Sarbanes-Oxley Act of 2002 requiring certifications by CEOs, CFOs, and auditors. Such tools have demonstrated certification requirements can be workable and beneficial for companies operating in good faith. Regardless of potential negative impact of certification requirements, affected organizations may become motivated to learn more, care more, and better support their compliance and ethics efforts. Such requirements may even lift the stature of the CCO, and thereby the compliant performance of faltering organizations.
Requiring the CEO to certify the compliance program alongside the CCO in the Glencore model provides an important level of cover for the CCO, ameliorating concerns the CCO does not have adequate resources in comparison to the CEO to assess the reasonableness of the compliance program. Ideally, the CEO and CCO will work together in the process.
Requiring the written certification for senior level executives resulted from the idea that, “there is something about seeing one’s name on the front of a subpoena that focuses the mind”. We have observed the career climbs of talented and ambitious executives who may not have been so concerned about compliance and ethics while on their way up, but who become quite concerned about such niceties when they reach the top—when they see their name as an individual on the front of a subpoena and realize they are subject to individual penalties for substantive violations, as well as for any false statements or obstruction during the process.
Some CEOs, before they sign a certification statement, will issue a similar certification statement to each of the relevant leaders of their business, who must certify accuracy as to their respective field to the CEO. That second tier of certification tends to focus the attention of the second tier of leadership. The cascade continues if the second tier requires a similar certification of their subordinates. Many compliance professionals, myself included, have observed how quickly the second tier and subordinate leaders focus on making sure that the information to which they certify is true, even in cases where they may not have previously been so concerned.
The potential signatories of such cascaded certifications are substantially less likely to blow off the statement if they know that it comes from their CEO or their boss, than if it merely comes from the CCO. And they are substantially less likely to sign without regard to its accuracy if they see language regarding truthfulness under penalty of perjury. And if we try in good faith to confirm that behavior is changing towards compliance, the certification exercise will be successful.
Michael Donnella is a Practice Professor of Law and the Director of Temple’s Center for Compliance and Ethics.