THE FOUNDATION OF PREVENTIVE LAW
IN CORPORATE AMERICA
by Gary W. Boyle
Senior Compliance Counsel
The Williams Companies, Inc.
It is axiomatic that in-house counsel in today's complicated business world must practice preventive law. The high cost of claims and litigation, to say nothing of the damaging impact of a public claim of wrongdoing, is well publicized. The less obvious costs of legal problems such as lost staff time and attention are difficult to evaluate but are certainly a real cost. The economic considerations of this equation demand the practice of preventive law.
Against a background of universal agreement that preventive law is desirable (or perhaps required) those of us responsible for corporate preventive law must find a way to make such a practice realistic notwithstanding the real world concerns related to costs and the increasing complexity of the modern business world. One of the now popular methods for making preventive law real is the adoption of a compliance program. While the decision to implement a compliance program may be easy and obvious, the effective implementation of such a program is significantly more challenging and depends upon a sound foundation.
Modern corporate compliance programs were born out of a desire to take advantage of the provisions of the federal criminal sentencing guidelines but they deliver benefits well beyond criminal sentences. The guidelines grant an organization convicted of crime significant leniency if the organization has adopted and implemented an effective compliance program. The guidelines prescribe seven elements of an effective program, all of which are intended to gauge whether a preventive law program is really intended to prevent legal problems.
A complete discussion of preventive law in corporate America must address each of these elements, but there are certain aspects of establishing an effective compliance program that require closer examination if practitioners of preventive law want to assure that their program is really effective. The most important aspect of an effective compliance program is its foundation. An effective program must be based on a cultural adoption of a formal set of values and beliefs.
Core Values and Beliefs
Williams has adopted a set of Core Values and Beliefs. The beliefs are written down in fairly simple language and are available to every employee almost wherever they turn. A copy of the Williams Core Values and Beliefs are attached to this essay. They serve not as a form to be adopted by other organizations but rather as an example of a values statement that, if heartily adopted at the highest levels of an organization, will form the foundation on which a compliance or preventive law program can be based.
The fact that a set of values is adopted in writing is a critical first step. The written adoption of a system of beliefs gives those beliefs greater emphasis in the organization and provides a checklist against which business decisions, behavior, and even thought processes can be measured. The writing facilitates discussion of the beliefs, the manner in which they are stated, the polarities among the different beliefs, and the meaning of the beliefs in everyday business. These discussions help transform the stated beliefs into a corporate culture.
Other steps are critical to assuring that the stated beliefs become part of the organization's culture. They must be justified by the needs of the business rather than by the need to implement a compliance program. They must be consulted and used on a regular basis when the company is determining a course of action. For example, the need for compliance training must be based on the interests expressed in the values statement rather than on a perceived need to take advantage of the criminal sentencing guidelines. When an organization adopts policies or procedures for the guidance of its employees, those guidelines must be based on the statement of beliefs and no policy should be adopted unless it is required by one or more of the statements. Numerous other examples could be constructed but the point is simple. The statement of values and beliefs must live and breathe every day at every level of the organization.
The Critical Role of Senior Management
Perhaps the most important step in the life of a values statement (and therefor in the life of a compliance program) is the real and wholehearted adoption of the stated values by the most senior members of the organization. An honest adoption can be promoted in several ways. First and foremost, the person at the top of the organization (and every other critical thought leader) must believe in the statement personally and professionally and must be committed to making it part of the corporate culture. This means the leader of the organization must base his or her actions on the organization's stated values and must make employees and others realize that the stated values will be the basis for his or her actions. The leader must behave consistently with the organization's beliefs at all times. In short, the person at the top must walk the walk and talk the talk.
If an organization's CEO is already committed in such a manner, the organization has accomplished an enormous step toward creating a culture that will be the most important part of the organization's effective preventive law program. His or her actions, if properly presented, will filter through the organization in stages and in a relatively short period of time, the organization will generally act in accordance with the company's values. Assuming those values are properly motivated in the first instance, a preventive program of the highest caliber will be well developed.
Once the commitment of the CEO is assured, the preparation of the statement must begin. That process will be much more likely to result in CEO buy-in if the CEO is directly and intimately involved in the preparation of the values statement. This step is critical in assuring that the CEO will really adopt and use the values statement and even more important in assuring that the CEO will make it clear to other members of the organization that he is being guided by that statement in everything that he does. The group that records the values statement should include all other significant opinion leaders in the organization.
Making the Core Values and Beliefs Available
If the statement of the organization's beliefs is expected to flourish in the organization and become part of the organization's culture, it must be made readily available to the members of the organization. Availability includes several important concepts. First, the statement must employ language that will be understandable by every employee. Indeed, it must be stated in a manner that every employee can readily embrace and that every employee will be proud to share with others outside the company. The Williams Core Values and Beliefs is an example of a statement that can readily be understood and embraced by each of the company's 24,000 employees.
In addition to being easy to read and comprehend, the statement must be made physically available to the organization. At a minimum, the statement must be distributed in various easily displayed forms. Williams provides large framed versions of its statement to all of its work and leisure locations. The company also provides each employee with a desktop version and even a pocket-sized statement. An employee cannot be at work for more than a few minutes without seeing a prominent display of the Core Values and Beliefs.
Finally, the organization must assure that the CEO relies on the statement in a public fashion consistently and constantly. The statement must be the basis for every action the CEO takes and the CEO must make that fact clear to every employee.
This essay has emphasized the importance of a properly prepared and endorsed statement of a corporation's values and beliefs as the foundation for a truly effective preventive law program. This should not be read to suggest that the other elements of an effective compliance program will take care of themselves. In fact, those elements can only be effectively implemented with a great deal of hard work and commitment throughout the organization. A quality preventive law program must include, for example, internal human resources dedicated to the success and administration of the program, high quality training, and consistent treatment of employees who violate company policies. My emphasis on the values statement and its adoption as part of the corporate culture should, however, make it clear that, without the proper foundation, no amount of hard work and commitment will create an effective preventive law program.
CORE VALUES AND BELIEFS
Integrity. Integrity must not be compromised. Honest relationships and trust are essential for long-term business success. We deal fairly in all our business relations.
Investors. We are committed to providing our investors an attractive return over the long term.
Customers. Customers are the essence of our business. Customers are all the parties with whom we deal. We work to satisfy our customers' requirements and anticipate their expectations. To succeed, we must work with our customers to help make them winners, too.
Employees. People are the Company's most valuable resource. Employees possess immense powers of innovation, imagination, skill and a desire to accomplish something of significance. Working as a team enables all of us to realize our full potential.
Communities. We recognize and enthusiastically accept our responsibility to the communities we serve, through acting as a good neighbor and through involvement and support for community activities. We are committed to protecting the public, the environment and our natural resources by operating in a safe, reliable manner.
Entrepreneurial Spirit. We maintain a corporate culture that values originality, invention and creativity, and that nurtures these qualities through openness and reverence for the entrepreneurial spirit.
Tolerance for Risk. The Company's willingness to take risks in deploying new technology and investing in large capital projects is central to its culture and it's success.
Efficiency. Efficiency means the difference between success and failure. We will relentlessly pursue a more efficient way to do everything we undertake.
Autonomy of Operating Units. The autonomy of operating units is important to promote focus, fast decisionmaking and ultimately commitment, which is essential for success. At the same time, cooperation must exist so that operating units work efficiently together and share ideas. Autonomy and entrepreneurial spirit go hand in hand.
Change. We welcome change for the opportunities it offers.
© 1998 The Williams Companies, Inc.