C for Compliance in Japan Inc.
“Good laws have their origins in bad morals” quotes Macrobius, the Roman Writer.
In any legal system, may it be Common as has been adopted by India and the UK or Civil as has been adopted by some of the European countries, the primary origin of any law is a crime or indiscipline in the society. Law is introduced into the society to correct the wrongs and to discourage the wrongdoers from committing the same crimes. In other words, wrongs exist and hence do the laws..!
An example can be cited from a few pieces of legislation from different areas of laws:
In Finance laws, Sarbanes-Oxley Act of 2002 also known as the Public Company Accounting Reform and Investor Protection Act was enacted as a piece of US Federal legislation to ensure the accuracy of the financial information of a corporation, the need for enactment of which arose from a series of corporate and accounting scams. Similarly, in the domain of labor laws, the laws related to abolition of bonded labor, contract labor, etc. were introduced based on the need of protecting rights and interests of these labors.
These examples clearly suggest that enactment of laws has many a times been a corrective step towards the elimination of indiscipline in the society. Such corrective action by way of introducing stricter laws should ideally reduce the number of such crimes and indiscipline in due course of time. However, in spite of this corrective action, the newspapers and media are still able to earn their bread and butter everyday relying upon increasing number of scams and crimes happening in the society. Thus, it is clear that a mere corrective action is not enough and the situation calls for a preventive step in the first place. “Prevention is better than Cure” goes without saying. The need of an hour is a tool that prevents a person from committing the very action of crime and indiscipline in the first place and to give secondary importance to a corrective action i.e. enactment of sanctioning codes to cure the scenario. In view of this necessity, Compliance and Ethics management has proven to be very efficient and effective while serving as a preventive tool for indiscipline in the society.
Compliance simply means the act of complying with the applicable statutory as well as regulatory legislation. The term ethics is a set of morals and principles that a person possesses without any interference of legislation. Michael Joesephson, the President and Founder of Josephson Institute of Ethics, clarifies the difference by defining these terms as “Compliance is what we must do; ethics is about what we should do”. Compliance management can be termed as the process of identification of compliance and implementing it in such manner as required by law. Compliance and Ethics management, as a tool, has proven its efficiency not only with respect to a single natural person but also for an artificial person i.e. a corporation. Due to a huge number and complicated nature of the compliance that a corporation has to comply with, Compliance and Ethics Management is indeed primarily customized and best suited for a corporation. The tool enables a corporation to focus on achieving its goals and targets when its legal compliance are completely taken care of by this tool and the non-compliance are prevented at every stage of its functioning.
Compliance and Ethics Management program as an efficient tool of prevention of any non-compliance may be reaffirmed by citing a recent case of Non-prosecution Agreements (NPAs) entered into by Securities and Exchange Commission (SEC) with one of the Argentine Companies. Non-prosecution Agreements are the written agreements that are entered into by the SEC in which the SEC agrees not to take any enforcement action against the entity if it agrees to co-operate fully and truthfully with the investigations. It entered into such NPAs with one of the Argentine companies in relation to the settlements of violations under Foreign Corrupt Practices Act (FCPA). SEC chose to put this tool of NPA to use due to this Company's prompt initiative in reporting of its non-compliance. The Company was able to take such an initiative primarily since it implemented Compliance and Ethics Management Program in the organization. The non-compliance and misconducts were discovered by the Company as a result of adopting measures to improve its worldwide internal controls and compliance efforts, including implementation of an FCPA compliance training program in Argentina. The SEC took into account the significant remedial measures undertaken by the Company, including a comprehensive new compliance program throughout its operations. Among Company’s remedial measures have been new compliance training, termination of employment and business arrangements with all individuals involved in the wrongdoing, and strengthening its internal controls and its procedures for third party due diligence. The Company also conducted a risk assessment of its major operations worldwide to identify any other compliance problems. The Company has ceased operations in Argentina. Thus, Compliance-oriented steps taken by this Company and SEC’s decision of entering into NPAs with the Company only reiterates the efficiency and effectiveness of the Compliance and Ethics Management as a preventive tool.
Benjamine Disraeli, a former British politician opines “When men are pure, laws are useless; when men are corrupt, laws are broken”. This can be interpreted as a fact that the laws remain as mere corrective written instructions for maintaining discipline in the society. It is indeed the process of managing compliance and ethics that prevents this indiscipline from occurring in the society in the first place. It is the Compliance and Ethic Management that prevents the very enforcement of sanctions given under the laws against a person and its aftermaths. Though, the strength and potential of the Compliance and Ethics Management tool is highly untapped at the moment, the cases such as that of the Argentine Company will soon reveal its hidden significance and bring metamorphic change in any legal system.
(Please Note: This is only a research based article with the support of the Bibliography mentioned herein. It only provides information and personal analysis concerning the given topic.)
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