Companies are in great need of conducting their due diligence, especially when doing business with other companies on foreign soil. Larger companies that move forward in acquisitions of smaller companies tend to keep the existing management and have them run the business as usual. The problem we see developing is the culture of doing business, especially in other parts of the world, may not coincide with FCPA regulations. As the National Law Review writes on Goodyear’s settlements with the SEC, it is important to make sure every company does their due diligence especially when doing business with another company abroad or even when acquiring a business abroad. In the case of Goodyear, their mistake in failing to be compliant with FCPA regulations, originated when they did not properly re-train the management level staff of the new company they recently acquired, Treadsetter. This poses a huge risk to Goodyear, as their own policy, procedures and records were not transferred over. This allowed for the continuing of negative business practices and eventually the uncovering of bribery schemes in countries in Africa.
“This settlement demonstrates that thorough, risk-based FCPA due diligence during the M&A process is critical to protecting parent companies from any improper activity on the part of their target companies. After acquiring majority ownership over Treadsetters in 2006, the subsidiary continued to be managed by its founders and general manager. From 2007 through 2011, Treadsetters’ management regularly authorized and paid bribes; a practice that “appears to have been in place prior to Goodyear’s acquisition of Treadsetters.”
The importance of having a robust anti-corruption program is the responsibility of the company conducting business globally. With having a program in place internally is not enough; making sure your subsidiaries and anyone you do business with has these recourses is a must.
“The Goodyear case also highlights the importance of having – and enforcing – a robust anti-corruption compliance program which includes adequate internal controls.”
With companies doing everything to be compliant, it is vital to make sure policies and procedures are followed in way to make sure regulation requirements are met and compliance is in order. Getting to this level of compliance can be difficult and many companies have a hard time of getting a roadmap or guidelines to assist them. Source Intelligence Powered by CREATe is releasing a series of guidelines that focuses on the 7 key categories to a robust anti-corruption program. In the first release of this series we focus our attention to policies procedures and records and guidelines and resources associated with them. You can download this informative guidelines here.
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