A View from the Front-Lines of Compliance in Mexico
Today, I am pleased to welcome Patrick Henz as a guest contributor. Patrick started his career in Compliance at the end of 2007, when he was responsible for the implementation of the Siemens Anti-Corruption program in Mexico and several Central American and Caribbean countries. Together with these tasks, he gained valuable insights into global Compliance programs, with a focus on Latin America. Since 2009 in his role as Compliance Officer he is responsible for an effective Compliance program, based on prevention, detection and reply. With these means, he defines Compliance as a pro-active function, being perceived as guardian, expert and facilitator. In total he lived and worked in Mexico from 2003 to 2013. Thus, Patrick brings his perspective from the “front-lines” of Compliance.
Where Compliance plays a key role, Patrick actively promotes the idea at university workshops and conferences (including the ACI Compliance Boot-Camp 2013 in Houston). He was twice President of Honor of Marcus Evans’ Latin-American Corporate Compliance Conference (2011 and 2012 in Mexico City) and co-founder of the Ethics & Compliance Forum in Mexico, including editor and co-author of the Ethics & Compliance Manual, published in April 2014.
Since July 2013, Patrick works and resides in the Atlanta Area, as the responsible Compliance Officer for Customer Services and Metal Technologies (Siemens), and since January 2015 as the Regional Compliance Officer Americas for Primetals Technologies (A joint venture of Siemens, Mitsubishi Heavy Industries and Partners).
Thus, with that introduction, I welcome Patrick’s perspective, as he shares his real-world approach and experience with respect to anti-corruption compliance.
The Transparency International Corruption Perception Index (2014) presents Mexico as 104 of a total of 175 countries. In comparison to 2013, this was a “one point improvement” from a score of 34 to 35. Thus, with a given statistic uncertainty, everything stayed the same as in the year before. There are several historic reasons and further theories as to why perceived corruption in Mexico remains so high, which is not the topic for today’s article. More important is that corruption is not limited to a single government, but represents a dynamic that can be found in all parts of society. Most countries have their share of pressures and temptations; Compliance can take those and convert them into an advantage. As corruption is not a theoretical construct; people from all social levels face its negative effects in their daily life. The good news is that Compliance can present itself as a practical problem-solver, not just limited to corporate life, but also as bringing integrity to the personal level. So, lets address some of those details, both with respect to Mexico, as well as to the implications for current Compliance efforts.
Mexico has a high-perceived corruption level, but on the other hand this does not mean that our employees are dishonest people! The goal for a Compliance Officer should be to be recognized as a “trusted advisor”. This includes two sub-roles, being a trusted expert, but also a trusted colleague. It makes no sense being the biggest Compliance expert if you have no idea about the business and how the company is earning money. As Compliance Officer you should trust your employees, but be prepared that in the beginning you will not receive the same level of trust returned by them. According to the OECD study “Society at a Glance 2011”, Mexicans express a low level of trust in others. As a Compliance Officer you have to be prepared to earn trust, with visibility, accessibility, and the perception as efficient problem-solver.
Compliance by Walking Around
Visibility (office, plant and project-site) is needed so that employees can perceive their CO as a trusted colleague, who is not just talking about Compliance, but living it as a good example. This investment is important, as you need employees to build up trust in you, as only with trust will they come forward on difficult topics and use the offered whistleblower hotline. Therefore, it is helpful not to see everybody as a potential risk factor, but rather, embracing the idea that more than 99% of employees are good and honest people, putting forth their best efforts for the benefit of the company. These people are to be protected and prepared so that they will not get into trouble via an accident, or through a case caused by a trustworthy or rouge employee.
From all OECD countries, Mexicans work the most hours, an average of 43 hours a week, and often have sideline work (risk: conflict of interest). This combines with only 6 paid vacation days and 7 paid public holidays. With this Mexicans have significant less free time than their colleagues in other Latin American countries such as Argentina, Brazil or Colombia. Time is precious and petty bribes present a great temptation, as small payments can often avoid spending a complete day (with loss of wages) at public office or a police station.
A Circle of Trust
Mexico is similar to other Latin countries with respect to the importance of family & networks as circle of trust (risk: conflict of interest) Also important are the social implications of, where a business invitation dine is more than just a possibility to talk about commerce, but also a sign of respect and appreciation (risk: gifts & hospitality). Due to the warm Mexican climate it is common in some regions to have a two or three hour break in the middle of the day, and for employees work until late in the evening, accompanied by business lunches and dinners. Most of these cultural dynamics present a small or medium Compliance risk, and can be mitigated by adequate tone from the top and Compliance communications. We are talking here about temptations, which mean we have to help our employees to not give in to them! The most relevant cultural risk factor here is the focus on family and friends, where business relationships are often included. Thus, in Mexico, the lines and distinctions between business and personal life are often blurred, as friendships play a strong role in business. In this environment, for Compliance, it is imperative to have robust controls, including the company’s business partners, travel and entertainment expense and other third party controls (risk: business partners / procurement / handling of competitive information).
Another known Mexican problem is the impunity of many public cases. If the Compliance department wants to make a difference, it has to ensure that Compliance cases are not just identified, but also remediated. There cannot be different answers for different levels of employees. If a violation is discovered, the company has to take the hard decision to separate the employee from the company, even if this means a loss of important knowledge and complying with the difficult local labor laws. Just this way you can earn the respect of the employees by avoiding any appearance of favoritism or impunity. As is valid for all other countries, a Compliance department has to be independent, adequately staffed and financed; reporting to the CEO and / or a global Compliance department.
Compliance as a Competitive Advantage
Compliance is a sales advantage! A robust Compliance program is a base of business reliability and sustainability. Global and local companies need to understand and embrace the importance of this issue. Some have learnt it the hard and others the easy way. Since 2011, Compliance and Internal Audit experts meet in the Mexican Forum for Ethics and Compliance. Started as self-help group, it has grown to be a relevant forum for an exchange of experience, best practices, and a platform for collective actions. It published a “Manual for a Compliance and Ethics Program,”a free document (link here) , which has its focus on small and medium sized companies. The manual explains how to implement a robust anti-corruption and ethics program. I highly recommend this manual, as it was developed by personnel who have a broad knowledge of experience and background, combined with a working understanding of the corruption risks which face corporations and business teams working in Mexico.
Train with with Real-World Examples and Perspectives
Regarding training and workshops, employees appreciate the discussion of real cases, which the company has had in the past, or around a situation that could come up regarding future business. This can also go involve small role-plays. Actual news and experiences like those of Richard’s, should be included into the training, as corruption is not always limited to big political and business cases. Rather, as is the case in Mexico, it often starts as small facilitation payments, petty bribery or product piracy (all forbidden under Mexican law). According a survey of the American Chamber of Commerce in Mexico, 80% of Mexicans have bought or downloaded pirated products. Thus, in many Mexican households, corruption is learnt by the youngest; as they receive pirated products from their parents or they observe their father give a small payment to the policeman. Demographically, the average age in Mexico is rising, at 27.7 years, but this is still quite young. Thus, there are a lot of the employees who have younger children and who embrace the wish is that they would grow up in a more transparent surrounding and environment. This starting position makes it easy for Compliance to get perceived as trusted advisor. In other words, in Mexico, and elsewhere, the Compliance officer sets an example, as someone to be trusted internally, as a role model, and as an example of success without corruption! You can make a difference!