Roughly translated, “compliance” means no more or less than “following the rules”. The concept is now at home in businesses and public bodies alike. It often refers above all to the part of business control mechanisms intended to prevent corruption and industrial espionage. Yet a comprehensive and correctly deployed compliance system can do much more – and is even perceived to be a competitive advantage by ever more companies.
“Compliance” has a long history
The concept of “ompliance” originated in the medical sphere where it refers to the willingness of the patient to do what the doctors recommend. In the 1980s it then also found its way into the American banking sector where rules were being put in place to deter money laundering, insider trading and bribery. At the latest with the introduction of the Sarbanes-Oxley Act in America in 2002, the term was also familiar to German managers as a synonym for legally compliant and ethically irreproachable business conduct. The law is intended to improve the transparency and legal compliance of listed companies. The sixty-plus pages of the legislative act also applies for German firms which are represented in America or whose securities are traded there. This is the route which has brought the concept of compliance into German companies.c
Compliance systems are becoming a factor for success
Today, companies which are not listed have long since introduced corresponding codes. These are designed not only to ensure that applicable laws in all spheres of the company are complied with but also regulate internal rules of conduct or can encompass the areas of sustainability or environmental protection.
Yet whereas the introduction of compliance rules continues its onward march in many places, a number of mainly smaller companies experience difficulties with implementation. The number of applicable laws and rules has become unmanageable in some sectors. Incorporating them in a uniform compliance system is complicated; monitoring compliance and establishing processes in the event of breaches is a real challenge. But it is a challenge which companies set for themselves, because good compliance systems are increasingly becoming a competitive advantage. Not least in international business flows, concluding a potential business deal can be dependent on whether the German parent company has established convincing compliance systems.
Even if compliance systems do not always increase turnover directly, they also often pay off financially not only because real losses through corruption, antitrust behaviour or data protection infringements are enormous. Indirect follow-up costs for dealing with breaches, for possible court cases and winning back trust and reputation cost a great deal of money. So much that it is worth investing in preventive measures.
But the fact that compliance systems are becoming ever more important is also linked to the fact that media and society are now watching much more carefully how companies do business – and consumers vote with their feet if firms are involved in scandals. As recently as fourteen years ago, a study on business crime reported that only 10 % of the companies surveyed suffered perceptible reputational losses after being involved in business crimes. In the 2011 follow-up study, the comparable figure was already more than 40 %. And in 2013 a number of company executives indicated that the threat of reputational loss as well as a deterioration in relations with business partners were decisive for the introduction of compliance systems.
Policy-makers and business must jointly ensure good framework conditions
However, developing good systems and making compliance and monitoring a permanent component of the business culture is a complex task. Support from experts and networking with managers of other companies can be helpful. For this reason, the BDI offers its members a regular compliance experience exchange and expressly supports the Alliance for Integrity which networks policy-makers and business managers at international level and seeks to establish standards.
But alongside business players, it is also necessary for policy-makers to put in place the right framework conditions for a fair business system for the benefit of all. Nevertheless, a corporate criminal law as proposed by the Justice Minister of North Rhine-Westphalia in November 2013 is not appropriate for this purpose. Not only because it is unnecessary given the scope of existing laws and rules, but also because it is unworkable as currently drafted and poses unknowable risks for companies.
What companies and their employees need first and foremost is legal certainty. Vague formulations and unclear definitions of situations must be avoided.