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The relationship between the ethics & compliance function and the legal department and why compliance is important to external counsel
What is the role of the legal department when talking about separating it from the ethics & compliance function?
At Shell, the ethics & compliance function is a separate unit within the legal function. One of the benefits of having a separate compliance organization is that we can specialize in particular areas of high risk and have more of an independent voice in the organization. This is reinforced by the fact that, as Chief Ethics & Compliance Officer, I have direct access to both the CEO and the Chair of the Audit Committee. However, I believe you will never be able to completely segregate the compliance role from the legal advisor role. Business colleagues will always look at the lawyer to advise on whether or not a particular course of action will breach the law and there will be times when lawyers have to hold the compliance line. The challenge and opportunity for both compliance staff and lawyers is to help find the path that supports business objectives while complying with applicable law.
How is your ethics & compliance function staffed?
We have three groups within our function. One group is comprised of mostly lawyers who act as subject matter experts in areas of high risk for our industry, such as bribery and corruption, antitrust, trade controls, money laundering and data privacy. The second group is responsible for management of the various compliance programmes and supporting tools as well as providing management information. The third group is made up of our ethics and compliance officers and managers, who come from a variety of skillpools. They are the primary interface with our business colleagues to help translate requirements and embed the controls into the business. This requires a different set of skills and they need to understand the challenges of the business and how they operate. Our function also works extensively with other parts of Shell such as internal audit, HR and IT.
What should smaller companies consider when looking at ethics & compliance?
First, they will need to consider which risks are most relevant to their company and industry. Second, they will need to consider what level of support they will need to ensure they adequately cover those risks – legal expertise, due diligence capability, audit, etc. This could be internal or external support, full- or part-time roles. Third, they will need to consider how they will safeguard the independence of those filling the compliance role(s). One way to protect independence is to establish proper reporting lines which do not report to the business client. Of course, all of this will come to naught if there isn’t the appropriate tone at the top in support of ethics and compliance.
What kind of challenges do you see for ethics & compliance in the future?
Unfortunately, there are many challenges. The increasing complexity of the regulatory environment is such a challenge. This creates an increasing risk of conflict of law as well as ambiguity – often a regulator is also grappling with what exactly it wants to see as compliance. This can put companies into rather difficult situations. In such situations, it is very helpful to be able to refer back to your core values and general business principles. The advent of social media and the high pace at which information is being made available also creates increasing challenges. From a compliance perspective, this touches everything from public disclosure to data privacy to intellectual property protection. One needs to understand how information is flowing and to whom, whether it can be captured and how to retrieve and produce it in the event of an investigation or the need to respond to e-discovery requests.
What are your expectations when looking to external counsel?
I have been surprised a few times about the lack of knowledge by external counsel, and even very senior partners, on what makes up the basics of a compliance programme. I would expect that external counsel are familiar with the basics of such a programme as well as the big ticket compliance risks in whatever industry they might support a client. This is an easy opportunity to add value to the client. External counsel can identify and raise such risks with a client who might not even be aware of them. This would enable the client to address the risks and remove any potential barriers to the achievement of the client’s business objectives before they become obstacles on the critical path, in addition to protecting the client from investigations, fines and reputational damage for any non-compliance.
What might be the reasons for this lack of knowledge?
Some of the current high risk compliance areas, such as bribery and corruption, have only come to the fore in terms of enforcement in the last five to ten years and did not get the attention they do today. I recall that some years ago some law firms did not even have their own policy on anti-bribery and corruption or regarding facilitation payments. I think there is room for improvement. To address this would be for their own benefit since they can provide such great value to a client.
What would you recommend to external counsel to start with?
They could start with simply asking the client for its code of conduct and ethics. With such information they could improve their understanding of the client, what its values and principles are as well as its expectations. Within this context, they would be much better positioned to offer legal advice. They should know the compliance basics, understand the framework of the company and the risks to the sector. Of course, there are many firms that specialize in high risk compliance areas, for example, anti-bribery and corruption. The benefit those firms provide is that they do not see only one client’s issues, but can form a view based on experience from multiple jurisdictions and industry sectors and their experience with different issues and regulators can help to inform one how to manage certain risks.
Ms. Leanne Geale joined Shell Canada in 2003 as Senior Solicitor and was appointed Associate General Counsel, Oil Products in 2004, Shell Legal Services Co-ordinator for Royal Dutch Shell plc and its subsidiaries in 2006, Associate General Counsel Heavy Oil and Head of Legal for Shell Canada in 2011. Today Leanne is Chief Ethics & Compliance Officer for Royal Dutch Shell plc. Prior to joining Shell, Leanne was Senior Counsel for the Royal Bank of Canada 2002-2003, Senior Counsel and Assistant Secretary for Rio Algom Limited 1996-2002 and Counsel for Alcan Aluminium Limited 1991-1996.
02/2015Read more interviews