As important as it usually is that “Compliance” be independent from “Legal,” there are realms in which it’s best when those two functions are full collaborative partners. One of those is the realm of contracts with third parties.
That was an inescapable take-away from a session on October 5th at the SCCE’s annual Compliance and Ethics Institute: “Peer-to-Peer Compliance: Are Y
our Contract Clauses Running Offense and Defense For Your Ethics and Compliance Program?” I had the honor of presenting the session, with Amy Hutchens of CLEARresources. I also had a complete blast, pretending to negotiate typical clauses with Amy, fielding questions about covenants that troubled SCCE colleagues in the audience, and sharing our lessons-learned.
Lessons such as?
- That the intersection (collision?) of transactional law and corporate compliance is happening more often, as companies pay more attention to the risks their third-party relationships can pose, and authorities from the Sentencing Commission to the FDA voice their expectation that these risks be managed contractually.
- That a careless clause can damage the structure or credibility of a company’s compliance regime – but a legal department engaging in zero-sum negotiations, without benefit of a partner from compliance, might miss that risk.
- That there are two strategic extremes for the company in the “prime contractor” role, each of which can be problematic: Unyieldingly insist on the most favorable language for your side, and eager vendors may agree even though they know they cannot follow the contract they signed. Take an overly flexible position, open to each vendor’s full range of concerns, and your resources may get nibbled to death while you wind up with no predictable consistency among your agreements.
What’s an enlightened company to do? First, consider your goal – is it to get a signed document full of hard-ball victories, or to have third-parties who are actually working with your guidance to engage in compliant behavior? Assuming it is the latter, your company may be better served by living its core values even in its negotiating style, and by taking a firm, comprehensive, but reasonable form of contract to market. And for that to happen, “Legal” and “Compliance” must work together, and understand the other’s issues.
If you missed the session at the CEI – or if you missed the CEI altogether – no worries. We are reprising the session in the form of an SCCE Webinar, on Tuesday, October 13th. Please join us!