By Evan Slavitt, Vice President for Business and Legal Affairs, AVX Corporation
Corporate policies are necessary in both small, one-facility organizations and large, international companies. In-house counsel often have direct or joint responsibility for issuing and updating these corporate policies. Not every policy is effective or useful. The following are ten basic tips for developing meaningful corporate policies.
1. Simplify, simplify, simplify!
A policy that is unread or unreadable is useless. Even though many of the areas that are addressed are complex, the policy must be straightforward. In-house counsel should ruthlessly discard legalisms, technical language, abstractions, and jargon - in other words, avoid writing like a lawyer. In particular, counsel should ensure that sentences and paragraphs are short and avoid long blocks of text. Key points should be highlighted and indented.
2. Use examples.
There is a reason that teachers require homework. No matter how clearly a general principle is explained, it only hits home when applied to specific examples. Such examples should be short, realistic, and focus on only one aspect of the policy. One way counsel can ensure that the examples work is to field test them with employees drawn from all departments of the company. Often, they can identify ambiguity or other problems not obvious from a chair in the legal department.
3. Focus.
No policy can cover every eventuality or situation. Corporate counsel should resist the temptation to write lengthy policies and focus on the highest risk issues. Even in policy-writing, the 80/20 rule applies: 80% of situations can be covered by 20% of the possible length of a truly comprehensive policy. Keeping focus will also help in employee comprehension. Rather than skimming or skipping because much of a policy does not seem relevant, employees will be more likely to read policies that are meaningful to their situations.
4. Update.
Policies begin to go out of date as soon as they are issued. This is particularly true for policies that deal with the Internet, email, social media, and the like. Although at times this task seems Sisyphean, no one pays attention to an obsolete or obsolescent policy. Indeed, as circumstances change, policies can lead employees to do the wrong thing. Thus, in addition to a regular schedule for review of policies, they should be checked whenever new laws, regulations, or cases are issued that are relevant.
5. Provide forms.
Make it easy for employees to comply with policies. If, for example, a policy requires disclosure of potential conflicts of interest, it creates an additional barrier to compliance to require the employee to figure out how to make that report. Again, counsel must resist the temptation to make the form overly comprehensive. Remember, the initial report is not the end of the interaction.
6. Set realistic standards.
There is a great temptation to require perfection. This is not only unrealistic but is counter-productive. If termination is the nominal result of bringing home a couple of paperclips, employees will disbelieve the policy. Further, the policy will provide no real guidance to the employees. That means that expecting employees with Internet access never to use such access for personal reasons is impractical. Instead, accepting minimum personal use that does not interfere with the employee's work is more likely to be effective and enforceable.
7. Establish reporting/self-reporting procedures.
It is impossible to enforce policies solely through independent enforcement or auditing. They can only be effective if the bulk of the enforcement comes from the employees themselves. Having a hotline is essential, but is not the end of the discussion. The more avenues employees have to report or self-report, the more likely they will do so. Thus, some employees may prefer anonymous reporting, others may feel more comfortable with a personal meeting in the HR department.
8. Avoid Amerocentrism.
There is a temptation to take US standards as the basis for all corporate policies. That may be the easiest course, but it is not the best. Instead, counsel should consider all the relevant jurisdictions that might apply. For example, US standards strongly favor the availability of anonymous reporting through a hotline. In the EU, however, anonymous reporting is strongly disfavored. Accordingly, while consistency is valuable in corporate policies, it is not the sole touchstone for their evaluation.
9. Provide training.
Written documentation is the foundation for corporate policy, but it is only the beginning. Consistent and periodic training is the only way to establish those policies and ensure they are understood. The same guidance set forth above for written policies applies to the training. It must be simple, understandable, and practical. Make sure that there are opportunities for questions, and not just at the end of the day when everyone is tired. It is also important to tailor the training for the audience. Senior executives need more focus on insider trading and antitrust issues; purchasing agents need more focus on gift policies and conflicts of interest.
10. Enforce them.
Once employees learn that policies are not enforced or are inconsistently enforced, they will ignore them. This does not mean that they must be harshly enforced without regard for specific circumstances, but it does mean that there must be consistent enforcement. Further, that enforcement must be documented in the event of later accusations of discrimination or failure to enforce. Indeed, it is a best practice for the Board of Directors to receive, at a minimum, annual reports on the effectiveness of the company's policy issuance and enforcement process.
Conclusion
In-house counsel can see the policy aspect of their jobs as an irritating burden or as an opportunity to educate and assist the rest of the company. Making those policies clear and effective is the only way of supporting the mission of the company and creating a context for meaningful compliance.
The information in this Top Ten should not be construed as legal advice or legal opinion on specific facts and should not be considered representative of the views of its authors, its sponsors, and/or the ACC. This Top Ten is not intended as a definitive statement on the subject addressed. Rather, it is intended to serve as a tool providing practical advice and references for the busy in-house practitioner and other readers.
Reprinted with permission from the Association of Corporate Counsel (ACC) 2012 All Rights Reserved.