The Role of Ethics in the Compliance Decision-Making ... · Damaging to reputation • Damages the...

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The Role of Ethics in the Compliance Decision-Making Process

Jean-Claude Najar

8th International Pharmaceutical Compliance Congress & Best Practices Forum

CURTIS, MALLET-PREVOST, COLT & MOSLE LLP 2

Introductory Observations

CURTIS, MALLET-PREVOST, COLT & MOSLE LLP 3copyright jean-claude najar


Ethics Matters !

• Not just a risk management issue

• The healthcare industry…based on ethics:– Between the company and the patient– Patient is not an ordinary ‘client’– Making profits contingent on providing benefit

• This end-purpose can only be achieved if the company inspires “trust and confidence on the part of the medical community, patients, government officials, regulators, journalists, investors and other stakeholders. Even more, [the company] needs to inspire trust and confidence among [its own employees]”. (Jean-Paul Kress, President of Sanofi Pasteur)

• Ethical behaviour establishing trust

Globalized… interconnected environment… information on (un)ethical behavior now just a click away

copyright jean-claude najar


Information… Just One Click Away



Unethical Behaviour: A Major Reputational Risk

• Reputation is key:

Reputation is an intangible asset

Reputation enables the generation of income

Reputation secures the activity as a going concern

Reputational damages… loss of future profit

Loss of reputation = loss of business

• A fragile asset… difficult to build, easily destroyed



Ethical Behaviour

• To conduct business effectively and to promote confidence in the integrity of the company, its managers and employees… maintain the highest standards of loyalty and ethical principles

• Avoiding situations where personal activities or relationships could create, or appear to create, a conflict of interest… or make it difficult to carry out job responsibilities … or act in the best interest of the company



What is Culture in a Company?

• Culture is the culmination of the shared attitudes, values, goals and practices that characterize an organization and set the environment which influences how employees behave.

• Compliance programs must be designed to help leaders – everyone – build a culture of compliance that positively impacts employee behavior.



“Culture guides discretionary behavior and it picks up where the employee handbook leaves off. Culture tells us how to respond to an unprecedented service request. It tells us whether to risk telling our bosses about our new ideas, and whether to surface or hide problems. Employees make hundreds of decisions on their own every day, and culture is our guide. Culture tells us what to do when the CEO isn’t in the room, which is of course most of the time.”

Frances Frei and Anne Morriss in the Harvard Business Review (HBR), May 10, 2012

Company Culture Matters

“Maintaining an effective culture is so important that it, in fact, trumps even strategy.”

Howard Stevenson (Harvard Business School Professor of Business Administration, Emeritus)



It’s All About Culture



Outline

I. Defining Compliance and Ethics

II. The Business Rationale for Incorporating Ethics into the Compliance Decision-Making

III. Corporate Compliance Decision-Making and How Ethics Can be Incorporated

IV. Best Practices


IDefining

Compliance & Ethics


Definitions: Compliance & EthicsCompliance

•Much broader than only anti- corruption… risk management & abatement embedded in a risk management system & processes… Rules and values !

•The entirety of a program which analyzes the legal, business & ethical risks a company faces, finds methods to reduce (‘abate’) them, builds processes to anchor these methods into the way the company operates, and makes sure that these processes are sustainable

Ethics• “Moral principles that govern a person’s behavior or the conducting of an activity.” (Oxford Dictionary)

•“…the system or code of morals of a particular […]group, profession etc. (Webster’s)

•What is right vs what is wrong

•Ethics is a subjective notion

• A more objective conception of Ethics is embedded and expressed in laws and regulations



Industry Standards

International Standards & Instruments

National Laws & Regulations

Sources of Ethics Objective Ethics

Individual Decision

Company Policy & Compliance Program

Subjective Ethicscopyright jean-claude najar


Ethics in the Normative Environment• Three groups of laws and regulations :

– Compulsory: imposed on the company by local laws and regulations. Compulsory regulation is the expression of the public’s/society’s ethics as a whole. It responds to an objective approach to ethics.

– Compromissory: agreed upon by the company in order to fit an international or an industry standard. Compromissory regulation is the expression of a common industry ethos.

– Self-regulation: decided by the company. The company regulates itself according to its own notion of ethics and its values… ‘limited’ by the requirements imposed or agreed upon by compulsory and compromissory regulation. It responds to a subjective approach to ethics.

Compliance decision-making process subject to the limits and the standards in these three groups of regulations: imposed, agreed or decided upon…



Who Sets Ethical Standards?

Individuals!

Legislators and regulators

International bodies

Professional and standard-setting associations…

Stakeholders

Companies and employees



IIThe Business Rationale for

Incorporating Ethics into the Compliance Decision-Making


Ethics in Risk Management – A Global Environment

• Complex regulated & globalized legal environment: Varying legal cultures (common law / civil law and multiplication of competent jurisdictions…of responsibilities…of faults (obligation of security, vigilance…)… of damagesConnection(s) with local criminal / penal laws… development of ‘soft law’Extra-territorial laws: the U.S. Foreign Corrupt Practices Act (1977) and the UK Bribery Act (2010)Each country with its own conception of ethics (public policy)Healthcare regulations not homogenousGlobal / local financial stability based on macro-economic requirements (EU competition law…) and micro-economic ones (SOX (US), Basel II & III (EU)…)

• Challenges for corporations:Complying with national, local, regional, transnational, international norms… Increased enforcement activities by –and cooperation between- regulatory authoritiesHaving internal controls & self-regulation policies efficiently converge: creating a common company-wide ethical standard complying with compulsory, compromissory and its own regulatory environment

In a globalized environment, taking ethics into consideration… a necessity in risk management



Ethics in Pharma Risk Management

• Bribery & corruption

• Competition law

• Off-label marketing

• Generics

• Industry-specific risks

• An industry with many interdependencies

Not “putting profits ahead of patient health”copyright jean-claude najar


Ethics & Compliance

• Compliance with rules necessary, but not sufficient to ensure that no breach of the law occurs

• Strict respect of national laws & regulations and international instruments

• But ethical underpinning promotes sustainable growth and performance improvement…. Reliance on fundamental assets of the company : focus on excellence in terms of technology, production, competitiveness, and talent…

• « The two faces of the same coin » (Philippe Montigny, President & CEO, ETHIC Intelligence, 2014)



Rules-based programs : ‘Is it legal?’vs.

Values-based programs :‘Is it ethical?’

“In a rules-based compliance culture the question is “Can I?”

In a values-based ethical culture the question is “Should I?”

In a rules-based culture the question is, “Is it legal?”

In a values-based culture the question is, “Is it ethical?” Michael Josephson, Founder, Josephson,Institute of Ethics, October 12, 2012

DNA of an Ethics & Compliance Program



Ethical Behaviour: A Competitive Advantage• Healthcare industry based on ethics. ‘Trust and confidence’.• Strong ethics buys reputation: a customer / patient is more likely to buy a product on

which his/her health depends from a company he/she trusts than from one that consistently puts « profit before the patient’s health ».

• Good reputation: strengthens market positionreduces the cost of capital increases shareholder valueinsulates the brandSuggests a higher quality of product (higher prices)attracts top talent…sustains work environment. Unethical corporate behaviour creates pressure on the employees - may even alienate them from their loved ones.

“Our ethical conduct should be something that truly differentiates us from other companies.” (Andrew Witty, CEO of GSK)



Unethical Behaviour… Not Viable in the Long RunDamaging to reputation

• Damages the reputation of an entire sector• A French study shows that patient trust in the drugs they

buy has fallen from 87% to 75% since 2013 • In France, scandals like the Mediator, the Isoméride, the

Furosémide, the PIP prosthetics, Distilbène or Diane 35 have increased distrust in the industryCostly… huge fines

• $1.5 billion Abbott settlement in Depakote case• $3 billion GSK settlement after investigations of its

Medicaid prices & False Claims Act accusations for the allegedly illegal marketing of ten drugs (including Avandia)

• $60.2 million Pfizer settlement in FCPA-related bribery allegations in China

• $29.4 million Eli Lilly & Co. settlement for alleged bribery of foreign officials in China

• $30 billion total in sanctions to the US DOJ paid so far by the Pharma industry



IIIIncorporating Ethics into Compliance

Decision-Making


Building Blocks / Steps



Building Blocks / Steps

• Tone at the top• Risk assessment (risk mapping) or

identification of issues• Raising & resolving concerns• Training• Communication• Evaluation



Engagement By Leaders

‘Tone at the top’

•Leaders hire the people•They own the processes•They set the priorities•They create the environment•They set the expectations for the compliance culture…. •Their engagement is visible•Compliance is part of the their business agendas

‘Walk the talk’copyright jean-claude najar


Mission of a Compliance Department

• “…The mission of the Global Compliance organization at Sanofi is to shape an environment and build processes that instill ethical values … and to articulate clear standards of compliant behavior so that the Group and our external stakeholders view Sanofi as a global leader in upholding its ethical values.” (Sanofi CSR Factsheet May 2013)

• “Integrity and good judgment must be the cornerstones for all the decisions we make. The first step in meeting this commitment means understanding our values and what we stand for as well as the policies and procedures that are there to underpin these values. The second step is to live and breathe, not only by the letter, but also by the spirit of, these fundamental values and principles.” (Andrew Witty, GlaxoSmithKline CEO in ‘An Introduction to Corporate Ethics and Compliance Integrity’ brochure)

• « Trust and confidence » … presented as the goal of ethical behavior in the health industry in a number of codes of ethics throughout the industry



IVBest Practices


Some Examples of Best Practices• Codes of conduct/ethics: promoting honest and ethical conduct, including

the ethical handling of actual or apparent conflicts of interests, disclosures, compliance, accountability

• Giving priority to ethics: for example «The rules in the Code of Ethics prevail on all other internal policies issued by corporate bodies while exerting their powers, which policies supplement the Code of Ethics.» (P&R Group Code of Ethics)

• Promote a synergy between subjective corporate ethics (pragmatic) and the objective ethics of the general public/society

• Constant training of employees…. ‘Train the trainers’

• Immediate triggering of internal investigation in case of an allegation of unethical conduct… to exemplify self-regulation



Examples of Codes of Conduct in the Healthcare SectorCode of Conduct for Healthcare Support Workers and Adult Social Care Workers in England (UK Department of Health)

Code de Déontologie des Pharmaciens (2009)

Code of Practice for the Pharmaceutical Industry (Prescription Medicine Code of Practice Authority / Association of the British Pharmaceutical Industry, 2014)

Hospital Corporation of America (HCA) Code of Conduct

Eucomed Guidelines on Interactions with Healthcare Professionals (2008) and Code of Ethical Business Practice: Procedural Framework (2012)

International Federation of Pharmaceutical Manufacturers and Associations (IFPMA) Code of Practice (2012)

US Pharmaceuticals Compliance ant Ethics Code of Conduct

Codes of conduct adopted by all companies active in the healthcare and pharma sectors



• In a letter to the Governor of Florida, the president of Lundbeck wrote that the use of his company's drugs in executions in Florida “contradicts everything Lundbeck is in business to do – provide therapies that improve people's lives.”

• Lundbeck put in place distribution restrictions to prevent its pentobarbital Nembutal from being sold to any prison or corrections department in the US.

Moral Business Choices



GE’s Code of Conduct

Improper PaymentsSupplier RelationshipsInternational Trade ControlsMoney Laundering PreventionPrivacyWorking with GovernmentsComplying with Competition LawsFair Employment PracticesEnvironment, Health & SafetySecurity & Crisis ManagementIntellectual PropertyControllershipConflicts of InterestRegulatory ExcellenceInsider Trading & Stock Tipping



GE’s’The Spirit & The Letter Booklet : Values & Rules

The « Spirit »Ethics

• Doing «the Right Thing»• Values• Beliefs• Learning• Choices

The « Letter »Compliance

• Doing «Things Right»• Rules• Knowledge• Training• Discipline



Any questions?

Thank you for your attention.

[email protected] +33 1 42 68 72 99


• Biography & Experience of Jean-Claude Najar• Presentation of Curtis Paris Office

ANNEXES


Mr. Najar is International Counsel based in the Paris and Istanbul offices. His practice is focused on compliance and international arbitration. Mr. Najar has worked on numerous compliance matters, including devising global compliance programs and conducting internal investigations, and has a wealth of experience in cross-business compliance. He represented GE on TI’s Business Principles to Counter Bribery (BPCB) initiative, and also at the OECD’s Anti-Bribery Working Group. He is a member of the ICC’s France Anti-Corruption Commission. He currently participates in an OECD task force drafting an anti-corruption investors’ guide for the MENA region. Mr. Najar teaches Compliance at the Law School of Sciences Po in Paris, and at the healthcare compliance certification programs of INSEAD, and of Sciences Po/Seton Hall Law School. He serves on the anti-corruption Certification Committee of ETHIC Intelligence.

Mr. Najar also has broad experience in international commercial arbitration in a number of sectors, including healthcare, oil & gas, energy, and international contracts. He has been involved in over 100 arbitrations in various capacities, including as arbitrator. Mr. Najar is the founder and a member of the Steering Committee of the Corporate Counsel International Arbitration Group (CCIAG). He is the chair of CPR’s European Executive Board, and a member of various arbitration boards.

His work on the involvement of in-house counsel in arbitration earned him a lifetime Outstanding Achievement Award in 2012. Mr. Najar speaks and publishes extensively on international commercial arbitration, ADR, anti-corruption, compliance, corporate governance, and the role of in-house counsel. Prior to joining Curtis Mr. Najar held several senior in-house counsel positions at GE for close to 24 years, in its Healthcare, Oil & Gas, and Capital businesses, and at Corporate, with the Compliance function always reported to him. He started his career in arbitration in Coudert Frères, a major international law firm in Paris. He is a trained mediator and is admitted to the Paris Bar.Mr. Najar speaks French, English, German, Italian, and Turkish., and has a good command of Spanish.

EDUCATIONUniversité Panthéon Sorbonne (Paris I), DESS, International Commercial Law; Université de Lausanne, Law School, Licence en droit; LSE (London School of Economics & Political Science), LL.M. (Master of Laws).

International CounselCompliance & Arbitration Phone: +33 1 42 68 72 99Email: [email protected]

JEAN-CLAUDE NAJAR


Compliance Experience

• Close to 24 years with General Electric Co (GE)• VP & General Counsel , GE Medical Systems (now GE Healthcare) for Europe,

the Middle East & Africa (‘EMEA’), Buc, Paris• General Counsel & Director of Government Affairs, GE Oil & Gas worldwide ,

Florence HQ• Senior Counsel & Chief Compliance Officer, GE Capital for the EMEA region,

Paris & London• Always managed the Compliance function: as such dealt with hundreds of

reviews, bottoms-up sessions, issues, internal investigations, drafting of policies and implementing guidelines, various tools, devising reporting procedures, training sessions all over the world… including in Dubai and the UAE…

• Was involved in drafting GE’s code of conduct, The Spirit & the Letter (1993 launch and subsequent editions)


Established in 1973, Curtis’ Paris office handles both international and French corporate matters, compliance, and international arbitration. It works closely with the firm’s 14 other offices in Europe, the Americas, the Middle East (Dubai & Muscat) and Central Asia. The Paris office is developing a compliance practice, with program building, training, and internal investigations expertise, in liaison with experts in other Curtis offices, including in the Middle East. It is currently advising a major French multinational and a SWF in compliance. It has also strong corporate, M&A, and tax capabilities, with a niche expertise in management packages and an enviable track record of success in representing international companies in the French market. Curtis Paris is a center of excellence in international commercial and investment arbitration. The team undertakes arbitrations under the ICSID, ICC, UNCITRAL, LCIA, SIAC, DIAC, OHADA, IATA, and other rules. Led by Paris office managing partner Peter Wolrich, the international arbitration team is known for its representation of states and state-owned entities in both investor- state and commercial arbitrations. The Paris office is staffed by a dynamic and highly motivated team that includes French, American, German, and Russian lawyers, admitted to practice in Paris, New York, Frankfurt, and England & Wales. All of Curtis’ Paris-based lawyers are multilingual and have business degrees in addition to their law degrees.

Paris Office Overview

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