The Man From FCPA recently spoke with Dan Chapman, CEO of Presyse Compliance, about his experience with the non-monetary costs and indirect costs of a major FCPA investigations. Chapman has led two significant internal FCPA investigations in his former CCO roles. He noted that “the biggest cost to a company during an investigation is the diversion of management resources” and further explaining, “everything stops to focus on the investigation.” This indirect cost comes largely through the time commitment of senior management, because “if senior management has to commit 20% of their time, that’s 20% that’s not going towards revenue generating, shareholder value protecting activities.”
I asked Chapman how a CCO could communicate that to somebody who has not gone through a full blown internal investigation then coupled with a federal investigation with the DOJ and FBI involved? Understanding that the all-encompassing nature of such an event is difficult to articulate, Chapman goes through some of his past experiences as touch points. He said, “One example would be at a past company, my first week on the job, I had a worldwide conference for all the senior managers from around the world. At that meeting, I asked all the senior executives, C-level executives, ‘Over the last few years, have you spent 5% of your time on the matter? They’d raise their hands. Then I kept escalating it: 10%, 15%. Hands didn’t go down until about 20%.’ Then I explained to them, ‘So if you got 5%, 10%, 15% more than your senior management, where would this company be?’”
The costs of a major FCPA investigation are almost always considered from the quantitative perspective; IE., in dollars and cents. Chapman believes such examples are “helpful, but there’s not great way to quantify it. How do you quantify the absence of non-compliance? How do you quantify what could have been? How do you quantify the opportunity costs of managements time?” These myriad other costs which can be equally damaging to your business. Chapman has experienced those first hand and knows just how costly they are to a company.