As sure as I write this, someone is out there saying that ‘tone at the top’ is one of the most overblown phrases in compliance. Yet if there is one truism about business, a company’s culture really does start at the top. While Enron did not enshrine that truism, it certainly still remains a potent example. If you put criminals in at the top, the rest of the company will be just as rotten.
We continue to see this play out at the disgraced pharmaceutical company Valeant, which recently announced that Paul Herendeen had taken over as the new Chief Financial Officer. As the Wall Street Journal reported, Herendeen's addition to Valeant's executive leadership team completes a clean sweep from the former management, which had led the company from a stock trading high of $260 per share one year ago; to the $31.28 price point which the share traded at Monday.
Herendeen told the WSJ that he was going into the job with his eyes “wide open." He was further quoted that, “In no way do I want to minimize the challenges facing the company and the potential for other things to go bump in the night. As a new team we need to look back and deal with this.”
Valeant still faces numerous external issues going forward, including an investigation by U.S. regulators into “whether it defrauded insurers by obscuring its ties to a mail-order pharmacy that boosted sales of its drug” and numerous civil lawsuits over its conduct. The company also has a huge debt burden which will no doubt be the focus of Herendeen in his role as CFO.
For the Man From FCPA, you simply cannot emphasize enough how important it is that management set an appropriate tone that the company will do business in compliance with external laws and with internal company policy and its code of conduct. Remember Enron once had a gold-standard code of conduct. Look at where it is now.