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Executivebiz chatted with McCoy and asked him about compliance at Siemens, what he looks for in potential legal counselors and what the affects of sequestration could be.
ExecutiveBiz: Briefly describe your responsibilities as the chief legal officer and head of compliance for Siemens Government Technologies and explain how those two positions overlap?
Scott McCoy: As the CLO here I lead several sub-departments that report up to legal – compliance, legal, contracts, and industrial security. Also the corporate secretarial function is within the legal department as is the management of the physical facility. So there are a number of different things that for various reasons report into legal.
By numbers, the largest group of personnel are in the contracts department, followed by legal and industrial security, which have smaller numbers. Unlike in some organizations, no individual in the department is 100% dedicated to corporate secretarial work, compliance, or to facilities management. Instead those functions are shared by several folks in legal and industrial security.
Looking at compliance, the overlap is that the function is spread across several members of the legal team (attorneys and paralegals). Compliance is primarily handled by me and my paralegal unless there are particular matters that I assign to an attorney or to someone in our HR department. The bulk of the work involves training and interfacing with the regional and global Siemens compliance organization. Although we run a separate compliance program in our company, we liaise regularly with other parts of Siemens for harmonization of compliance policies and coordination of training, particularly web-based training modules.
Generally, investigations take up a smaller amount of time but this varies widely and can be a nearly full-time job during a major investigation. At our company, compliance investigations begin with one of (1) direct contact to me or another person in the legal department, (2) call to our hotline number, which is managed by a third party service, (3) a referral from another part of Siemens or , (4) in rare cases, it could be referred by a teaming partner or a sub-contractor.
ExecutiveBiz: How much of your job is designated to compliance?
Scott McCoy: It varies significantly but overall about 20%, I think, at the most is compliance-related. Most of my time is spent on a mix of company strategy and legal, contracts, and industrial security matters although sometimes it is difficult to separate that from compliance. When we’re doing compliance training, especially live training, that’s fairly encompassing. We have not had a lot of compliance investigations lately but if and when we do that can take up a lot of time . But generally I’d say 20%.
ExecutiveBiz: How are you attempting to develop leaner and smarter ways to achieve optimum compliance in your company?
Scott McCoy: Compliance is extremely important and Siemens is a recognized leader in the field but I don’t believe compliance has to be reinvented to be successful. It’s important to keep the goal of compliance simple: educate employees on regulations and company policies, teach them what business ethics and the company’s code of conduct are, show them how they can perform their job without running afoul of the rules, and when they’re unsure what to do or have a problem they need to report, who to contact.
You know, a number of companies jettisoned the old-fashioned way of doing compliance training, which was live sessions led by a company lawyer or compliance officer in favor of just doing web videos and presentation. And while web-based training is great, I still think it is very important to do live training because you can have a discussion, a back and forth with company employees who may otherwise have no contact with legal or compliance, which is very important. For some, this is the only time that they hear me or another company lawyer or compliance officer speak to them, so effectively they “meet” me and/or the legal and compliance team. Most employees won’t spontaneously contact a compliance officer, who they don’t feel like they know well, with an ethics or company policy question but may do so once they’ve met and engaged with us during a live training session, or may ask the question there at the session when they see their colleagues doing the same.
As I said, though, web-based training is great too, though. At our company, for web-based training, we have generally harmonized this compliance training with other parts of Siemens and, for much of it, use materials from a supplier called LRN, which is used by a lot of companies. We can take their web material and either use them as they are or have them modified for use at Siemens. That’s often easier than developing your own web-based training for everything, which some companies have done. In our case, we use the LRN modules for subjects like antitrust, intellectual property rights, and other general topics and then focus on creating our own modules for more Siemens-specific subjects such as company polices on signature authority.
As long as you’re using an effective combination of methods – if you have a compliance program that’s got web-based, that’s got live training, you have a perhaps an ethics awareness month at some point during the year, and you make clear that the tone from the top of the company is “ethics is important and we comply with the law.,” and you have your hotline, I’m not sure how much more there is to do on compliance. That said, it is important to verify that the programs are effective, and so you can do surveys as well and see how you’re doing or, of course, if you’re seeing a lot of non-compliance, you’re getting a lot of calls to your hotline, then maybe you need to focus your efforts on a particular group, subject, or location. You probably need to try something different. But compliance at base isn’t that complicated as long as you’re getting the message out, you’re seeing employees behaving ethically and legally, and you can verify that.
ExecutiveBiz: How do you structure your legal teams to be the most effective?
Scott McCoy: I think it depends. I have a huge amount of flux in what our legal needs are. In the contracts department, which includes some attorneys focused entirely on contracts, I have it where some larger company divisions have an assigned contracts person or persons who spend most of all of their time on matters for that division. For legal, though, I’ve left it much more fluid and for the most part haven’t assigned lawyers to particular company divisions, which the lawyers seem to appreciate and allows us more flexibility, especially if someone is traveling, if their workload is becoming unsustainable, or if they’re simply on vacation.
While we do have commercial, antitrust, employment law, and the whole gamut of issues, a major specialty that most of the team has here is government contracts and the whole legal and contracts team has experience with that, which I realize is not the case in all departments. And that does make it easier than in some companies to be this flexible with department structure. But for now, I don’t actually assign anybody individual clients. I assign it generally on a task by task basis.
ExecutiveBiz: Okay and what attributes do you look for in potential legal counselors?
Scott McCoy: Beyond being great lawyers, contracts managers, and regulatory specialists from a subject matter point-of-view, people that have very effective communication skills and that have some business sense, in the true sense of that term, is very important for us. Sometimes it can be hard to know when you’re hiring from a law firm or, in particular, from the government who has those skills because a candidate may or may not, especially coming out of government and, even more so, out of a government enforcement division. But even from law firms, people that have not been close to the business and are not used to making fast decisions while working together with business, finance, HR, etc. colleagues.
We have had times we will bring someone who was a fine specialist, an expert even, but who just doesn’t understand their role as a part of an in-house legal organization. Sometimes, as company lawyers, we do have to say “no” but we usually want to help facilitate the business’ goals and show them the proper way forward from a legal point-of-view.. But if one is used to working in regulatory enforcement, for instance, they may not have experience with facilitating and helping move projects and deals along. Rather, they are used to arriving on the scene and just saying no, you can’t do that, and if you do that, there will be severe penalties. When you work inside a company, our internal clients want us to advise them how to do that and how to avoid severe penalties.
So the most important thing is communicating and being able to see things from our internal clients’, which is the business’, point of view.
ExecutiveBiz: How would sequestration influence your legal department and your company going forward?
Scott McCoy: The short answer is I don’t know. We’ll wait to see what guidance comes out from the government here later this year but hopefully we never have to go through this. Its a very hard question to answer until I know what is going to happen although plans are beginning to be shaped and information is trickling out. Some have posited that, post-sequestration,there will be more terminations for default in addition to, perhaps obviously, terminations for convenience based on the theory that the government will be looking for any flaw in your performance in order to get out of contracts..
But we are already working to be compliant with every contract that we have and are doing our best to give our government customers great performance, our best efforts. So I don’t know – if I knew sequestration was coming for sure – if there’s really anything that we would do differently except in the case if certain government customers are going to unfairly push to terminate contracts or terminate them for absurd or unjustified reasons. And of course that would bring some obligation onto us to fight that if we felt that it were unfair. But absent any unfairness on the part of government customers I don’t think there’s anything different that we would do as far as contract performance is concerned.
ExecutiveBiz: When contracts are awarded to your company how involved is your legal team in each contract?
Scott McCoy: We are involved in all contracts our company gets but how much effort that takes of course depends on the contract. We have some contracts that are smaller task orders issued under an IDIQ contract that may not require much legal oversight. And in those cases, there may not be a lot of involvement with it but if it’s a classified contract, even a small one, then my industrial security team is heavily involved, andthat group is a part of the legal department here. And when we are preparing a smaller proposal and if there are not a lot of teaming or sub-contracts, then that also would be primarily in the contracts department without a lot of additional legal involvement.
A large, complex IDIQ with lots of sub-contractors would have heavy legal involvement, though. Both when establishing the teaming and partner relationships through NDAs, teaming agreements, and getting the draft sub-contract ready. There’s a lot of negotiation back and forth with that, generally, and that requires significant legal resources
So depending on what type of contract, including commercial, non-government contracts such as procurement, real estate, and the like,,there may be anything from fairly minimal legal input to, for an entirely new, major contract ,heavy, heavy legal involvement.
ExecutiveBiz: In what ways do you and your legal team really show value to the company? In what ways are you trying to show more value as you go forward?
Scott McCoy: We show value in many ways but overall, in it’s a form of risk management. We show our our internal clients ways that they can do business effectively and legally.. . But how they can do that with minimal risk and still be profitable isn’t always an easy question, particularly in our ever-increasing regulatory environment. Generally, though, most projects are infinitely doable butwe often find that there is some confusion about – or total ignorance of – what the rules are or what’s actually risky or not.
So if we can point out what the risks are and how to work to minimize them, there are very few cases where the company wouldn’t be able to move forward with a project without significant risk when they have worked closely with legal along the way. It’s very rare that our internal clients would say, “okay, thanks for telling me and explaining that significant risk, but we have decided to proceed anyway.” And if they did, we would in some cases have to escalate the situation to higher review if a particular manager was pressing forward with what we consider to be very risky.
And generally Siemens’ system of internal controls would prevent this in any case because there is an effective, risk-based system to review projects. But there’s also an education component as it is also our job to make sure that our employees know once they’ve gotten the contract, what they can and can’t do during performance. And then we’ve come full circle to the role of compliance again!
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