Introduction:
The official birth of corporate compliance was marked by the 1991 U.S. Organizational Sentencing Guidelines, according to which the state will mitigate or even waive penalties for the enterprise involved if it can prove that it has tried to prevent misconduct from occurring by establishing an effective compliance program. In recent years, corporate compliance has gradually become one of the mainstream propositions in China's corporate governance, legal services, and social development, and has received great attention.On November 2, 2018, in order to promote the comprehensive strengthening of compliance management by central enterprises, the State-owned Assets Supervision Commission of the State Council formulated the "Guidelines for Compliance Management of Central Enterprises (for Trial Implementation)"; and in March 2020, the Supreme People's Prosecutor's Office initiated the reform of compliance for case-involved enterprises Pilot Work, incorporating corporate compliance into the criminal justice process; in June 2021, in order to promote the establishment and improvement of a third-party supervision and evaluation mechanism for compliance of enterprises involved in cases in the pilot work of corporate compliance reform, and to effectively punish and prevent corporate crimes, the Supreme People's Procuratorate and the Ministry of Justice, in conjunction with a number of departments, formulated the "Guiding Opinions on Establishing a Third-party Supervision and Evaluation Mechanism for Compliance of Enterprises Involved in Cases"; and in August 2022, the the State-owned Assets Supervision Commission of the State Council issued the Measures for Compliance Management of Centralized Enterprises, making it clear that centralized enterprises should strictly promote the following and implementation of compliance requirements in their own enterprises. Corporate compliance has opened a new chapter due to the successive introduction of various regulations by the regulators, and has continuously promoted the theoretical research and practical discussion of compliance, adding a colorful touch to the development of local compliance. This article attempts to develop a functional understanding and problematic thinking of corporate compliance, which will help strengthen the understanding of the great potential of compliance.
I. What is corporate compliance
(i) A novel approach to governance in corporate management
The traditional corporate governance structure mainly adjusts the mutual checks and balances formed among the general meeting of shareholders, the board of directors, the supervisory board and the management in the company's decision-making, operation and other aspects. However, out of the need for the company to prevent legal risks and minimize company losses, compliance has been gradually incorporated into the corporate governance structure. As a result, the company's governance structure has evolved from the traditional two-horse cart of business management and financial management to a "three-horse cart" including compliance management, and accordingly, the function of compliance management has been attached from the outside to the inside of the company. The function of compliance management is to make the enterprise's behavior comply with laws, regulations, social norms, business standards, etc., unlike the traditional mode, the power and responsibility of compliance does not originate from the board of directors and shareholders' meeting at this time, but it is the internal governance that law enforcement departments impose on the company from the outside, and the public power department reduces the penalties through the establishment of a series of administrative settlement system, deferred prosecution system, and the mechanism of plea bargaining. By establishing a series of administrative settlement system, deferred prosecution system, plea bargaining mechanism and other ways to reduce penalties, the public power department motivates enterprises to realize the benign operation of enterprises and prevent the occurrence of illegal and criminal behaviors through self-management activities.
(ii) A firewall to cut off criminal behavior
In practice, the likelihood that an enterprise will incur administrative liability or criminal risk as a result of the actions of its internal employees, subsidiaries, branches or third parties is often greater than the probability that the enterprise itself will incur the corresponding risk of liability for the unlawful and criminal acts it commits. The behavior of such non-enterprise subjects are often easy to be presumed to be the responsibility of the enterprise. And enterprises to fight this "presumption of responsibility", need to prove that they did not commit criminal acts, prove that they have no subjective positive or indulgent mentality towards the occurrence of criminal facts, so as to exempt the enterprise's responsibility. The experience of the United Kingdom and the United States shows that, in the case of internal employees, subsidiaries, branches and third parties committing illegal and criminal acts, the only way for the enterprise to prove that it has established a set of effective compliance management system is to prove that it has not encouraged or agreed with the former's illegal and criminal acts and that it does not have any obvious negligence due to the negligence of the management, and therefore does not bear administrative responsibility or criminal responsibility. Not coincidentally, in our country also has through the "compliance system" defense and will employees and other third-party behavior and corporate responsibility for the effective cutting of practical experience. Such as China's famous Lanzhou Nestle case, Lanzhou Nestle employees in order to seize market share to promote milk powder, many times through illegal means from the hands of medical personnel illegal access to personal information of citizens, a number of employees to defend the behavior of the unit, the proceeds of the benefits attributable to the unit. However, it is precisely because Nestle has already established a perfect compliance management system within the company, and has carried out relevant compliance training for its employees, thus negating the company's active or permissive "subjective will" to commit criminal acts, and cutting off the unit from the employees' personal behaviors, so that the company does not bear criminal responsibility. Therefore, corporate compliance is a firewall for enterprises to operate in accordance with the law, and effectively cuts off the illegal and criminal behaviors of enterprises and employees.
(iii) An opportunity to revitalize a business after a criminal conviction
Corporate compliance is not simply a form of corporate governance, a firewall against liability, but can also be a form of corporate self-improvement in which companies are legally incentivized to commit crimes - a criminal law incentive. In foreign countries, criminal law incentives mean that the criminal prosecution department can make a decision not to prosecute enterprises suspected of committing criminal offenses, or apply to the court to reduce criminal penalties, based on the establishment of a compliance program. Prosecution authorities can also order enterprises to pay high fines, improve their compliance programs during the test period, and assign compliance ombudsmen by entering into a deferred prosecution agreement or non-prosecution agreement with them, and the prosecution can be withdrawn at the end of the test period. In foreign countries, many enterprises are after being investigated and reached a settlement agreement or non-prosecution agreement with the appropriate agencies, is the enterprise to obtain a rebirth, once again the opportunity to develop. China's procuratorial authorities from 2020 to explore in a number of pilot enterprises involved in compliance reform, also seeks to partially promote the enterprises involved in the case of active corporate compliance work, through the implementation of internal compliance rectification, so that the enterprise "live down", "stand up". According to the work report of the Supreme Prosecutor's Office at the National People's Congress in 2023, "Since 2020, the procuratorial authorities have been exploring the pilot reform of compliance of enterprises involved in cases: they may not be arrested or prosecuted according to the law, and the enterprises involved in the cases will be instructed to make commitments on compliance and practical rectification. Since the pilot program, as of 2023, a total of 5,150 related cases have been handled, 1,498 enterprises have been rectified and qualified, and 3,051 responsible persons have not been prosecuted in accordance with the law. Procuratorial organs have helped enterprises get a new lease of life by promoting internal compliance rectification and filling compliance loopholes." After the development of these years, it can be said that enterprise compliance and rectification has gradually become one of the valuable opportunities for enterprises to get light treatment and prolong their lives after being involved in criminal cases.
II. Realistic bottlenecks in the development of corporate compliance
(i) There are certain thresholds for corporate compliance
Corporate compliance is a cutting-edge subject involving multiple legal disciplines and a knowledge project in multiple specialized fields, requiring participants to have not only specialized legal knowledge and knowledge of the field disciplines, but also a hands-on background in other specialized fields. On the one hand, enterprises in the daily operation and management of specialized issues tend to be complex, and not the traditional criminal law, civil law, administrative law or other single discipline can explain and deal with. For example, issues related to environmental protection may involve civil law, administrative law, criminal law and other disciplines at the same time; issues related to export control may involve administrative law, international law, civil law and other disciplines. On the other hand, corporate compliance is embodied in each specific element within the enterprise, which requires participants to do compliance also need to have practical background experience. For example, in the field of data compliance, only knowing the law but not the technology of data transmission and storage does not effectively carry out compliance in this field; in anti-fraud compliance, not having a sense of reconnaissance and chain-of-evidence thinking does not effectively carry out internal investigations; and in the construction of integrity compliance system, not understanding the internal structure of the enterprise and not being familiar with the mode of business operation is just a talk on paper and divorced from the reality.
(ii) Lack of specific normative textual references
Corporate compliance belongs to the imported goods, the development of China started late, the domestic enterprises for compliance awareness is still in a very primitive state, from the enterprise's functional departments can be seen, most of the domestic enterprises are basically the compliance affairs to the legal department to deal with, that is, as long as it is related to the law-related issues have to be handed over directly to the legal department across the board. On the one hand, there is a lack of awareness and necessary compliance advice and counseling, and on the other hand, there is a lack of standardized and specific compliance texts to refer to in the domestic corporate environment. At present, although the State-owned Assets Supervision Department has issued the "Compliance Management Measures for Central Enterprises", banks and financial institutions have issued relevant compliance guidelines in the early years, as well as ISO37301, GB/T35770 Compliance Management System Guidelines have also been issued, but these guidelines are generalized basic compliance frameworks, to solve the specialized areas, deep-rooted, emerging risks are obviously not targeted. In addition, as most domestic enterprises have not been investigated by European or American law enforcement authorities, nor have they been sanctioned by international organizations such as the World Bank, most of the compliance programs implemented by most enterprises belong to the aforementioned "big and comprehensive" compliance program, and are not "tailor-made" according to the nature of the enterprise and the main compliance risk points. There is no international experience in "tailoring" a set of targeted compliance programs according to the nature of the enterprise and its main compliance risk points, not to mention the absence of a special compliance guideline text.
(iii) Short-term costs outweigh benefits
Compliance is the internal environment construction of enterprises, which needs to go through the cyclic process of building, continuous operation, regular inspection and effective improvement. In the short term, it not only can't bring direct economic benefits to enterprises, but also requires enterprises to invest the necessary manpower, material resources and time costs, which is not yet enough motivation for many enterprises just getting out of the difficulties or small and medium-sized enterprises which have not yet developed and matured.
III. Future development of corporate compliance
(i) Strengthening disciplinary learning in the field
Participants in compliance should be "multi-talented", not only to be proficient in their own professional knowledge in the business field, but also to master the knowledge of the corresponding disciplines, but also to be skilled in understanding the special areas of knowledge involved in compliance issues. Here can seek ideas from the following questions: First, the participation of enterprise compliance work should be special compliance program as the center, that is, for the specific compliance risk of the establishment of specialized compliance management system, compliance solutions to focus on reflecting the specialization. And lawyers involved in the special compliance should be matched with their own business areas, reflecting the professionalism. Second, on the basis of special compliance, according to their own business areas, and then learn to master the knowledge of other neighboring disciplines, such as anti-fraud compliance, in the mastery of the criminal business on the basis of further study and mastery of the company law, the basic norms of enterprise internal control and other regulations. Third, skilled understanding of compliance issues involved in special areas of knowledge, for example, data protection compliance, but also to understand the technical knowledge of data extraction, storage, transmission; anti-fraud compliance, to understand the internal investigation of the evidence specification, reconnaissance thinking, forensics and other investigative knowledge; integrity compliance, to understand the system construction of the enterprise's internal structure, business operation mode, day-to-day management and other business management knowledge. The accumulation of this part of the knowledge is generally not a short-term study can be practiced, often need to be personally practiced to have, so it is recommended to set up a compliance team, as far as possible, to absorb with the special compliance with the special field of practical background of the personnel.
(ii) Issuance of specialized compliance guideline texts by the relevant authorities
The soul of corporate compliance is not a large and comprehensive compliance management system, but the establishment of a special compliance program for the "compliance risk points" of the enterprise. Therefore, the original standardized guidelines for a comprehensive compliance system cannot be fully applied to the deep-level, specialized and highly targeted special compliance work. The future compliance text should be a pattern of "one full and multiple specialties". It is suggested that the relevant departments or associations can introduce multiple sets of effective specialized compliance guidelines based on the realities, the needs of enterprises in practice, and the advanced experiences of the industry's leading enterprises. For example, the Ministry of Commerce or relevant departments can formulate special compliance guidelines for export control, and at the same time draw on the relevant experience of ZTE; for example, the Internet Information Office or relevant departments can formulate special compliance guidelines for data protection. In fact, in practice, there are already judicial departments that have produced special compliance guidelines based on their experience in handling cases. For example, the Shenzhen People's Procuratorate issued the "Guidelines for Compliance Building of the Criminal Protection System of Trade Secrets (for Trial Implementation)" in April 2023, which guides enterprises to promote the construction of an internal compliance system in the field of trade secret protection.
(iii) Inclusion of corporate compliance as a component of social governance
Corporate compliance is one of the modes of corporate governance, and, together with business management and financial management, is one of the three pillars of the corporate governance structure; it is also a reflection of a city's governance capacity and level of governance. By including corporate compliance as one of the contents of social governance, the public power to promote the participation of enterprises in the whole society in corporate compliance construction, from the initial right to "social responsibility", to create an atmosphere of "enterprise-wide compliance". For example, recently the General Office of the CPC Shenzhen Municipal Committee, the General Office of the Shenzhen Municipal People's Government formally issued the "on accelerating the building of corporate compliance demonstration area of the implementation of the views", clear Shenzhen to build a corporate compliance demonstration area of the strategic objectives, put forward a comprehensive promotion of corporate compliance construction of a specific path, the deployment of key areas to carry out the special compliance governance of the innovative tasks, and actively promote the construction of Shenzhen enterprises to build the full participation of all staff, the whole process of monitoring, It actively promotes Shenzhen enterprises to build a compliance management system with full participation, full monitoring and full coverage. It can be said that strengthening the construction of corporate compliance is both an internal and external requirement for the future development of Shenzhen enterprises, which directly elevates corporate compliance from the positioning of corporate governance to the height of social governance, further strengthens the concept of corporate compliance, and guides enterprises and entrepreneurs to set up and improve their internal compliance management system.
(iv) Strengthening the interaction among law firms, enterprises and scholars in universities and colleges
Corporate compliance is an imported product, which has gradually evolved from the initial conceptual product into one of the management systems within many enterprises, and the knowledge, understanding and concrete implementation of compliance still need constant communication, interaction and learning. Therefore, the corporate compliance work should strengthen the visits and exchanges between law firms and enterprises, strengthen the linkage learning between law firms and universities, and strengthen the inspection and exchanges between universities and enterprises. Through the interaction and exchange between the subjects, for law firms, they can enhance the implementation ability of internal compliance action plan, strengthen the effective landing of compliance program, as well as timely access to the latest theoretical achievements in the field of corporate compliance; for enterprises, they can have a clearer understanding of the gap between the internal system of the enterprise and the effective compliance, the value of compliance, and the future benefits of compliance to the enterprise, etc.; for scholars of colleges and universities, they are able to For the university scholars, they can learn about the judicial practice, the compliance status quo in the actual operation of enterprises, and explore the path of corporate compliance in China more deeply.
Author:
Zeng Mai, President, Compliance Research Institute of China Commercial Law Firm
Fu Zhengjie, Vice President, Compliance Institute of China Commercial Law Firm