Rebuilding trust after a scandal

For journalists – particularly those in the financial media – there’s nothing quite like a good corporate scandal to really brighten the working day. The joy is generally short-lived, however – even the juiciest of headlines can only be milked for so long, after all.

As those legal and compliance teams tasked with righting the ship are only too aware, however, a scandal’s aftershocks continue to reverberate long after the headlines have faded into obscurity.

If you’re looking for proof, just ask Amy Fliegelman Olli, executive vice president and general counsel at software provider CA Technologies. Olli joined the company in 2006, six years after CA was accused of illegal interpretive accounting practices and two years after the company finally settled with the SEC and Department of Justice. By the time Olli arrived, CA had already cleaned house. In fact, Olli says her predecessor did ‘an extraordinary job of rebuilding the compliance program in the aftermath of the accounting scandal.’

As with the proverbial tree falling in an empty forest, however, sterling damage control work is worthless if no one hears about it. An interesting challenge for legal and compliance teams at the end of the cleanup process is how to convince those within the company, beyond a shadow of a doubt, that ethical behavior is now an imutable constituent of the company’s DNA.

‘You want to get people to be less fearful of compliance,’ Olli explains. This requires ‘being as proactive as possible so people understand what we’re trying to achieve rather than seeing us as just being the police after the fact.’ Rebuilding trust is indeed a tall order, but Olli’s novel approach is resulting in some big dividends.

Enforcement versus outreach
Back when she first took the helm of CA’s legal department, the compliance team was a stand-alone function separate from the legal department – a division created in the wake of the scandal, in reaction to members of the legal team who were alleged to have been involved in the artistic interpretation of accounting rules.

But when Olli took over as head of the compliance funtion was saddled with the decision to either maintain the separation of compliance and legal or integrate the two departments.

‘When I came to CA I always thought it was a little strange,’ she admits. ‘As a legal department we are the heart of compliance across the board. After going through an accounting scandal you can surely understand the logic behind the structure, but the issue then was really that the company had grown and compliance was now able to be integrated into the law department, and I thought that was best.’

Dual role
Once the decision was made, the next set of issues to tackle was how to structure the newly unified department. Top of the agenda was appointing a chief compliance officer. When it comes to this role, Olli notes, ‘there’s always that tension between being the cop or doing outreach and being proactive with respect to answering ethics questions and providing the right level of education. It’s a very interesting dichotomy.’

For Olli, the most effective solution, given the skills of those within her department, was to split the role into two positions: a chief compliance officer and a chief ethics officer.

‘When I looked at my team, I really had two people who fitted the bill,’ she explains. ‘First, I had a former assistant US attorney, Gary Brown, who was in charge of our litigation activities and who was eminently positioned to be our chief compliance officer. There’s a synergy between the work that was done in litigation and the work that’s done in compliance from an investigative perspective.

‘Second, I had a lawyer, Joel Katz, who really supported the HR team. He was already viewed by a good number of employees as someone to reach out to and was already doing a host of education-related activities, so there was synergy there too between the work he was doing and the role of chief ethics officer, because he was already dealing with those issues.’

The old saying asserts that two heads are better than one, but what this maxim fails to take into account is that those two heads often don’t agree. For Olli, however, this is an advantage.

‘One of the reasons I selected Joel and Gary – and this is what I told the board – is because they don’t often agree,’ she explains. ‘And it’s not just because they’re two lawyers, and two lawyers never agree; they really do view things differently, but I believe we actually get better and more responsible outcomes as a result.’

Teething troubles
Of course, creating this new structure wasn’t as easy as it sounds. As one might expect when a pilot program is first suggested, Olli remembers some initial hesitation. That quickly dissipated, however, and a new concern emerged: privilege.

This largely pertained to Katz, and the issue of when he is working as a lawyer, and when he is working in the non-privileged context of company ethics officer. ‘It’s a comfort issue,’ Olli explains. ‘Katz represents the company in his HR role, but at the same time he’s providing counsel on an ethics basis, so he had some concerns and some rightful reservations.’

Another issue, which came up during a review session after the division of the chief compliance officer role was made, was whether the new structure meant losing a bit of that ‘team feel’ – not to mention the possibility of fewer human resources being available for projects. The solution was to recreate the team feel virtually. Once or twice a month, Olli brings both the compliance and ethics sides together for a virtual meeting, which not only allows them to share projects they’re working on but also facilitates resource sharing. ‘Collectively they feel a great deal more like the team they used to be,’ Olli says.

Law and order
Since ironing out most of the initial kinks – and since it was decided that to avoid reporting-line confusion, Katz would be the face of compliance – Olli and her team have been busy evangelizing for ethics and compliance. They’ve created a newsletter, for example. ‘In the newsletter, Gary and Joel are trying to make us seem like a friendlier group,’ Olli laughs. ‘It gives people a better sense of what we do.’

And they haven’t settled for mere text in the newsletter, either. To get people engaged, the compliance team brought in actors and put together several educational videos. ‘They’re great,’ Olli enthuses. ‘We posted them on the website and had a number of hits. They’re very funny – legitimately funny, not just lawyer funny.’

Aside from ethics and compliance, Olli has been busy cutting legal costs. ‘In four years, we have reduced legal costs 40 percent on the budget,’ she says. In the spirit of full disclosure, she admits the percentage may be a little skewed. ‘I like giving that number because it’s so big,’ she laughs. ‘But you have to realize how much litigation we had when I came in.’

In fact, Olli is downplaying her role. In the aftermath of the 2000 scandal, practically every move had to be vetted by outside counsel first. ‘We needed memos on everything,’ she recalls. She has since been able to restore sufficient faith in the legal department to keep some of the work in-house. ‘You get to a point where you understand the business very well, so you get a better sense of which business issues really require outside counsel,’ she points out.

Perhaps her biggest contribution to cost savings came from revamping the company’s approach to litigation. ‘In the past, if you litigated with CA, whether we were right, wrong or indifferent, we were going to make it very expensive and we were going to take it all the way to the end,’ Olli explains.

‘But we’re a different company now from the one we used to be, and if you want to be effective and spend the money on your business instead of on outside counsel, you need to be able to look at the cases and decide which ones to settle. For example, if you have a bad case and you’re going to lose, why would you take it on other than to torture the other side?’

Olli says that right now she is preoccupied with software licensing, intellectual property and acquisitions. She adds that ‘cloud computing will play an important role in the coming years, and legislation and policy on security and privacy in the cloud will have a crucial affect on global enterprises industry-wide.’
Future tense

Olli is hesitant about hazarding any predictions on the future of corporate governance generally. However, she admits to foreseeing ‘a backlash as the economy improves because, instead of finding a good balance, I believe the government has exaggerated the need for regulation of non-essential commercial enterprises.’

She adds that ‘corporate governance practices will play an especially important role in determining how companies are able to adapt to – and succeed in – the post-financial crisis environment. Legal departments cannot be caught flat-footed, and should be prepared for a more aggressive enforcement approach to ensure that investigations are executed in a timely, ethical and effective manner.

'Like the remainder of the executive team, it’s crucial that the legal department be flexible and ‘evolutionary’ by being ready to deal with changes – and challenges – as and when they come.’  

Six things you didn't know about Amy Fliegelman Olli

• She always wanted to be a lawyer: ‘I always knew what I wanted to do, though my father insisted that I major in business so I could make a living if I did not elect in the end to go to law school.’
• In an alternate universe: ‘I have always wanted to teach and do hope to teach business law to future business executives, at college level.’
• Worst job ever: ‘The summer after college and before law school, I processed forms for an insurance company – if there was ever any motivation to go back to school, it was processing insurance forms eight hours a day.’
• Most helpful piece of technology: ‘The iPhone and BlackBerry have enabled me to multitask at a level that was not available before. Not being tied to a computer has allowed me to be far more effective and have a far more balanced life.’
• Office pet peeve: ‘Not having all the facts in a given situation drives me crazy. If I am not given all the facts, it is impossible for me to be an effective lawyer.’
• One of her favorite parts of the job: giving unsolicited business advice. ‘The overall reason I really love the job at CA is that unsolicited advice is always welcome. I feel relevant here. The reason I tease that it’s unsolicited is because, often, whether you like it or not, you’re going to get it! Sometimes people take it and sometimes they don’t, and I’m really OK when they don’t.’