Why Bearing Manufacturers and Suppliers Should Adopt Compliance Programs

If you are a small or medium-sized bearing or precision instruments manufacturing company or supplier operating regionally and have limited international presence, I’m certain you have asked yourself why your company should implement an antitrust compliance or anti-corruption program or policy. After all, any potential risk is remote and you must operate according to local conditions and requirements. Hopefully this note will provide you with a framework to reconsider your approach.

Over the past decade OECD countries especially have been strengthening competition, anti-corruption (FCPA), and anti-money laundering (AML) legislation and enforcement. Because the legislation is derived from cornerstone OECD guidelines, the precepts in all OECD countries are rather uniform and variations (if any) laws and regulations are relatively minimal. Internationally-operating companies and financial institutions filing public records are required to implement processes and procedures that adequately account for all transactions to ensure that they are engaged in fairly, legally, and ethically.

This requirement also has a business-driven objective that goes beyond accounting. Since adequate controls make it more difficult to make payments that are not accounted for, the costs and risks associated with bribery and extortion decline. As more and more companies sign on, corruption will have an increasing tendency to be ferreted out and eliminated. But it’s not only business. Anti-corruption has been recognized as good government policy. The World Bank, for example, requires compliance with its procurement and investment rules because of the proven correlation between corruption and poverty. The more corrupt a governmental entity, the greater the poverty In the community. You need only look at the infrastructure of a corrupt state to visibly see the direct correlation between high corruption and poor infrastructure (and social services). More and more, research over the past fifteen years has shown that the more compliant companies are with laws and regulations, the more likely they they are to have long-term sustainable growth. a higher number of retained and loyal employees, and broader (more permanent) market penetration.

Corporate social responsibility matters. It makes a difference to the bottom and top lines. Of course implementing a compliance and anti-corruption program from scratch is not easy. Sometimes even, it may require a complete rethinking of a company’s business processes and a reorganization of its operations. In other cases, it may require the implementation of complex and costly monitoring and control systems that may include the adoption of six sigma-oriented control systems even for legal and regulatory compliance.

During the 1990s, I was charged with drafting, developing, and implementing an international antitrust and business practices program for a Japanese manufacturer that had distributors and sales channels in all major markets on all continents (save Antarctica). Ensuring that the program was properly developed and designed required many hours at headquarters reviewing and fine-tuning them to the new realities of global compliance. What followed was a review of the agreements with all distributors and agents worldwide. The review included an analysis of local law requirements in 30 to 40 countries where the company held a major market share or where earnings were robust. This was followed by an international tour that included visits to local affiliates and subsidiaries and major distributors and outlets. Last, but not least, export and import processes, materials procurement procedures, and product delivery, shipment, and logistics practices were reviewed at all manufacturing facilities and modified appropriately.

Implementation took two years. And it was certainly worth the time and the expense. The company earned a reputation for being not corruptible, for having sophisticated processes in place, and for being an internationally-qualified manufacturer and seller of quality (and compliant) goods. With enhanced reputation, sales went up and so did production. Most importantly, many years later when government investigations sent senior management of the company’s competitors to jail for price fixing and illegal market manipulation, the company avoided liability and reputational fallout because it had an effective compliance program in place.

If you would like to educate yourself more on compliance and on how to structure an effective compliance program, I recommend Professor Boghraty’s upcoming MOOC taught at Boston University School of Law: http://www.bu.edu/law/news/bu-law-first-us-law-school-to-offer-mooc-in-compliance.shtml. Please do contact me if you would like further information about how to design an effective compliance program or if you would like to have me help you adopt one.

Peter Manda is former in-house counsel to ball bearing and automotive parts manufacturers. He is currently working toward an LLM in International Business Law at Boston University School of Law and works as an attorney in the New York metropolitan area.

You can contact Peter Manda for all your request for suggestions of legal topics you are interested in.

Contact: petermanda@comcast.net