More Questions on Trump II and Compliance

Let’s keep talking about what Donald Trump’s return to power means for the corporate compliance profession because, honestly, what else is there to talk about right now? I’ve spoken with compliance officers all week long about Trump’s victory, and most folks were bewildered, dispirited, anxious, or some blend of all three. Their comments are telling.

We can start with the big existentialist stuff first. One audit executive said this in response to my first post on Wednesday about Trump’s victory:

While I agree with your sentiments, here’s what I think about what the average American thinks about compliance: they don’t care. They don’t care how corporations are run. They don’t care that corporate executives are dishonest. They don’t care about business rules. Think how Trump runs his businesses. Think about Musk as a corporate leader. That’s our future.

With all due respect to the writer (who is an accomplished and thoughtful senior internal audit executive), I’m not sure I agree with him. I believe voters were frustrated with “the system,” and lashed out at the candidate who represented that system: Kamala Harris. To jump from there to the conclusion that people like what Trump represents, and embrace his venal nature — that’s a leap too far for me. 

Do people grumble about ethics and compliance, because it requires them to do work with no clear, immediate benefit? Sure, but that’s not the same as them not caring about compliance and ethical conduct. 

In my observation people only say they don’t care about compliance, right until the [expletive] hits the fan. They absolutely care when their boss harasses them, or their 401(k) implodes thanks to accounting fraud, or they can’t schedule a medical procedure because the hospital suffered a ransomware attack. Then they care on steroids. 

More broadly, survey after survey shows that most employees want to work at an ethical company and for leaders they admire. For example, I’ve never met a great sales executive who likes to cheat on business contracts; they take it as a personal offense that they can’t best their competitor in a fair contest. 

Do some sales execs cheat because they feel they have no choice? Yes. So wise leaders will strive to give them a culture where they feel they do have choices. Do a select few sales execs enjoy cheating to win? Also yes — but we’ve all met those types, and those types are a—holes. 

Trump is one such person, but I believe that was incidental to his victory this week rather than a driving factor. And I bet his approval ratings will start sinking again just like they’ve always done.

‘You Think We’ll Still Have FCPA?’

I had one conversation with a compliance officer at a large business listed in the United States but headquartered in Britain, with operations in countries around the world. We started talking about FCPA enforcement and whether it will still continue in Trump 2.0, since Trump (a) detests the law; (b) doesn’t understand why bribery is bad; and (c) plans to exercise more direct control over the Justice Department.

This CCO’s take: “Oh, FCPA isn’t going away; and even if it did, it’s not like my company could forget about FCPA compliance anyway.”

He then raised several important points. First, the FCPA is a money-maker for the federal government and the Justice Department. FCPA enforcement rolled along at a reasonable rate during the first Trump Administration, so there’s at least a reasonable expectation that enforcement will continue along again.

Will we see Trump Justice Department minions update the guidelines for effective compliance programs yet again? Of course. I suspect they’ll retreat from expectations on companies pursuing clawback policies or when prosecutors will appoint compliance monitors. But will they abolish the need for compliance programs entirely? No.

So how will all this affect a compliance function? “Look, will this mean employees going overboard on dinners with government officials more often, and we don’t make as big a fuss about it? Maybe,” my CCO friend said. “But we still need controls to manage contracts and figure out who our third parties are. Those controls will still need to work. This is really going to be about changing our risk tolerance for FCPA violations.” 

His point about changing risk tolerance is an excellent one. He wasn’t condoning the idea that a “little bit” of corruption will now be OK; he was stressing that serious corruption is still going to be a big risk for a company. Maybe you’ll see the general counsel and the CEO argue more often against self-reporting FCPA violations, but I don’t think you’ll see those two argue that internal controls can go out the window.

His final point was important, too. “We’re a British company,” he said. “Even if Trump never enforces the FCPA, I still have the U.K. Bribery Act and a bunch of other laws to worry about.” Very true.

How Will Government Work?

A third compliance officer speculated about the role of Elon Musk in the next Trump Administration. Musk supposedly wants to join Trump 2.0 in some Cabinet-level position running a Department of Government Efficiency, where he’ll gut federal personnel, spending, and operations just like he did at Twitter. 

OK, let’s entertain the idea that this happens. How will Musk’s pet project interfere with standard government operations? What happens when they do?

For example, one early name to run the Securities and Exchange Commission is Dan Gallagher, a former Republican commissioner during the Obama years. Gallagher is a smart, accomplished man and a reasonable choice for a Republican SEC chair.

So how is Gallagher going to run the SEC when he has someone like Musk breathing down his neck? 

Like, we all know Musk will want to pull apart the SEC root and branch, gutting the enforcement and examination ranks and repealing disclosure rules willy nilly. Is Gallagher supposed to sit back and take that meddling? Will Musk just make recommendations that Gallagher accepts with a smile and then put in a desk drawer? 

Ditto for Robert Kennedy Jr. and healthcare compliance. He, like Musk and Trump, don’t actually want to do the work of policy development and administration; they want to bark out orders and people obey. So how will other senior bureaucrats at the Department of Health & Human Services respond to that? 

Probably in a confused, chaotic mess. And that’s going to be your person at the other end of the phone when you have a regulatory issue that needs resolution.