Start by Rolling your Eyes: What to Do when They request Your Company to Sign Up to Their Policies

Many companies include in their template agreements a little provision that feels like humble bragging mixed with a warning: “Your company agrees and warrants that your employees shall comply with our company’s Code of Ethics, which can be found at [URL].” Some even request your company to sign up to their Anti-Corruption, Health & Safety, and/or a broad ESG policies. Too often, internal business clients assume this sort of provision is “no big deal” since “we have all those policies anyway.” At that point, dear Compliance Officer, you may be thinking that medical school would have been a good idea. But, no, you instead recognize this is another opportunity to tackle a recurring risk gap, and maybe even do some humble bragging of your own. Here are some reflections and tactics to help:   

• Consider your company’s posture in the business relationship. If you are a supplier and the policies are specific to their supplier network, you will probably need to be more flexible. Even so, it is important to remember that your Business colleagues are not going to read the other party’s policies, so you will need to do that and explain what would be required to comply, including timeframes and costs.

  
  

• In most business relationships, it is important to engage with the other party on this type of provision to manage the risk it poses. Start with constructive pushback by sharing with them your company’s policies and stress these points, which are very likely true:

1. Your company has very similar policies and training that are built on the same principles,

2. It would be confusing and impractical to require your employees to comply with their policies, and

3. The agreement already contains representations and warranties regarding compliance with applicable laws, including anti-bribery, anti-competition, sanctions, criminal finances, etc., so warranting to their internal policies does not add much additional protection, and, in fact, it muddies the waters.

4. Finally, ask the other party what will happen in the very unlikely event that the provision was breached? Would that be a material breach of the agreement?

• Expect to hear crickets. But to be fair, if your company’s templates contain a similar provision, then you should be able to respond cogently to points a through d above. (NB. We all need to reconsider these types of provisions and whether there is a better approach. Please feel free to add your comments below.)

  
  

• So, what to do? Try this: include with the above pushback points and questions a request that the provision be a mutual obligation, so each party has the same level of comfort that the other is ethical and maintains basic corporate compliance hygiene. Also suggest the provision be revised so that each party:

  
  

x. Acknowledges their receipt of the other’s policy (perhaps including their URLs), and

y. Is obliged to continue providing their respective policy and training to their employees through the term of the agreement and any extensions.

• It is a useful tactic to mark-up their template to reflect the above points x and y so that you move the discussion in the direction you want it to go and put the action squarely on the other party to deal with your proposal (which is the entire point of redlining and a fun topic for another time).

  
  

• It is worth noting that this proposed revised mutual provision also accomplishes three other important goals (to share with specific audiences):

1. It minimizes the chance that a party’s failure to comply with the provision may be viewed as a material breach of the agreement. (Share that with the other party.)

2. It better positions the provision within the bigger picture of parties’ business relationship. (Share with your Business or Exec team.)

3. Also, it will not add to your Compliance team’s already huge workload. (Yay! Share only with your team.)

• Hit the send button on your email + attachments (your policies and the mark-up) back to the other party. You will feel sheer joy for having humble bragged about your company’s Compliance program in a way that also inches the business forward. When the other party agrees to the proposed mutual provision, you may even be tempted to yell out “Sorted!” But wait . . . there’s more to do if you want to replicate this success across all similar situations. Yes, there’s always more.

  
  

• In a word: Training. Prepare your Business and Legal colleagues to expect these ‘you-comply-with-our-policies’ provisions, how they should react to them, and why your company cannot simply sign up to the other party’s policies. Include a slide with a fairer, workable mutual provision like that discussed above and distribute it to the Legal team with a request they add it to their negotiations quiver. Ask all to get the Compliance team involved if the other party refuses to play nicely on these types of provisions.

  
  

By completing a training campaign on this topic, you will have further expanded your Compliance team’s reach and the company’s ability to manage this particular risk. And that is yet another point to humble brag about. (Share with everyone!).

Lee Nelson

Independent Compliance and Ethics Attorney