BY CHARLES NEWBERY | JULY 22, 2019
The industry is growing by leaps and bounds, but a real impact is hard to measure.
This article is adapted from AQ’s latest issue on Latin Americas anti-corruption movement | Leer en español
BUENOS AIRES —?In 2016, as the Lava Jato probe was unfolding in Brazil, only a small crowd turned up for a panel discussion on corruption at the World Economic Forum here?—?a sign, one panelist glumly noted, of apathy around the topic in Latin America.
Today, the apathy is gone. The massive outbreak of scandals throughout the region, and the related approval of new corporate criminal liability laws in many countries, have put executives and board members on edge. If caught, they could go to jail, mar their brand’s reputation and hamper profit growth to a far greater extent than before. That has unleashed a mass hiring of compliance officers from Mexico down to Argentina and beyond.
Laura Alonso, head of the Argentine government’s anti-corruption office, told AQ that just three years ago, compliance and ethics “were not an issue in the private sector.”
“Now, (many of) the events that the private sector is organizing are partially or entirely dedicated to ethics and compliance,” she said.
Although no reliable data is available on the growth of the compliance industry in Latin America, all specialists consulted by AQ were quick to highlight that it is a hot and booming topic in the corporate world. Brazil-based compliance attorney and professor Isabel Franco started a monthly roundtable with compliance officers in 2012 with 30 people and the group’s mailing list has reached 950 in São Paulo alone. “We can only fit about 40 every month,” she said. “The subject is on fire.”
For many years, some companies would have their law firm draw up an integrity manual and call that a compliance program. Little was done to improve processes or control mechanisms or spread a sense of ethics down through the ranks, said Martín Lepiane, a partner at Buenos Aires law firm Martínez de Hoz & Rueda.
But when the latest wave of scandals erupted and executives started getting thrown behind bars in greater numbers, they began to worry about the implications on their businesses, from lost contracts to harder access to financing, he said. Indeed, Albanesi, a power generator and natural gas trader in Argentina, had to scrap a bond sale after its chairman was arrested in relation to a graft scandal. “Reputation damage hits a company a lot quicker than legal damage,” Lepiane said.
A search for talent
The trouble for companies is that the talent pool is shallow for compliance professionals in Latin America, largely because the profession is so new.
This is good for job seekers. “If you have a little bit of experience and put the keyword ‘compliance’ on your LinkedIn profile, you are going to be found,” said Sebastián Rago, a managing partner at Wall Chase Group, an executive search firm based in Buenos Aires.
At first, companies reassigned accounting, legal or internal affairs managers to compliance, or just doubled up their roles. But with the career prospects and the salaries increasing in compliance, especially from corruption-tainted companies, more people are entering the profession, Rago said.
Even so, most have to learn on the job, he said.
Academia has yet to catch up with the demand, said Martín Böhmer, a law professor at the University of San Andrés in Buenos Aires. There are no undergraduate degree courses that he knows of in Latin America, and postgraduate courses are only starting to pop up.
Multinational companies tend to send their compliance officers to headquarters for training, said Rago. For others, a growing number of short certificate programs, conferences and discussion meetings are emerging, such as those put on by chambers of commerce and a new crop of compliance associations across the region.
Diego Sibbald, a Santiago-based senior associate at Page Executive, an executive recruitment firm, said growth in compliance programs has been led by big companies. But smaller businesses and startups are also trying to create “a culture of compliance” so that employees know the risks of inside information, dubious tenders, client-sponsored trips or even gifting a bottle of wine.
What was once “frowned upon is now prohibited,” Sibbald said.
José Abadi, an Argentine psychiatrist who speaks on ethics at business events, said many companies still view ambition and competition as their main values, even if it means stooping to wrongdoing. “They think there is only one cake, and if you eat it, you take my part,” he said.
To change this perception, a compliance officer helps. But Delia Ferreira Rubio, chairwoman of Transparency International, said more must be done so that ethics, integrity and responsibility become part of the corporate culture and strategy, dissuading corruption. Otherwise, it could seep back in when judicial and social pressures wane.
“How can you not have free riders if everybody is a free rider?” said Böhmer. “How can you make sure that when you tell your boss he can’t do something because of compliance issues that he’s not going to turn around and fire you and bring in somebody else who will tell him he can do it?”
For that to happen, companies can’t just fill compliance posts “to check it off on the shopping list,” said Ferreira Rubio.
Böhmer said some companies seem to be creating compliance programs as “a way to get off the hook,” and reduce potential fines and other punishments. Indeed, Sibbald noted that Chilean regulators recently reduced a fine for U.S.-based retailer Walmart, related to alleged price-fixing of fresh chicken a decade ago, because the company had made “serious efforts” to implement a compliance program.
Maria Fernanda Teixeira, CEO of Integrow, a management consultancy in São Paulo, said that while most companies in Brazil have one or two workers in compliance and risk management to meet regulations, they are not always the best talent, “have no power” and are “not respected, not heard.” Nor do they always have access to the top management. “They just follow orders” because their bosses are really only focused on boosting profits to fatten their end-of-year bonus, she said.
Matías Nahón, an expert in corporate compliance and risk management at California-based consulting firm Berkeley Research Group, said it will take a couple of decades for compliance to be viewed in Latin America not as a cost that slows decision-making, but as an asset to support long-term growth by attracting business and investment as consumers increasingly opt for ethical, sustainable and responsible products.
Newbery is an independent journalist based in Buenos Aires