In general, compliance is an overarching term for adherence to rules. In the world of business it is primarily understood as the activities of a company and its employees that ensure adherence to legislation and internal guidelines as well as adherence to the company’s ethical code of conduct. For this type of compliance the term “corporate compliance” has also been used since it focuses on corporations.
Although it may at first seem that compliance is purely a legal issue, it has its origin in corporate governance. For a targeted system of organisational compliance measures within the company, the expression “Compliance Management System” (CMS) has been used in the world. In fact, this is a comprehensive compliance programme, which intends to ensure compliance with legal, ethical and other rules in a particular company with the aid of a wide range of tools.
In modern organisations, regulatory compliance represents a natural part of a company’s corporate strategy and company culture.
Benefit of compliance programmes
A properly proposed and implemented compliance programme serves as a very strong protective shield. It is in particular an effective form of preventing and detecting fraud, bribery and other corrupt business practices and helps to significantly reduce especially the following risks:
- the occurrence of criminal liability of a company (including board of directors and staff members)
- imposing of fines and penalties by authorities
- damage to company’s reputation (e.g. via negative publicity)
- the occurrence of property damage and financial losses
- disadvantageous legal positions (e.g. as a result of a disadvantageous or invalid contract)
The existence of a compliance programme within the company also represents a high and valued-driven company culture and company ethics, based on following the rules. Experience from abroad shows that from a long-term point of view compliance programmes also contribute to increasing the company’s value and represent a competitive advantage.
Compliance in the Czech Republic
Since 1 January 2012, a law regarding criminal liability of legal entities has been in force in the Czech Republic, which based on the model of legislation abroad has introduced an entirely new definition of business corporations’ liability for “their” behaviour, which establishes bases for the implementation of compliance programmes in companies.
The result is that unless a company proves that it has adopted sufficient preventive and control measures aimed at reducing or preventing their criminal liability, such company may alone be found criminally liable for the unlawful actions of its managers, and even those of regular employees. Aside from the commencement of criminal prosecution, the result of such criminal liability may also be the criminalisation of the company’s activities thus far and disqualification among existing business partners.
However, compliance programmes are not only based on criminal law, but also cover a much wider range of areas, such as economic competition, data protections, contract law and many more.
In Western economies, the topic of corporate compliance is already a relatively tame topic. The need to establish compliance programmes in foreign business corporations has become even more relevant with the adoption of very strict anti-corruption legislation, often with even draconian sanctions for breaches thereof.
For example, the Bribery Act of 2010 has applied in Britain since 2011 and is generally considered one of the strictest pieces of legislation in the world. Under that act each company is required to implement appropriate organisational measures to avoid corrupt behaviour and to ensure that if it does occur it is uncovered in time.¨
The British anti-corruption law is strict in particular since it has a practically global reach and enables the issue of fines with no set limits. Of course, there is also the possibility of criminal law prosecution, which can result in prison sentences and/or other punishment.