In our last installment, we discussed the roles of different categories of individuals involved in responding to a government investigation, but now we turn our attention to the executive officer (“EO”) of the company.
As EO you must initially be involved in some of the key decisions that will help guide the response to the government and the steps the organization will take in preparing any response. However, depending on how far up the allegations rise and who the allegations may target, your role may be limited.
For the purposes of this article, we will assume the EO is not a target of the investigation. Building off of that, the EO, at the very beginning of the process, must work with the chief legal officer (“CLO”) of the organization to determine:
- Whether to conduct an internal investigation
- Who is best suited to conduct the internal investigation
- The EO and CLO roles in the investigation
- Who this individual will report to
Recognize that at this time, the primary function of the EO will be to manage the crisis (or potential crisis). This is especially true for communications. Employees, and the public, will become aware very quickly of any government investigation and thus may demand more information. In addition to seeing, hearing and reading what information is publicly available, employees will also hear internal rumors and speculate on their own about what is being spread throughout the workplace. Thus, the failure to manage communications may increase the severity of the problem—and how this is managed will set the tone and affect public and internal perspectives.
Based on the above, it is very important for the EO, along with the CLO, to assess the situation early and get a firm understanding of the facts and allegations involved. By doing so they can make a better determination on how to manage communications and decide if it is necessary to communicate with the employees about the process for responding to the government. This includes whether to disclose to employees (and the general public) if the organization is or is not conducting its own internal investigation.
Assuming your organization will conduct its own internal investigation, what role should the EO play?
As EO you should anticipate some involvement in the process, and at a minimum, support the investigation. However, care must be taken to insulate an EO whose conduct is called into question by the allegation or whom the scope of the investigation could possibly include.
As we have discussed in previous articles, aside from any unusual situation or financial hardship, it is highly recommended that independent counsel be engaged early on in the process to help establish credibility with the government. A governmental agency is less likely to trust an assessment or investigation performed by CLO or an organization’s current outside counsel, both of whom may appear to have conflicts from being objective. It would be nearly impossible for independent counsel to investigate the allegations adequately without the full support and assistance by some members of management. But, like the CLO, management should not “drive the ship.” That function is best performed by the board of directors, or a committee of directors delegated with the authority to manage the investigation.
One important step that the EO must do at the outset of any internal investigation is to appoint a point person to work with independent counsel.
Regardless of how involved any EO is in the process, their presence cannot conflict with the direction of the investigation or the route that independent counsel decides it needs to travel. But if the investigation starts to stray into areas of the organization that would not be remotely related to the investigation, then the EO, with the assistance of CLO, should step in to keep the investigation from veering off course. Still, the key is for the investigation to remain credible. Therefore, any EO cannot be directly involved, pressure, or attempt to limit the scope of the investigation from areas of inquiry that may be related to the alleged wrongdoing.
Independent counsel will be well aware of the fact that the EO will be left with, and need to live with, the condition of the organization after the investigation. Therefore, help will be appreciated in understanding the layout and operations of the organization so independent counsel can determine the proper areas of investigation. Still recognizing there could be some fallout, both internally and externally, the EO needs to stay focused on effectively managing the organization before, during, and after the investigation.
As EO you will likely want to be involved, fix any problem and rescue the company. However, most of the time, similar to the CLO that is not conducting the investigation, you are better suited and needed more to manage the indirect costs and consequences associated with the investigation.
This includes dealing with:
- Management distractions as a result of the investigations
- The Company’s clients or potential clients raising concerns about the investigation
- Employee discipline issues as a result of the investigation
- What to report to Regulators
Overall, the most important task of any EO is the same as it always is--to effectively and efficiently run, manage, and operate the day-to-day tasks of the organization. While the impact of a government investigation will require your attention and skills as EO, the organization is better served with your attention focused on running the company and not being directly involved in the actual conducting of the investigation. This time spent focused on running the organization (and preparing for the impact of the results of the investigation) will help the long term viability of the company both during the investigation and after it has concluded.