Government Contracting and Relationships

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Compliance Overview: Corporate Involvement in the Federal Public Policy Arena

An increasingly regulated area of corporate activity is involvement in the federal public policy arena. [2] Lawmakers’ and regulators’ decisions have a direct and substantial impact on corporate operations and the general business climate, compelling many companies to seek ways to influence the political process. At the same time, high profile enforcement actions and public pressure for increased transparency has led to more stringent regulation of the interactions between lawmakers and corporate executives. This regulatory environment has prompted some corporations to adopt overly cautious internal policies. Ultimately, the challenge for entities that engage in the public policy arena is to balance effective advocacy with robust compliance.

Establishing an effective compliance program for federal public policy activities serves to mitigate both legal and reputational risks. Potential legal exposure includes a wide range of civil and criminal penalties. The reputational risks related to political activities are reported in the news on a daily basis and include widely-publicized incidents such as the Abramoff lobbying scheme or Target Corp’s political contributions to an allegedly discriminatory group in Minnesota. In addition, there has been a marked rise in shareholder activism surrounding transparency in corporate political spending. Having an effective compliance program in place will not necessarily insulate a corporation’s public policy activities from scrutiny, but will serve to mitigate risk and provide an affirmative response in the face of public outcry.

This overview addresses three specific areas of greatest risk on which corporations should focus their public policy compliance program:

  • gift and ethics rules governing interactions with congressional and executive branch officials and employees;

  • lobbyist registration and reporting; and

  • political contributions.

It also provides tools for implementation using the four key elements of a comprehensive public policy compliance program: written policies; implementation; education; and monitoring. Any compliance program is only as effective as the people who oversee its implementation, so it is imperative that companies have effective and well-managed government affairs organizations as well as in-house or external counsel who are knowledgeable about the issues that arise in the context of engaging in public policy activities.

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