Many [compliance] programs are strong on investigation, but not so strong on preventative practices.

Thomas Wardell, Partner, McKenna Long & Aldridge LLP, on the subject of ‘compliance readiness’ in The Metropolitan Corporate Counsel, “Corporate Compliance: Casting a Wide Net,” at 36, September 2006.

While I agree with Mr. Wardell that companies tend to be more reactive than proactive in their approach to compliance, I dislike the term ‘compliance readiness’ because it sells the true essence and merit of preventive law short.

To begin with, ‘compliance readiness’ is a negative term.  Legal compliance requires meeting standards.  It involves a lot of ’thou shallt nots’.  Getting ready for ’shallt nots’ doesn’t sound like much fun.  Indeed, it sounds like a chore that invites procrastination.  They’ll get ready tomorrow.

Proactively managing legal risk involves much more than ‘compliance readiness.’  It includes things like contract review and intellectual property portfolios.  It includes legal issues the law doesn’t set compliance requirements for intellectual property rights, for example. It doesn’t require you to patent your inventions.  Yet, securing such rights is a very proactive and a smart way to apply the law for competitive business advantage.  But if we continue to frame proactive legal risk management in terms of ‘compliance readiness’ we’ll miss such opportunities.

Framing legal risk management in terms of legal literacy instead has the advantage of engaging clients in a constructive dialogue, of showing them the strategic value of the law, and of equipping them with additional business building blocks to do their jobs instead of creating road blocks.  Incorporating legal literacy into day-to-day decision making drives respect for the law deep into the corporate culture, unlike a bunch of ’shallt nots’ that float like an oil slick on the surface of our consciousness.  Best of all, it helps unlock the power of legal leverage.

For more information about the value of legal literacy and the legal leverage process management portfolio see The Business Guide to Legal Literacy: What Every Manager Should Know About the Law.

It’s ironic that boardroom leaks at Silicon Valley’s technology powerhouse, Hewlett-Packard, occurring over a year ago are still threatening to sink the company.  Ironic too is that it’s not the content, or source of the leaks that’s posing the problem, but rather HP’s investigation and handling of the leak.

[T}here is too much focus on reputation risk management, and not enough on the positive of reputation opportunity.  Companies that consistently manage and nurture strong brand and corporate reputations borrow/raise capital more cheaply, attract and retain the best people and have customers and supply chains that will try their new products. Sounds like good business sense to me.

Corporate governance is a chess game requiring you to look several steps ahead. Capitalizing on reputation opportunity starts with legal literacy.  To learn about the nexus between ethics and legal savvy read The Business Guide to Legal Literacy: What Every Manager Should Know About the Law (Jossey-Bass, 2006).