Compliance Get’s Proactive

How Avnet’s stringent requirements and ethical practices benefit, rather than hinder, the business and its partners

Corruption is nothing new. Neither is the idea that an unethical society or organization ultimately degrades its own economic performance and success. Yet hardly a week passes without news of a new corporate scandal or governmental breach of ethics somewhere in the corporate world, including in information technology.

To combat this proactively, companies like Avnet’s technology solutions unit have adopted anticorruption and antibribery, or ABAC, initiatives. The Phoenix, Arizona-based company has had ABAC programs in place for years to help guide its worldwide business practices, but two years ago, it joined a larger set of ABAC standards.

In 2014, along with other Global Technology Distribution Council (GTDC) members, Avnet launched a new shared ABAC platform that can ensure that business partners and customers are committed to ethical and lawful behavior as the company.

Avnet initially implemented the GTDC platform in its South American and Asian business units, and it is now being rolled out in North America and Europe. While there is always a learning curve and some initial resistance when implementing a new approach, but Michael Walker, associate general counsel for Avnet’s government solutions subsidiary, knows this approach is the right one.

“There is always concern about maintaining the pace of business when adding new processes or that competitors aren’t taking the same steps,” he says, “but we’re convinced that an ethical business environment is paramount to supporting our own long-term success, as well as that of our customers.”

Part of the process for onboarding potential new customers is having them complete a due diligence questionnaire to detail their business history, ownership structure, and compliance policies and practices. To comprehensively assess the level of risk, Avnet weighs several factors, such as whether the business has any government ties, criminal histories or civil judgments involving fraud, where they do business, and whether they have anti-corruption policies.

Avnet Through the Years:

1921: Avnet is founded as a supplier of radio parts

1950s: The Korean War sparks Avnet’s transition into electronic components for missile systems and airplanes

1960s: Diversifies into consumer electronics

1970s: Invests in computer technology

1990s: Shifts focus to global data warehousing, supply-chain solutions, and global logistics management

2008: 228,000 square-foot global solutions center opens to provide integration services and customer support

2014: Avnet Government Solutions forms to sell solutions to federal, state, and local governmental entities

Because of Avnet’s business and global reach, a number of other specific issues must also be addressed. These range from the US Foreign Corrupt Practices Act, International Traffic in Arms Regulations, and the UK Bribery Act, to conflict materials, antitrust concerns and, in its government business, federal acquisition Regulation and Defense Federal Acquisition Regulation compliance. All these results are then reviewed and assessed by a multidisciplinary team to determine the level of risk.

While larger information and technology companies often face such extensive scrutiny and compliance challenges, that isn’t always true for small companies expected to meet many of the same standards. Walker served as the business lead for the North American ABAC due diligence platform roll out and says, “We can help smaller, less experienced companies understand where they might have gaps or deficiencies in their compliance regimens, educate them on how to address them appropriately, and help them better understand their compliance obligations in the ABAC space.”

Avnet has been aggressive about its ABAC platform roll out, and company leaders believe it provides benefits both internally and externally. Outside parties participating in the process help create and maintain a reputation of honesty and integrity and, in some cases, can even improve efficiencies by shaping operations to adhere to compliance requirements. They typically also improve communication and transparency that help make them more appealing business partners.

Internally, the goal has been to foster a culture of awareness by clarifying expectations and providing extensive education on legal requirements, how to recognize potential red flags, and how to respond to them. Walker says that he has been surprised by how quickly the levels of awareness have increased throughout the company. There have been many instances when has staff come to him with questions about ongoing business that are directly related to issues addressed during training.

“Training has resulted in more dialogue and more collaboration at all levels than we expected. It’s creating a culture of people genuinely wanting to ‘do the right thing’ rather than simply go through the motions to satisfy requirements forced on them by the compliance team or the legal department,” Walker points out.

Avnet’s commitment to compliance is already producing the right business results. The company has been named a “World’s Most Ethical Company” by the Ethisphere Institute for three consecutive years.   

Avnet’s proactive approach to ABAC issues is very similar to Walker’s own style of addressing legal concerns for which he is asked for advice. Input from many stakeholders and departments is frequently needed to reach a fully informed decision due to the company’s diversity of departments and divisions.

However, Walker believes some issues face delayed resolution or simply fail to get resolved because of participants being too reliant on passive means of communication that ultimately leads to inconsistent follow-through. “People are often overwhelmed by e-mail, old action items, and the daily demands of their jobs, all of which can lead to entropy,” he says.

He points out that being effective as an in-house attorney doesn’t mean having only the legal answer for a particular matter; it’s also about knowing who to talk to in order to find a resolution. And because legal works on so many issues, it has better visibility into which parties need to be involved and which groups may be impacted by an initiative.

We’re convinced that an ethical business environment is paramount to supporting our own long-term success, as well as that of our customers.

“I am a firm believer in reaching out directly to whomever is needed to get their input in real time, whether it’s on the phone or walking down the hall to make a stakeholder part of the discussion toward an informed decision,” Walker says. He admits that his role often feels as much like a producer’s as it does a lawyer’s as he works to line up the right resources.

As the ABAC initiative moves forward, Walker estimates that 95 percent of all “red flag” compliance issues have been addressed through processes and models that have been developed to help guide the business units. However, he admits a key challenge has been resolving one-off scenarios that don’t fit into the standardized methods and have to be dealt with on an ad hoc basis.

Moving forward, Avnet is doing its best to maintain transparency and keep employees worldwide informed of relevant compliance issues and the company’s own internal expectations. Walker and his colleagues will continue to keep their doors open to answer questions and to encourage employees to alert them to potential problems.

Walker sums up Avnet’s compliance objectives: “Naturally, we want to be successful, but we want to succeed within the law and in ways that are mindful of ethical and compliance issues wherever we operate.”