The Importance Of Internal Governance

By Author: Cathy Hiycks
Total Articles: 6
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Every large company that operates in an area of business in which the behavior of its employees can expose it to considerable liability should consider implementing an e-discovery software solution as an integral part of its internal governance. While some may consider such a solution to be intrusive, the fact is that being proactive about preventing bad behavior is the best way to avoid liability.Some e-discovery software can be quite expensive, and this can be an inhibiting factor in companies' decision about whether to buy a solution as part of the internal monitoring process. But the direct cost of a software solution is only one factor to consider in that decision, even if the decision will ultimately be made on purely financial grounds.Of course, the salespeople who represent e-discovery software will talk about the potential cost of letting an employee's behavior go on for too long. The longer an employee is able to continue an illegal or unethical practice within the company, the more credence a claim against the company will be. Even if there isn't direct proof of knowledge, judges and juries tend to be more sympathetic ...
... to a plaintiff when the company does too little to check its employees' bad behavior.However, the potential cost of a large claim is only one of the financial factors to consider, regardless of how convenient it is as a sales pitch line. Another factor to consider is the fact that implementing a strong risk management policy, including the tools to make that policy effective, can reduce the cost of other items, such as liability insurance and longer-term financing.This is because having good internal procedures for maintaining compliance with the law and company policy are a hallmark of stable, well-managed companies. Insurers and lenders tend to look favorably on companies that have both good management teams and good, enforceable policies in place. Those characteristics make it less likely that a company will have to pay out expensive claims, making it more financially stable in the long term.The fact is that most bad behavior starts with low-hanging fruit. An employee of questionable moral character sees an opportunity to gain an advantage and takes it because he's unlikely to get caught. Picking that low-hanging fruit becomes habitual, and slightly more risky maneuvers seem less dangerous because he's getting away with playing fast and loose with policy or the law.Simply implementing e-discovery software discourages employees from picking low-hanging fruit in the first place because it dramatically increases the likelihood that they will get caught. When employees can't (or just don't) pick the low-hanging fruit, the evolution of bad behavior that leads to major liability is nipped in the bud. If an employee is determined to break the law, he's probably going to leave a strict company and look for one with laxer internal governance.If an employee does find a loophole that leads to major liability, having e-discovery software in place as part of a comprehensive program of self-governance helps to limit the level to which the company has to share in liability. Judges and juries don't fault a company for an employee who finds a way around a robust system to nearly the degree that they fault a company for not having those internal processes in place.To learn more about e-discovery software, click here