Compliance Lessons from Venice: Arsenale and Incentivizing Compliance

I continue with my Venice themed podcast series by focusing on the Arsenale. This is not a precursor to that famous north London football club, the Arsenal Gunners, but the district in Venice where one of the main commercial enterprises of the city took place, that being ship building and ship repair. At one point, the Arsenale employed almost 10% of the city’s workforce or 12,000 people. This was in the mid 1200s to the 1400s when Venice was at or near the height of its trading and financial power. The Arsenale developed the first production line for the building of ships, when, of course, it was all done by hand. The equipment developed to drag ships up on shore and repair was simply amazing. Appropriately, the Arsenale is now an Italian and NATO naval facility. 

But I also picked up some interesting compliance insights in learning more about the Arsenale. On the incentive side there were several mechanisms the City of Venice used to help make the Arsenale work force more loyal and desirous to stay in their jobs, all for the betterment of themselves and their city. The first was job security. The Arsenalewas so busy for so many years that lay-offs were unheard of. Even if someone lost their job, through injury, mishap or worse; they received enough of compensation that they could live in the city. Finally, when a worker died, the company provided not only funeral expenses but would assist in taking care of the family through stipends or finding other work for family members.

The 2012 FCPA Guidance is clear that there should be incentives for not only following your own company’s internal Code of Conduct but also doing business the right way, i.e. not engaging in bribery and corruption. The incentives can be burned into the DNA of a company through the hiring and promotion processes. There should be a compliance component to all senior management hires and promotions up to those august ranks within a company. Your Human Resources function can be a great aid to your cause in driving the right type of behavior through the design and implementation of such structures. 

Just as the fathers of Venice viewed the workers of the Arsenale as critical to the well-being of their city, senior managers need to understand the same about their work force. The City of Venice long ago showed how such incentives could help it maintain a commercial advantage. Fortunately the DOJ and SEC still understand those valuable lessons and continue to talk about them as well.