By James G. Derouin
Summary: As a sign of the times, none other than Time magazine recently named “Whistleblowers” as its People of the Year. Whether it’s Enron, Worldcom, Tyco, Adelphia, etc., the issue of corporate scandal has risen to the fore of the American conscience and it’s apparent that better policies regarding in-house paperwork are required.
Events in recent months have emphasized the importance of having a legal and comprehensive document retention policy. Here are eight steps every corporation, including water treatment dealers, should take to make sure you have a policy that meets your needs and complies with the law.
Step 1: Recognize that implementing a document retention policy has a legitimate business purpose. If there’s no business reason to keep a document and no legal obligation to retain it, it can be destroyed—as a matter of practice—to reduce storage costs.
Step 2: Ask your lawyer to write the policy to assure the criteria chosen (usually based on the date the document was created) are legally correct. The purpose for the policy isn’t to evade the law or create a legal problem. Rather, the purpose of a legitimate document retention policy is to manage, properly and legally, the mass of documents that a corporation generates.
Step 3: Do not buy into “aggressive” or “clever” legal positions when you adopt and implement your document retention policy. Current events—i.e., the Enron/Arthur Andersen debacle—demonstrate the huge price that’s paid by those who do.
Step 4: Do not destroy documents if a legal “matter” is pending. Clearly, a court proceeding is a “matter.” A grand jury investigation is a “matter.” But what about contested administrative proceedings or Securities and Exchange Commission (SEC) investigations? The existence of these nuances is why legal input is necessary, even decisive, when deciding whether to keep or destroy documents.
Step 5: Do not distribute your document retention policy without any explanation as to how to apply it. If an employee asks for a copy of a document retention policy without any explanation of why it’s wanted, the request should raise a red flag. It isn’t likely an idle request. In other words, a document retention policy is like a gun; it has a legitimate purpose, but it can be misused and must be properly supervised. Any document retention policy should be accompanied by written guidelines on how to apply it along with periodic training on its proper use.
Step 6: Do not implement a document retention policy in haste at a time of crisis. This is the absolute worst time and approach. Think ahead and do it right. If you delay and implement the policy when you need it, you risk applying the policy in a way that hurts you in the media and absolutely kills you in the eyes of your consumers, regulators and prosecutors. If there is anything worse than a bad document, it’s an illegally destroyed document. Ask Arthur Andersen.
Step 7: Teach employees how to properly prepare internal communications. A corp-oration’s own files will be used to embarrass it or, in some extreme cases, have charges brought against it. The words of a company’s officers and employees can literally sink the ship. There are very few truly “business confidential” documents. This is why employees need training on how to write internal communications that, while accurate, don’t misstate the law or erroneously jump to legal conclusions. The lack of such training cannot be cured by the late and hurried application of a document retention policy.
Step 8: As is the case with all businesses, water treatment dealers cannot afford to keep all produced documents forever. Because of legal and regulatory requirements, however, a dealer needs to first know what he or she can properly and routinely destroy to determine whether the cost of managing the proper disposal of documents will outweigh the cost of storing them. Do you know what documents must be retained and for how long? Do your computer personnel already have a disposal system of their own with respect to email and voice mail? If you are disposing of documents routinely, do you have a written policy that assures consistency? Do your employees understand that the purpose for such a policy is cost-related and proper rather than a means of evading legal responsibilities? When litigation or a governmental investigation commences, do you have the ability to preserve all documents related to each so that you aren’t accused of improper document destruction? These are just a few questions that arise when contemplating the complex issue of document retention.
Needless to say, the furor over document shredding in the accounting scandal involving Enron and Arthur Andersen is all that needs to be said regarding the importance of promoting a good document retention policy. These issues are paramount to any company in any industry, including water treatment. And they affect any company regardless of size. For the good of your business, your employees and your customers, a review of these issues—in consultation with your attorneys and reviewed with your staff—are now a must.
About the author
Jim Derouin is the senior environmental partner in the Phoenix office of Steptoe & Johnson LLP, attorneys at law. He has published an Executive’s Survival Guide to Environmental Compliance and Defense, which includes 24 ways to avoid environmental compliance and defense problems as well as nine proven strategies to achieve your environmental goals. To receive a complimentary copy by mail, please contact Cynthia Carlo at (602) 257-5235 or email: firstname.lastname@example.org. Derouin can be reached at (602) 257-5237, (602) 257-5299 (fax) or email: email@example.com