X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
In 1995 The Scotts Co. acquired Miracle-Gro, one of the nation’s most popular garden products. At that time the Hagedorn family, Miracle-Gro’s owners, became Scotts’ biggest shareholders. But they got more than they had expected. A year later, Scotts had an accounting meltdown. The Marysville, Ohio-based company underreported the incentives it gave retailers to stock its wares; Scotts had to restate its earnings for 1995. The Hagedorns took over, ousting the old corporate leadership and installing their own team. The new regime put Scotts’ financial procedures into shape, buffed its battered public image, and acquired pesticide and garden care product makers in Europe. All of this activity, says Executive Vice President and General Counsel David Aronowitz, meant that putting out the company’s financial fires took precedence over implementing a companywide compliance program. “We didn’t have people here who were driven enough to look at things in a global way,” he says. That all changed in 2001, when Aronowitz, now 47, was promoted to GC from assistant GC. The lawyer had implemented new compliance measures at his two earlier in-house stints: the Dublin, Ohio-based Insilco Corp. (as assistant GC) and the Grimes Aerospace Co. in Columbus (as GC). But the Scotts project was his first across-the-company compliance drive. Aronowitz’s program has one crucial difference from other corporate compliance efforts: It’s mostly homegrown. The company didn’t hire outside consultants to develop a customized compliance system, nor did Scotts use a prepackaged program from an outside vendor. Instead, Aronowitz deputized 20 of the company’s senior executives to help the seven-lawyer legal department develop the program. That group broke into subcommittees that focused on nine subject areas: antitrust, business ethics, Sarbanes-Oxley, environmental, human resources, product regulatory compliance, safety, intellectual property and international issues. Each group reviewed the company’s policies in these areas and made changes where necessary. For example, the group looking at the sales team’s tactics came up with procedures designed to prevent a repeat of the 1996 scandal. “That is the most effective type of internal reform you can have,” says Lawrence Mitchell, professor at George Washington University Law School and author of “Corporate Irresponsibility: America’s Newest Export.” “By using your managers instead of just the lawyers, you actually know what’s going on. You get a lot more information. Doing it without the managers is foolish.” The rash of recent corporate scandals helped senior management buy into the program. Aronowitz started the process by lobbying CEO James Hagedorn with his plans. To make his point, the GC slipped a snapshot of the arrests of Adelphia Communications Corp. senior executives into his PowerPoint presentation. “I think my job was made a heck of a lot easier by those perp walks,” says Aronowitz. With Hagedorn’s approval, Aronowitz and Assistant General Counsel Vince Brockman performed a risk assessment. They identified such potential problems as price-fixing, insider trading and antitrust. Those are critical areas for Scotts because its garden care staples, including Miracle-Gro, Ortho and Roundup (which it markets for Monsanto), account for 50-90 percent of a given market. From there the duo started working with the 20 top executives. Finally, rather than provide manuals or online training, Aronowitz’s in-house lawyers fanned out to business units, meetings and conferences, and tutored employees in person, often with the use of PowerPoint slides. Doing it this way was cheaper, but more importantly, it instilled a strong “culture of compliance,” says Aronowitz. The company spent about $150,000 on the program out of the legal department’s annual budget of $12 million. “It hasn’t been cheap, but compared to an antitrust case or a government investigation, it’s peanuts,” says Aronowitz. The main expense came in the form of “soft costs,” the hours executives spent away from their regular jobs to work on the project. “When the head of the whole sales department is spending an afternoon brainstorming, that’s a major investment,” he says. After more than a year of legwork, the program rolled out in April 2003. Former Securities and Exchange Commission chairman Harvey Pitt, now CEO of Kalorama Partners, LLC, a Washington, D.C., consulting firm, kicked off the launch with a speech for the 20 senior managers. Pitt, according to Aronowitz, had served as a consultant as the Scotts team put the compliance program together. Over the last nine months, about 2,000 of Scotts’ 5,000 employees have received training. (Aronowitz is still surprised to find employees who don’t know, for example, that they shouldn’t send racy e-mails to one another.) He says workers are generally receptive to the classes, but “certain people come to these things with their arms folded, and they’re usually the ones most in need of the training.” Aronowitz says the next step is to train the 1,200 employees based abroad; Scotts does business in 15 countries and is a major force in the garden products industries in Germany and the United Kingdom. The GC says the program is still a work in progress: “We’re never going to identify every risk immediately. We’re looking at gradually diminishing the level of problems.”

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.