We have a guest post today from Jim Boeckman, focusing on compliance lessons from the recent Tiger Woods rule controversy.  Jim is a business lawyer in Austin, Texas, who works with small and mid-sized companies, and can be reached at [email protected].

With the 113^th U.S. Open at the historic Merion Golf Club close at hand, I thought it might be interesting for those who are both avid golf fans and close followers of developments in compliance matters to look back a few weeks at the rules controversy that erupted at the 2013 Masters at the Augusta National Golf Club.

For compliance officers, the controversy underscores several important principles when it comes to internal reporting and discipline.

During Tiger Woods’ Saturday round, his third shot into the par 5 fifteenth hole hit the flagstick and rolled back into the water.   After evaluating his options for taking a drop (with a one-stroke penalty), Tiger incorrectly dropped his ball too far behind the location from which he took his original shot.

Later, in a post-round interview, Tiger admitted that he intentionally dropped his ball a few yards back from his original location in order to have a better yardage (PGA pros are that accurate with their irons!).  The Masters Rules Committee decided to re-examine Tiger’s actions on the 15^th hole, and subsequently assessed an additional two-stroke penalty.  Under the long-standing Rules of Golf (and accepted traditions), Tiger would have been disqualified because he signed an incorrect scorecard (that is, one not including the two-stroke penalty) at the end of his round.

However, the Masters Rules Committee invoked a relatively new modification to the Rules of Golf, and permitted Tiger to continue in the tournament, where he ended up placing in a tie for fourth, four shots out of the ensuing playoff.

Why is any of this of interest to compliance professionals?

First, compliance officers urge employees to consult for advice so as to avoid potential problems.  Tiger could have checked with his on-course consigliere (his caddie) or called in a rules official when making his drop, but did not.  If he had done so, there would have been no controversy.  Compliance officers need to emphasize the message of consultation and make themselves accessible to employees, executives and board members.

Second, Tiger’s violation or conduct was initially identified by a television viewer who had a history as a golf official.  Golf is the only sport I know of where TV viewers can call in rules violations.  Golf is also unusual in that the competitors are supposed to enforce the rules themselves – one of the things that makes golf different from “refereed” sports such as basketball or football.  You don’t see Kobe Bryant calling traveling on himself, or Peyton Manning telling a referee that his receiver really was out of bounds before catching a pass.  Compliance also has a self-enforcement aspect – for example, self-reporting can be a mitigating factor when it comes to FCPA, export controls and other compliance issues.

Third, compliance programs can be seriously undermined when discipline is not handed out in a consistent and fair manner.  Many commentators complained that Tiger should have been disqualified for signing an incorrect scorecard.

Last year’s  Best Buy controversy which led to the resignation of the Chairman of the Board and the CEO because of their inappropriate handling of the CEO’s relationship with a subordinate seems to be a good example of even-handed enforcement of corporate standards.   The rules are the rules and a Chairman and the CEO cannot escape or avoid compliance by virtue of their position.

On the other hand, Tiger and other prominent players (but especially Tiger) receive far more TV time than less-prominent players, and those further down the leader board.  The high-profile players’ rules violations are far more likely to be exposed to the viewing audience and then commented upon through phone calls or social media postings.  Is that fair?  Is your company under similar scrutiny, as compared to your competitors?

Was the Masters Rules Committee’s decision to allow Tiger to continue playing in the tournament an arbitrary and capricious decision to protect one of the most popular players in the field, and the TV ratings of their broadcast partners at CBS (who pay a lot for the privilege of broadcasting the tournament)?  Or was it a sensible interpretation of the Rules of Golf as modified by the USGA and R&A?  What do companies do when they believe that Federal or other law enforcement agencies are making capricious decisions, either about themselves or their competitors?

All of these issues underscore important compliance principles for your company – the global marketplace is filled with risks, there are many who have an incentive or motive to report potential violations, and, in the event of misconduct, the matter has to be handled fairly.