The Evolution of Compliance Training and Corporate Risk Management

The Growing Importance of Compliance Training

In recent years, compliance training has become one of the most important areas of corporate employee development.

Compliance training teaches employees how to conduct themselves in accordance with applicable federal and state laws, as well as company policies and regulations.

It covers a wide range of topics, including sexual harassment prevention, workplace bullying, diversity and inclusion, cybersecurity, workplace safety, antitrust laws, and anti-corruption regulations.

Many companies also establish a Code of Conduct that outlines their expectations for employee behavior and requires employees to acknowledge their commitment to following it. Compliance training often goes hand in hand with these policies.

Traditionally, compliance training has had a reputation for being dry, lengthy, and tedious. Many employees associate it with uninspiring training videos created by corporate legal departments, something they are required to sit through rather than something they genuinely want to learn.

While helping employees understand the material is an important objective, maintaining documentation that employees have completed the required training has also been a central purpose.

However, compliance training is evolving.

To engage younger generations, particularly Gen Z employees who are accustomed to consuming information in shorter formats, companies in the United States are increasingly adopting more accessible and engaging approaches.

These include appealing, gender-neutral animated characters, short learning modules lasting approximately five to ten minutes, and mobile-friendly courses that employees can complete conveniently on their smartphones.

The goal is to make compliance training easier to understand, more engaging, and more effective.

Compliance Training as a Risk Management Strategy

As its name suggests, compliance training is designed to help employees understand applicable laws and company policies and incorporate those expectations into their everyday behavior.

For this reason, compliance training is directly connected to corporate risk management.

When implemented consistently over time, effective compliance training can help shape employee awareness, influence workplace behavior, and ultimately become part of an organization’s culture.

This, in turn, can help prevent misconduct and reduce corporate risk.

Some executives view compliance training as a temporary obligation. They may prefer to conduct it only once a year to minimize the burden on employees.

However, completing a training course once does not necessarily mean that employees will retain what they have learned. In fact, much of the information may eventually be forgotten.

The real objective should be to make appropriate behavior a natural part of employees’ daily work.

One effective approach is to provide repeated learning opportunities over time, using different courses that address related topics.

By revisiting important concepts at regular intervals, employees have more opportunities to reinforce their understanding and apply what they have learned.

Imagine compliance training that is brief, engaging, easy to understand, and supported by high-quality content and animation.

Wouldn’t this make it easier for companies to achieve their training objectives without placing an excessive burden on employees?

Next, let’s look at some real-world legal disputes involving Japanese companies operating in the United States.

These examples illustrate why compliance training related to discrimination and diversity—topics that may be less familiar to some Japanese business professionals—is particularly important.

Employment Litigation Facing Japanese Companies in the United States

Based on the legal publications and reports I have been following, 2022 saw a number of significant employment-related disputes involving Japanese companies operating in the United States.

Some of these cases had the potential to affect the very foundations of corporate management.

The issues included racial discrimination, gender discrimination, retaliation, and labor union organizing.

In one case, deficiencies in a company’s administrative system allegedly resulted in employees receiving fewer paid sick days than required by law, leading to a class-action lawsuit.

In another, employees who opposed wages that had allegedly remained below legally required minimum levels attempted to organize a labor union. The company’s alleged efforts to prevent unionization led to action by the National Labor Relations Board (NLRB), with the dispute eventually reaching the Supreme Court.

Several cases also raised concerns about the potential involvement of Japanese parent companies in employment decisions made by their U.S. subsidiaries.

When a Japanese parent company becomes involved in litigation arising from its American operations, the potential financial exposure can be substantial.

Below are several examples.

Case 1: Gender Discrimination Lawsuit Involving a Female Attorney

In one case, an experienced female in-house attorney who had worked for a Japanese company in the United States for many years alleged that she was denied promotion to a senior legal counsel position because of her gender and was ultimately terminated.

The company already had a female legal counsel. According to the allegations, management wanted the second position to be filled by a man.

As a result, the company hired an external male attorney despite his having less experience and a shorter history with the organization.

The case also involved allegations of retaliation.

One Japanese executive had previously been investigated by the female attorney in connection with a sexual harassment complaint. It was alleged that the executive held a grudge over the investigation and subsequently interfered with her promotion.

The lawsuit raised serious questions about a male-dominated corporate culture and the potential influence of retaliation on personnel decisions.

Because the Japanese parent company was allegedly involved in the appointment of legal counsel, both the U.S. subsidiary and its Japanese parent were named as defendants.

Had the organization made a serious, company-wide commitment to preventing gender discrimination—including through training at its Japanese headquarters—it might have developed greater awareness of discriminatory practices.

Such efforts might also have helped demonstrate the company’s commitment to preventing misconduct in the event of litigation.

Case 2: Racial Discrimination Lawsuit Involving a Black Attorney

Another case involved a Black male in-house attorney who complained that his compensation and promotion opportunities were inferior to those of a white colleague in an equivalent position.

According to the allegations, after raising these concerns, he was accused of sexual harassment without justification and subsequently dismissed.

The lawsuit was filed in 2021 and named the American company president, the U.S. subsidiary, and the Japanese parent company as defendants.

What makes this case particularly noteworthy is that the alleged misconduct centered on an American executive.

Some Japanese business professionals may assume that employing an American president will automatically reduce the risk of discrimination-related problems in the United States.

Unfortunately, this case illustrates why such assumptions can be dangerous.

Discrimination and retaliation are organizational risks that require attention regardless of a leader’s nationality.

Case 3: Class-Action Gender Discrimination Lawsuit

Another case involved female employees of a Japanese company operating in an industry with a history of gender discrimination concerns.

In 2021, one female employee filed a lawsuit in federal court.

The number of plaintiffs subsequently increased to nine, raising the possibility of broader collective litigation.

The complaint described several alleged discriminatory practices, including:

  • Failure by Human Resources to take corrective action after receiving complaints of gender discrimination.
  • Failure to recognize and promote qualified female employees.
  • Consideration of employees’ family circumstances when evaluating women for promotion.
  • An internal committee addressing gender discrimination that consisted entirely of men.

Together, these allegations suggested the possibility of systemic gender discrimination within the company’s organizational culture.

Another concern was the potential scale of financial damages.

Within the same industry, two well-known American companies had already faced adverse court judgments in gender discrimination cases. In one case, a punitive damages award reportedly reached $10 billion.

The developments in the Japanese company’s case therefore warranted close attention.

The Importance of Dialogue with Employees

In recent years, the balance of power in American workplaces has increasingly shifted toward employees.

Labor shortages following the COVID-19 pandemic accelerated this trend.

Employees have become more willing to raise concerns about workplace conditions, while agencies such as the Equal Employment Opportunity Commission (EEOC) have taken steps to facilitate the reporting and enforcement of workplace discrimination claims.

There has also been growing interest in labor union organizing, particularly among younger workers seeking greater collective bargaining power in discussions with employers.

Against this backdrop, how can companies reduce the risk of employment disputes and litigation?

One of the most important steps is to respond promptly and seriously when employees raise concerns.

Executives and managers must be willing to engage in meaningful dialogue, listen carefully, and demonstrate a genuine commitment to addressing workplace problems.

Based on recent conversations with our HR consultants and employment attorneys, the following practices are particularly important.

1. Respond promptly and seriously to employee complaints.

Take all employee concerns seriously, investigate them appropriately, and avoid unnecessary delays in addressing potential problems.

2. Communicate leadership’s commitment to preventing discrimination.

Senior executives should regularly communicate company-wide messages reinforcing the organization’s commitment to preventing all forms of discrimination.

3. Establish an internal committee dedicated to preventing discrimination.

Create a committee that meets regularly, reviews workplace concerns, and actively supports initiatives to improve organizational culture.

4. Require compliance training for all employees and maintain training records.

Provide mandatory compliance training through e-learning and retain accurate records documenting employee participation and completion.

Why Maintaining Training Records Matters

The fourth recommendation deserves particular attention.

Maintaining accurate records of compliance training can be an important part of a company’s legal risk management strategy.

If an employment dispute or lawsuit arises, training records may help demonstrate that the company has made ongoing efforts to educate employees and prevent discrimination.

These records can provide evidence of the organization’s commitment to maintaining a compliant workplace.

Depending on the circumstances, such documentation may be relevant when evaluating the company’s preventive measures and response to alleged misconduct.

Now consider the opposite situation.

What if a company becomes involved in a discrimination lawsuit but has no records showing that it provided employee training?

The absence of documentation could make it more difficult for the company to demonstrate that it took meaningful steps to prevent inappropriate behavior.

It could also raise questions about whether the organization had adequately addressed discriminatory practices or allowed an environment in which misconduct could occur.

Of course, training records alone do not establish legal compliance or protect a company from liability.

Training must be accompanied by effective policies, consistent enforcement, appropriate investigations, and meaningful corrective action.

Nevertheless, accurate documentation remains an important component of a comprehensive compliance program.

Protecting Japanese Parent Companies Through Effective Compliance Training

As employees in the United States become increasingly willing to challenge workplace practices, Japanese companies must pay close attention to the legal risks associated with their American operations.

When a Japanese parent company is found to have participated in or exercised control over decisions that give rise to employment litigation, the potential consequences can be significant.

Depending on the facts and applicable law, both the U.S. subsidiary and the Japanese parent company may face legal exposure.

For this reason, compliance training should not be viewed merely as an annual administrative requirement.

It should be treated as an essential part of corporate governance, employee development, and long-term risk management.

By investing in effective training, maintaining accurate records, encouraging open communication, and building a workplace culture grounded in fairness and accountability, Japanese companies operating in the United States can take meaningful steps to reduce risk.

Ultimately, the purpose of compliance training is not simply to demonstrate that employees have completed a course.

It is to create an organizational culture in which employees understand what is right, act responsibly, and help prevent problems before they occur.

That is how compliance training can contribute to protecting employees, strengthening organizations, and supporting sustainable business success.