E-mail Archives For Control and Contract Enforcement in Europe
European enterprises feel impelled to improve internal controls, and retention of e-mail records must play a role.
For years government authorities have sought greater accountability and transparency among European companies, and greater uniformity in financial reporting. This campaign has led the European Union to adopt amendments to the following: 4th directive 78/660/EEC (annual accounts of specific type of companies), 7th directive 83/349/EEC (consolidated accounts) 8th directive 84/253/EEC (auditor and audit committee requirements).
In accordance with these amendments, individual EU member countries are now implementing new national law. Informally known as “EuroSox” (a nod toward the US Sarbanes-Oxley Act - SOX), these laws reflect modern expectations that institutions open themselves to much greater outside scrutiny, through disclosure and third-party review.
Although the details can vary from country to country, the broad message is clear: publicly-held companies and larger public enterprises are expected to pay greater heed to responsible governance and internal control.
A critical part of modern internal control is electronic mail. E-mail records (and other electronic messages records such as instant message) show who was delegated responsibility for what and when. They show what the terms of business deals were. They deter the creation of false accounting books.
See for example the UK case Hall v Cognos Limited (Hull Industrial Tribunal 1803325/97). Cognos’ company policy was not to reimburse employee expenses more than six months after they were incurred. That policy was part of the larger, written employment contract between the company and salesman Hall. The employment contract stated it could be modified only by a signed writing. Then a superior agreed by e-mail to depart from the policy and reimburse Hall for certain old expenses. When the company failed to honor this commitment, Hall sued. The court held the e-mail (when printed out) was in fact a signed writing that amended the employment contract. Therefore, the court enforced the agreement to reimburse the expenses.
E-mails need to be kept (in a way that facilitates searching) so that third parties –- that is, auditors -- can review transactions and relationships after the fact. They enable investigations into issues like fraud, bribes, kickbacks, corruption, tax evasion, false pretenses, misrepresented facts, government waste, misappropriation of funds-assets, executive abuse of assets. As internal control grows in importance in Europe, the old practice of deleting business e-mail and text messages quickly looks more and more archaic.
Mr. Wright is an advisor to Messaging Architects, global provider of electronic archival solutions.