This article was republished with permission from Michael Volkov’s blog, Corruption, Crime & Compliance.
In the wake of ever-constant business scandals (e.g. ZTE, VW, Takata, Odebrecht), chief compliance officers have to refresh their approach and strategy. Everyone agrees, or at least I think they should agree, that a company’s most effective control is its culture.
For CCOs, selling the board and senior executives on this point should not be very hard. Research and common sense often come to the same conclusion: an ethical company is more profitable in the long run. Just start with some basic “facts” (not alternative facts, but research-driven ones): employees who work at ethical companies are more productive and less likely to leave the company, misconduct rates among employees are lower at ethically driven companies and employee reporting rates are higher at companies committed to a culture of ethics.
With these basic building blocks, a company with an ethical culture has a competitive advantage in the marketplace. Consumers, competitors, vendors, their communities and government institutions each have favorable views of the company, its leadership and its overall contribution to the economy and the community.
LRN Research has put out some brilliant research and analysis in this area. Here are links to two important papers released by LRN (here and here). LRN’s analysis reveals the importance of culture and values-based principles as guideposts for corporate compliance programs and overall performance. The organization’s work is a must-read on these important topics.
CCOs have to take a new approach – or at least adjust their existing approach. All too often, I see CCOs who attend to program elements, making sure that each is followed and working properly. Not enough attention is being paid to the most important control: a company’s culture.
Culture is not so tangible or easily defined, but it can be measured, monitored and remediated. CCOs are very familiar with these latter concepts. CCOs and Human Resource professionals know how to survey employees. They typically will coordinate an employee survey every two years to measure employee morale and overall culture. While those efforts are laudable, there needs to be a new approach taken that reflects a greater focus on the importance of culture.
To that end, I have often encouraged CCOs to consider conducting narrowly tailored culture surveys that may be restricted to certain regions, countries or areas where compliance concerns may be on the rise. Alternatively, there is no reason to require surveys of all employees when targeted surveys could be designed to middle managers and their abilities to communicate the company’s cultural message, listen and respond to employee concerns and coordinate their efforts with compliance officers.
I know such an approach requires companies to break out into a new mold where traditional surveys are replaced with a more comprehensive approach including not only targeted surveys, but also focus groups, interviews and other ways to encourage employee communications about company values, culture and overall morale.
Once a company collects more culture data (e.g. surveys, focus groups, interviews), the company has the ability to measure the results over time, monitor the results and design remediation strategies to address weaknesses in its culture. This is not the most exact science, but CCOs have to start somewhere. CCOs have to measure the impact of their current strategies, such as CEO statements, CEO messages, newsletters and other attempts to promote corporate culture. It is not enough to videotape a CEO speaking generally about the company’s culture and commitment to values-based principles – more has to be done to establish and promote a real commitment to a culture of ethics.
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Michael Volkov is the CEO of The Volkov Law Group LLC, where he provides compliance, internal investigation and white collar defense services. He can be reached at email@example.com. His practice focuses on white collar defense, corporate compliance, internal investigations, and regulatory enforcement matters. He is a former federal prosecutor with almost 30 years of experience in a variety of government positions and private practice.
Michael maintains a well-known blog: Corruption Crime & Compliance which is frequently cited by anti-corruption professionals and professionals in the compliance industry.Michael has extensive experience representing clients on matters involving the Foreign Corrupt Practices Act, the UK Bribery Act, money laundering, Office of Foreign Asset Control (OFAC), export controls, sanctions and International Traffic in Arms, False Claims Act, Congressional investigations, online gambling and regulatory enforcement issues.
Michael has assisted clients with design and implementation of compliance programs to reduce risk and respond to global and US enforcement programs.
Michael has built a strong reputation for his practical and comprehensive compliance strategies.Michael served for more than 17 years as a federal prosecutor in the U.S. Attorney’s Office in the District of Columbia; for 5 years as the Chief Crime and Terrorism Counsel for the Senate Judiciary Committee, and Chief Crime, Terrorism and Homeland Security Counsel for the Senate and House Judiciary Committees; and as a Trial Attorney in the Antitrust Division of the U.S. Department of Justice.
Michael also has extensive trial experience and has been lead attorney in more than 75 jury trials, including some lasting more than six months. His clients have included corporations, officers, directors and professionals in, internal investigations and criminal and civil trials. He has handled a number of high-profile criminal cases involving a wide‐range of issues, including the FCPA and compliance matters, environmental crimes, and antitrust cartel investigations in countries all around the world.