The Person of the Year: The Chief Ethics Officer

This article was republished with permission from Michael Volkov’s blog, Corruption, Crime & Compliance.

To bring some continuity to my blog, I try to start the New Year off by acknowledging the most significant person for the past year.

Over the last three years, I recognized the Chief Compliance Officer, the Whistleblower and the Prosecutor, respectively, as the Person of the Year.

This year I am recognizing the Chief Ethics Officer as the Person of the Year.

Many companies have embraced the importance of ethics as an important function as related to, but separate from, the compliance function. Wal-Mart has appointed a Chief Ethics Officer, and more companies are refocusing compliance programs on the importance of ethical culture.

I have written often this past year about the importance of an ethical culture, the significant benefits of an ethical culture and the role that ethics can play in the overall effectiveness of a compliance program.

To that end, I have reminded my readers (and clients) that a Chief Compliance Officer is actually a Chief Ethics and Compliance Officer. Some have taken this concept even further by separating the ethics and the compliance functions to underscore the importance of managing and promoting a company’s ethical culture.

The rise of the Chief Ethics Officer, whether combined with compliance or not, is the most significant trend we see today in compliance.

This past year was an important year for compliance – not because of any significant changes in the profession itself, but because of business leaders recognizing (finally) the importance of ethics, not for some altruistic reason, but as an essential priority for any successful and sustainable business organization.

In the past decade, businesses have started to pay attention to compliance as an important function of a successful business. With the focus on compliance, in the past year, businesses have suddenly discovered the value of ethics as a separate and important part of the company’s compliance function.

Businesses now see a strong ethical culture as the most effective protection against compliance failures. Employees at ethical companies are more likely to question and report what they see as unethical behavior.

More companies are starting to realize that investing in a company’s culture is an important priority for company growth and sustainability. The new focus is on values and ethical behaviors, as opposed to compliance policies, procedures and guidelines. One goes hand-in-hand with the other – ethics means nothing without compliance, and compliance means nothing without an ethical culture.

As part of this trend, companies have re-examined their codes of conduct to simplify the message around a core set of values and beliefs. Once the values and beliefs are embedded in the company culture, compliance policies and procedures take on a new meaning, a new life.

A code of conduct is now being used to endorse and promote a set of aspirational values. That is just the beginning part of the process. Companies have rolled out targeted training on their respective codes of conduct and are reinforcing this ethics messaging through blogs, social media and other internal communications techniques.

All of this emphasis on ethics, codes of conduct, values and beliefs is welcome news, but now the question boils down to leadership commitment and ultimately, demonstrating commitment to ethical conduct.

The ethical culture has to extend through every layer of a company, including the behaviors of sales personnel who are on the front lines of every business.  Employees have to believe in the company rather than just comply with the company’s rules. A believer is a happier and more productive employee, as opposed to an employee who performs his or her job while making sure they do not violate company rules.

A Chief Ethics Officer has an important function in every company – they have to ask the question of whether a company should act in a certain way, as opposed to whether the company can act in a certain way. The transformation in business thinking is not easy to accomplish, but with the rise of the Chief Ethics Officer, many companies want to give it a try.