Why Compliance Officers Need Independence

Posted on February 17, 2017 at February 20, 2017 by Donna Boehme 5907 0

“Collaboration, not Subordination”

Captive compliance programs are hamstrung programs. Compliance officers who enjoy independence and are able to collaborate with legal, HR and other key business teams… they’ll be far more effective. We’ve long discussed the need for compliance officers to have a seat at the table. It’s time for businesses to graduate to Compliance 2.0.

By: Donna Boehme

I recently read a great blog post by Tom Fox on why compliance officers need independence. And former federal prosecutor Michael Volkov, who completely understands the CCO’s hard job, has reiterated the value of independence here, although this is mostly old news to any CCO who has been in the trenches. With the feedback we are seeing to the launch of the Compliance 2.0 Infographic, this is probably a good time to discuss the independence issue.

Why is independence so critical to the establishment of a strong compliance program that works? The CCOs in my networks know the answer, and they have the scars on their backs to prove it. I’ve said that the CCO’s role is an incredibly hard job – maybe the hardest one in the company. I use a single slide to summarize why this is so.

Here are some ways independence helps CCOs do their job well:

Clear-Eyed Focus on Independent Mandate

CCOs need to perform their clear mandate to find, fix or prevent problems before the company is forced to do so by third parties on terms those parties demand (e.g., a mandated monitor, fines and a deferred prosecution agreement with additional obligations). But when compliance is operated as a captive arm of legal or any other function, it is incentivized to work through the lens of a very different mandate. That’s what we call “Mandate Conflict.” I discuss this phenomenon here with Roy Snell. That’s how GM got its “69 Naughty Words” training, but failed to fully understand and define the delayed recall problem. Or how VW may have had excellent relationships with its Works Councils, but failed to surface and resolve concerns about its emissions cheating scheme.

Independence means the recognition of a new, standalone mandate for the compliance program discharged independently, but in high collaboration with other SMEs in the organization. For instance, in a multidisciplinary task force developing investigation guidelines (so critical after Yates), legal can contribute its SME about privilege issues, HR on people issues and IT/security on email and documentation issues. This kind of check-and-balance plays out when designing and implementing all aspects of the program, which is why we say that the new generation of Compliance 2.0 can use the mantra of “Collaboration, not Subordination.” Thought-leader and two-time CCO Pat Gnazzo has described this approach as “Partners at the Table.”

The Mauritza Munich Rule

Corporate America and multinationals like WalMart and Siemens have far too many examples of compliance professionals who are fired or forced out for doing their job well. It’s the Mauritza Munich saga recently highlighted by Mike Scher here. It’s the Machiavelli rule played out in Technicolor. One of the goals of Compliance 2.0 is to avoid situations where compliance professionals have to choose between doing their jobs well and “sleeping at night,” paying the mortgage or sending their kids to college. Recruiters tell me that if gatekeepers can find a way to promote Compliance 2.0, the entire company and its stakeholders benefit. #TheRisingCCOLiftsAllBoats.

I’ve said this before, but it bears repeating: when a CCO exits a company, that should be an 8K event akin to a change in outside auditors and, similarly, the board should include in its escalation clause any incident of a CCO being fired or forced out and ask to know why. That’s called OVERSIGHT in the compliance world.

Government Gatekeepers are Paying Attention

Compliance Week 2016 was a grand week for Compliance 2.0! In the opening keynote, entitled “Are We Defining Effectiveness Correctly?” both the DOJ and SEC discussed themes of independence, empowerment and subject matter expertise in their remarks. And especially with the DOJ’s hire of compliance SME Hui Chen, these are hopeful signs that government gatekeepers will be focusing on the distinction of effective, robust Compliance 2.0 programs that work, as opposed to Compliance 1.0 “paper programs” merely for show. Independence, empowerment and the other elements of Compliance 2.0 are intended to position CCOs, compliance professionals and teams to do their jobs well without becoming an 8K event or a board-escalated event. Other regulators, such as the OIG HHS and the Office of Currency and Control, have also expressly acknowledged the criticality of independence. Even outside the U.S., gatekeepers and policymakers, such as the OECD, Brazil’s CADE and the Canadian Competition Bureau, understand the elements of Compliance 2.0. We are headed to a consensus.

So simply stated, Compliance 1.0 was a costly experiment that didn’t work. That experiment has just cost Volkswagen $14.7 billion. Compliance 2.0 is the “New Normal.” The #RisingCCOLiftsAllBoats!

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Donna Boehme

Donna Boehme is an internationally recognized authority in the field of organizational compliance and ethics with 20+ years of experience designing and managing compliance and ethics solutions, within the US and globally. As Principal of Compliance Strategists LLC, she has advised a wide spectrum of private, public, governmental, academic and non-profit entities. She serves on the respective boards of RAND Center of Corporate Ethics and Governance, Rutgers Center for Government Compliance & Ethics. Donna is an Emeritus Member and past Board member of the Ethics and Compliance Officer Association past Board member of the Association of Corporate Counsel – Europe and past Advisory Board member of The Society of Corporate Compliance & Ethics. She was a charter member of the Conference Board Council on Corporate Compliance & Ethics, The Compliance and Ethics Leadership Council of the Corporate Executive Board and a past member of the Ethics Resource Center (Fellows Program).

Donna’s extensive on-the-ground experience includes serving as the first global compliance and ethics officer for two leading multinationals. As Group Compliance and Ethics Officer for BP plc (London), she established the company’s first global compliance and ethics function in 2003, including the company’s global code of conduct, covering 100,000+ employees in over 100 countries (translated into 34 languages), a dedicated global compliance and ethics team and a groundbreaking network of 135+ senior–level business ethics leaders. At BOC Group (now part of Linde Group), she established the company’s first global compliance and ethics function and its first global code and program “Living Our Values.” Many elements of the programs designed and developed by Donna are viewed as best practice in the field and have been adopted in various forms by leading companies.

Donna is a regular columnist with Corporate Counsel, Corporate Compliance Insights, ComplianceX, and the FCPA Blog. She has been published and quoted widely on issues in the field including in The Wall Street Journal, the Boston Globe, the Washington Times, Reuters, the Economist, the Financial Times, Chicago Tribune, Bloomberg, New York Law Journal, Board IQ and Compliance Week. She is a frequent speaker to business and professional groups, including as keynote speaker to Compliance Week Europe (Brussels), Ethics Practitioners Association of Canada (Ottawa), International Financial Executives Leadership Forum (Montreal) and Network for Good Business Ethics and Non-Financial Reporting (Copenhagen). She has advised departments of the Canadian government, has spoken at the House of Lords (London) on the design and implementation of global compliance programs, has served as a member of the US delegation to the 9th annual Rand-China Reform Forum (Beijing), and has presented in front of the U.S. Senate’s Whistleblower Caucus. She has participated in working sessions of the OECD Working Group on Bribery (Paris), providing input for the OECD Good Practice Guidance on Internal Controls, Ethics, and Compliance, and has also presented to government agencies and regulators, including the U.S. Securities and Exchange Commission in connection with the final rules for the Dodd-Frank Act whistleblower program. Donna is an invited guest lecturer at various business and law schools including New York University Stern School of Business. Donna is also co-chair and co-founder of the RAND Compliance and Ethics Symposia series, an important vehicle of thought leadership for the profession. She has been cited and interviewed as the “Lion of Compliance” because of her tireless work to increase understanding of the role of the chief compliance officer (CCO) and to improve the governance model for CCOs to include empowerment and independence, and position CCOs for success.

A featured expert in the award-winning PBS documentary, “In Search of the Good Corporate Citizen,” Donna has been frequently interviewed by the media as an authority on organizational compliance and ethics, including by Dow Jones, Fox News, Compliance Week, Canadian Business Network, Corporate Compliance Monitor and Progressive Radio Network. She has been named to The Top Thought Leaders for Trustworthy Business in 2014, 2015, 2016, and 2017 by Trust Across America, named the Trust Across America 2018 Lifetime Achievement Honoree, is a recipient of the 2014 SCCE International Compliance & Ethics award for extraordinary contributions to the field, and was named as Who Compliance Professionals Should Follow on Twitter in 2013 by ComplianceX.

Prior to specializing in organizational compliance and ethics, Donna was in private practice with Fried, Frank, Harris, Shriver & Jacobson in New York. She holds a J.D. from New York University School of Law.