Compliance professionals’ jobs are made immeasurably more difficult without the support of the board. Michael Volkov offers five concrete actions the compliance department can take to enhance the board-compliance relationship.
In today’s aggressive enforcement environment, corporate board members have a target on their respective backs. Even with robust liability insurance, corporate boards are operating in a state of “ignorance is bliss.”
Chief compliance officers face enormous challenges, and perhaps their greatest challenge is enlisting and securing the support of the corporate board. We often hear happy-talk about senior management and board support – but the proof is in real and tangible actions.
To assist in this effort, I have put together five specific steps a company can take to improve corporate board engagement with compliance.
1. Ensure Compliance Experience on the Board
The latest mantra among practitioners is the need for compliance experience on the board. This can have a dramatic impact on the board’s engagement with and understanding of compliance.
We all know that corporate board members rarely understand what a compliance program looks like, how it operates and what needs to be done to make the program effective. This is where a board member with compliance experience can help. In the real world, a board member who understands compliance will naturally partner with the chief compliance officer and help promote compliance initiatives. Such support is invaluable and can dramatically improve a compliance program’s performance.
2. Educate the Board on the Importance of Culture
We all know that corporate board “training” is really an “educational” function. Corporate boards are woefully uninformed on ethics and compliance programs. A CCO has to prioritize training and education on the importance of corporate culture, and there is overwhelming research supporting the conclusion that an ethical culture advances a company’s financial performance. Such a basic educational point has to be emphasized over and over. Once it is drilled into board consciousness, the CCO has to explain how to measure a company’s culture, how to monitor its culture and the steps needed to remediate weaknesses in the culture.
3. Implement Training and Education Initiatives
Like our youngsters/children, corporate boards have to be reminded about important ethics and compliance ideas. A regular training program is critical – not an annual appearance before the board, but a quarterly appearance for training and education purposes. The risk environment is rapidly changing – from serious #MeToo issues to data privacy to cybersecurity, companies face a rapidly changing landscape, and they have to be kept abreast of such risks and mitigation strategies involving corporate culture and compliance.
On a separate front, corporate boards do not know how to oversee and monitor a corporate compliance program. A CCO has to provide a step-by-step explanation to outline what information is relevant, how the information is collected and what information should be provided to board members for their review and response.
As board member liability increases for compliance failures, CCOs have to address these anxieties by providing detailed and specific guidance – not feel-good pie charts and bar graphs recounting training attendance and code of conduct certifications.
4. Utilize Compliance Dashboards
CCOs are rapidly converging to reliance on a compliance dashboard that reports in real time key compliance statistics and performance indicators. Vendors are bringing these products to market, and CCOs have to embrace automation as a tool to advance compliance performance and oversight. Corporate board members need a similar dashboard – an easy way for board members to understand and monitor compliance.
5. Build Personal Relationships
CCOs have to establish a personal relationship with key board members, and with the audit chairperson in particular, who may be responsible for oversight of the compliance program. CCOs are politicians; their success depends on interpersonal relationships. A CCO who has a strong personal relationship with the audit chair has the ability to communicate consistently about ethics and compliance issues. Such communications avenues are invaluable to the overall success of a compliance program.
This article was republished with permission from Michael Volkov’s blog, Corruption, Crime & Compliance.