This article was republished with permission from Michael Volkov’s blog, Corruption, Crime & Compliance.
Everyone likes to cite and talk about the list of horrible scandals. Whether it is Enron, WorldCom, Siemens, GM, VW or Wells Fargo, we pick through the details, cite failures and use it as a springboard to a discussion of higher ideals and performance. Call it a reminder of worst-case scenarios.
The rise in the chief compliance officer is based on the need for corporations to prevent such horrible events from recurring. In some respects, such an expectation is unrealistic. Compliance will not prevent future corporate scandals or wrongdoing, but compliance can certainly reduce the risk of misconduct. In the end, compliance is only as good as corporate commitment from the top and its culture of ethics and compliance. Of course, compliance has a key role to play in promoting and maintaining a culture of ethics and compliance. In the end, a CCO can only do so much.
Do not get me wrong: CCOs play a critical role. They can build effective procedures and systems, attend to a company’s culture and foster a culture of compliance. CCOs build the foundation of a culture of ethics, and it is up to the business side to embrace and embed ethics and compliance in its business operations.
There are two key points here to examine:
- Does the business ensure that ethical issues are considered in its business operations?
- Have business managers embraced and taken responsibility for ethics and compliance concerns?
These two questions have to be addressed in a meaningful way. The issues can be quickly answered and are fairly obvious. We all know and can sense when executives and business managers are “mouthing” the words rather than reflecting a true corporate commitment. If they express a real concern and passion for ethics and compliance, you may have a real commitment.
I like to harp on these two issues because in the absence of a real and dedicated commitment at the top and at the managerial level, CCOs are limited in what they can accomplish. Frankly, these issues often determine the difference between an adequate and an effective compliance program.
It is easy to imagine how many of the corporate scandals listed above would have ended up if a CCO was at the table when various important business decisions were made. – Wells Fargo’s decision to implement a sales incentive program to increase the number of customer accounts, or GM’s decision to avoid replacing a defective ignition switch and hide behind attorney-client privilege to delay public disclosure or remediation of the car safety hazard.
A company that makes sure a CCO has a seat at the business table has made an important commitment to ethics principles in its business operations. A CCO may provide advice and counsel but is sure to have a different perspective from a chief legal officer and other senior representatives. The CCO’s voice is an important one and a company committed to fostering that voice may well avoid serious mistakes.
A commitment from the top has to be matched by mid-level management sharing and promoting this same ethical commitment. All too often I observe companies that have a fine commitment to compliance at the senior levels but fail to translate that message to mid-level managers who are essential to promoting a culture of compliance. I often recommend that companies attend to the needs of mid-level managers by conducting in-depth training and providing support (e.g. guides, talking points) and other materials to help them in dealing with employees directly on ethics and compliance issues.
So when the next corporate scandal is announced, we can all agree that there was a systemic breakdown at the board level and all the way through the company. We can pick over the details and remind ourselves of how important compliance is to the success of a company. Instead of patting ourselves on our own backs, reinforcing each other on the message, let’s look at the issues and use them as teaching moments to remind our corporate leaders and clients of the importance of bringing business ethics into the room, offering them a seat and the table and listening to them.
