Establishing and implementing a robust Ethics and Compliance (E&C) program remains a key issue that many leaders face. Regardless of its sector or size, the landscape in which companies operate is evolving and despite the layers of complexities it presents, leaders want to ensure that their business is being done in the right way. While some companies strive to go beyond hitting the bare minimum regulatory standards, the truth is there are fundamental characteristics that contribute to high-quality ethics and compliance programs.
“The E&C program is expected to provide an independent voice when needed,” said a recent report by the Ethics and Compliance Initiative (ECI), a non-profit body. “Staff of [high-quality programs] maintain excellence by dedicating themselves to continuous improvement in E&C through innovation, engagement with stakeholders and consistent consideration of employee feedback.”
The report titled, Principles and Practices of High-Quality Ethics and Compliance Programs provides five core principles of effective E&C programs and identifies pitfalls that companies should avoid. These characteristics and common missteps include:
- Principle 1: Ethics and compliance is central to business strategy.
- While E&C is too decentralized, companies should avoid assigning responsibility for program staffing and design to business units. Each program operates independently, lacking central oversight and a singular voice at high- level meetings, the report highlights.
- Principle 2: Ethics and compliance risks are identified, owned, managed and mitigated.
- Currently, the chief ethics & compliance officer (or the equivalent) reports too far down in the organization to be effective among senior leaders. This is another misstep companies often make.
- Principle 3: Leaders at all levels across the organization build and sustain a culture of integrity.
- Reporting: Ethics and compliance matters are usually discussed inside meetings or briefings and not in the presence of the full leadership at regular meetings.
- Principle 4: The organization encourages, protects, and values the reporting of concerns and suspected wrongdoing.
- More efforts should be undertaken by leaders to examine the impact of the E&C program, particularly on employees.
- Principle 5: The organization takes action and holds itself accountable when wrongdoing occurs.
- Often, a misstep can occur when companies fail to quantify data collected to spot emerging issues and identify potential risk areas, the report said.
The study was prepared by a Blue Ribbon Panel of ethics and compliance practitioners, academics, white collar and whistleblower attorneys, as well as former enforcement officials. Some members of the panel include: Suzanne Rich Folsom General Counsel, Chief Compliance Officer, and Senior Vice President – Government Affairs, United States Steel Corporation; Peter Jaffe Chief Ethics & Compliance Officer, The AES Corporation; and Alfred Rosa Chief Compliance Director, Senior Executive Counsel, General Electric Co., among other leading governance officers.
