Ethics and compliance professionals are working harder than ever in 2020, as the pandemic collides with a season of social and racial protest, and an ongoing climate crisis that seems to worsen each year.
Chief ethics and compliance officers, amid all their hard work, have a real opportunity in the midst of these circumstances to spotlight their expertise managing risk, handling crises, forging corporate culture, developing and delivering learning and communications, and influencing human behavior in companies.
Ben DiPietro, Editor, LRN E&C Pulse
This atmosphere of uncertainty and social fracture offers opportunities for chief ethics and compliance officers to better connect with their boards, and to show the importance of making sure the company’s values are aligned to its corporate strategy and overall mission.
Focus on Impact Over Actions
With proper board support, E&C can play a key role in keeping people and teams together as remote work continues for the foreseeable future. All too often, though, CECOs don’t make the most of their time before the board, said David I. Greenberg, a special adviser at LRN, a board member of NYSE-listed oil shipping firm International Seaways Inc., and a former chief compliance officer at Altria Group.
Reporting to the board that focuses on activities, as opposed to impact, leaves boards less interested in E&C compared with the other issues with which they are contending, said Greenberg.
“We as CECOs are missing a real opportunity to talk about our impact on the culture, and the impact on filling the gap between what we are promising to the world and what we’re delivering,” he said on a recent panel at the SCCE annual conference.
CECOs have a huge opportunity to show that they are strategic thinkers, and that they make important contributions to the organization’s culture, said Ellen Hunt, the senior vice president, audit, and ethics and compliance officer for AARP. It’s important to take the time to invest in building relationships with your directors, she said.
“The more you know what’s relevant and important to your board members, a better executive you will be, no matter what your level is in the organization,” Hunt said during that same panel discussion.
Connect the dots of what you are doing, and be a strong collaborative partner with HR, legal, and audit; show how it all goes together, she said.
“Impact and outcomes,” said Hunt. “Nobody cares that everybody got trained in 30 days and you got 99%; they care what did they get trained about, and did they actually learn something? Why does it matter?”
Ideal Time to “Go Big”
David Greenberg, Special Advisor, LRN
Greenberg, along with LRN’s Ty Francis, recently participated in an Ethisphere virtual roundtable discussion about CECOs and board engagement during and after the pandemic.
COVID-19 is a time for CECOs to “go big,” said Greenberg, who says that means E&C can think of itself and act in a narrow, functional, and technical way, or it can think of itself as core to the company’s role in the world.
“We’re at the center of a company’s relationship with its people, the center of a company’s ability to do the right thing or the wrong thing, and the center of a company’s ability to have the right relationship with society and enhance value and reputation, or the wrong relationship with society and destroy value and reputation,” said Greenberg.
“It’s partly how you think about yourself, it’s partly how you present yourself to management and the board,” said Greenberg. “It’s partly what you choose to talk about when you have that choice, its partly about the metrics you advocate for to measure you and how the company is doing.”
What exactly does it mean to play bigger?
As mentioned, it means understanding that boards are focused on culture and outcomes. It means building a strong relationship with the committee chairman, and making sure that people understand your strategy and how it fits into the company’s overall plan, said Greenberg.
That person needs to know “what you do has fundamental impact on the company culture” and can drive it in the right or wrong direction, he said. “They should be filtering decisions through a values-based structure.”
E&C must do better to educate the board, as directors in general know very little about ethics and compliance. Barriers to understanding include that it’s a relatively new function; board agendas are very crowded, as are committee agendas; and boards often don’t see E&C as finance, legal, and other units.
More Communication, More Interest
Greenberg puts his own insights and compliance experience to use in his role as a director at International Seaways, where he serves on the audit committee.
“I came to the International Seaways board with a point of view about what ‘good’ looks like, and I’ve stuck to it,” said Greenberg. “Where we were weak, I spoke up. Where we were strong, I praised us. I took all of the things we know about great E&C and applied them.”
Ty Francis, Special Advisor, LRN
Beyond ethics and compliance itself, the CECO is often in a good position to best translate for the board stakeholders’ various points of view related to ESG, or what critics actually are saying, or why society is reacting in a particular way, as these are areas where boards aren’t always strong, said Greenberg.
In the end, it comes down to finding a way to reframe what ethics and compliance is all about, said Francis. It may be wise to bring in a third party to evaluate the effectiveness of the E&C program, and then prepare a report.
“Change the discussion. When the board asks, ‘how do we know we are having an impact,’ use the opportunity to put forward bold metrics and targets,” said Francis, head of advisory services at LRN.
An informal poll of the session participants asked how the pandemic had impacted their communication with their boards. Although some said their communication with the board increased as a result of the pandemic, more than twice as many said communication had remained the same, showing works needs to be done to elevate E&C to the high-level status it deserves.
Among those who said communication increased, they said it resulted in increased individual interactions with board members, which is driving more collaboration and output from working groups and resulting in some meaningful change, Francis said.
One example: A person in the process of revamping their company’s code of ethics has seen much interest from the board in how the new code’s message can be reinforced.
“Many boards being pressed for time are often only interested in hearing the hotline numbers, so it was refreshing to see that at least some boards are not only getting more involved with E&C but championing it,” said Francis.
Boards want to see what impact the program is making, and what metrics it can move, and taking steps to evaluate our organization’s ethical culture is one good way to accomplish this. For example, one metric could be improving the perception of the ethics of leadership, another might be reducing the reluctance to report misconduct.
“Pick some metrics from the survey and state how you will move the dial, and then do it,” said Francis.
About the Expert:
Ben DiPietro is a former Wall Street Journal reporter and editor who for the past two years has been involved with thought leadership at LRN. Ben hosts LRN’s Principled Podcast, and edits the weekly E&C Pulse newsletter. Please subscribe to both.