Last week, I was interviewed by David Banks, the Senior Content Marketing Manager at NAVEX Global, for the firm’s blog. One of the questions he posed to me struck me and it was “When it comes to contributing to a greater good, is there a distinction between ethics and brand building?” My immediate response was, “There is no distinction between ethics and brand building. Put another way, your organization’s brand is its ethical behavior.” I was therefore intrigued by a recent article in the Harvard Business Review (HBR), entitled “Competing on Social Purposeby Omar Rodríguez Vilá and Sundar  Bharadwaj. The authors posited that companies could gain greater market share and have financial success by tying social purpose missions to growth. That seemed to me quite like tying ethics and brand building.

The reality of today is that a company doing business with ethical behavior and having an ethical culture is a market differentiator. It can not only drive customer behavior in a positive manner but equally significantly millenniums place large stock in companies which are seen to do the right thing. It has led to an expectation that companies will do the right thing. Clearly, this is not something which happens overnight but having an effective strategy can create value for an organization by building adjacencies and can be used to mitigate the risk of both negative associations and threats to an organization.

The article had several concepts which I thought gave resonance to compliance and which a Chief Compliance Officer (CCO) could use going forward to advocate for ethics and compliance within an organization. The first is an ethical heritage, which can be used to identify opportunities to demonstrate the brand’s commitment. We have seen that here in Houston in the wake of Hurricane Harvey with companies which could respond immediately garnering a huge wave of positivity and increase in brand share.

The article identified challenges which are applicable for a CCO. Obviously, a course, once set is hard to change. While most companies are aware of the Foreign Corrupt Practices Act (FCPA) and are attempting to do business in compliance, changing perceptions in an organization can still be difficult. Not only does it require steadfast support of senior management but the CCO and compliance department must accomplish the day in and day out execution of a compliance regime.

It can be difficult to gauge the effect of an ethics program on a business. Return on Investment (ROI) for an ethics and compliance program is still in many ways viewed as the Holy Grail of a compliance program. While surveys can help project out how a company is perceived, it can lead to unreliable estimates of market response and growth based upon the ethics function of an organization. Finally, all parties must not get distracted and keep their eye on the compliance ball going forward.

One example from Houston after Hurricane Harvey is that of H-E-B who demonstrated the next key asset of a robust and functioning ethics and compliance program; the ability to move into adjacent businesses. The company was the logistical leader in delivering both food and supplies. It was the logistics solution which was so powerful for the organization. An effective ethics and compliance program allows a company to manage more risk because the risk management strategies are so much stronger and work better. It is the same reason you have brakes on a car; not to slow down but so you can take more risks by driving faster. To gauge whether your ethics and compliance program can help you move into an adjacent business, consider these three questions:

  • Does the strategy reinforce existing brand attributes?
  • What new and valuable brand attributes might it create?
  • Would the strategy be difficult for competitors to imitate?

The next area is stakeholder acceptance. This is more than simply responding because the law says we must do so. There is one major driver of negative reaction for stakeholders around a company’s ethics and compliance program. It is where there is inconsistency between word and deed. Quite simply if you talk the talk, you must walk the walk. If there are inconsistencies in the two, they should be quickly addressed and resolved.

The article ends with four prescriptions which I believe translate well for the compliance practitioner going forward to help inculcate ethics and compliance into your company’s brand. The first is to generate resources for ethics and compliance. This means you should pair your compliance regime to other corporate functions to increase resources. For example, use Human Resources (HR) for touchpoints on compliance throughout the lifecycle of employee involvement with your company. But also partner with such other functions for technological solutions which benefit the company.

Second, use your ethics and compliance program as a way to do business differently. This was an original goal of the drafters of the FCPA, to provide US businesses with a reason (and excuse) not to pay bribes. Here you can take your company’s words, deeds and actions a step further by engaging in ethical and compliance behavior through all of its dealings. People will notice and it will make a difference. Next, get the word out about your ethics and compliance programs. One of the most powerful ways is to apply for Ethisphere’s World’s Most Ethical Companies designation. This can be an influential way to get the word out about your company’s program.

Finally, constantly work to upgrade your ethics and compliance program through continuous improvement. This is a by-word from the regulators but it also allows your organization to face new business opportunities in a more agile, more nimble manner going forward. Both greater opportunities and greater rewards can come through continuous improvement and innovation in your compliance regime.

Competing on your company’s ethics and compliance program requires buy-in from the company, the stakeholders, your partners and your customer base. However, the potential benefits are great and well worth the effort for your brand going forward.

 

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2017

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