As I end this section on innovation, I want to conclude by laying out a road map which allows a CCO or compliance practitioner to make more effective and better operationalize a corporate compliance program. With the DOJ’s Evaluation of Corporate Compliance Programs emphasis of operationalizing your compliance regime, innovation is an important tool for you to use in this journey, yet one that I believe is too often overlooked. One of the best recent roadmaps I have seen was suggested by LRN Corporation’s 2016 Ethics and Compliance Program Effectiveness Report.
The Report detailed four key findings which are symptomatic of an operationalized compliance program. Susan Divers, Senior Advisor at LRN Corporation, noted overarching theme in is that ethics and compliance “programs centered on values are more effective than ones that aren’t. A values-based approach toward shaping culture emphasizes and sets expectations, not just about what can and cannot be done according to rules, but rather what should and should not be done in alignment with core beliefs. In rules-based environments, that is, everyone’s job is to do the next thing right—to act correctly. In values based environments, in contrast, everyone’s job is to do the next right thing—to act morally.”
It is this drive to burn compliance into the DNA of an organization that fully operationalizes compliance. Think of any recent scandal, Volkswagen (VW), Wells Fargo, Valeant, Uber or you name the scandal, where if an employee had simply done the right thing instead of the illegal action, how much better off a company would have been. The four findings were:
The most effective E&C programs are embedded in business operations. Diver pointed out it is critical a company should think “about ethics and compliance and values as part of your brand.” By doing so, each level in a company will understand its role going forward, from the Board of Directors, senior management, middle management and the employee base. Moreover, the company will train, develop and promote an ethics and compliance program through each of these levels.
Susan Divers provided an insightful example, “I think if I were to use one word to characterize all of them together, it would be holistic. The first one of embedding your ethics and compliance programs in your business operations, one big piece of that is your brand. For example, Volkswagen used to have a fantastic brand. You thought of Volkswagen and you thought of basically a green car, and one that was well engineered. Now it’s a massive fraud. One headline I saw called it Hoaxwagen.”
The most successful ethics and compliance programs use a variety of channels to convert guidance into practice. An effective compliance program will communicate the corporate ethics and compliance values through multiple channels throughout the company, on an ongoing basis. This speaks not only to upward and downward communications within an organization but also inbound and outbound to the company as well. But more than simply saying there should be communication, the Report also assesses how communications occur through inquiring into the clearness and conciseness of messages and whether an organization uses more effective communication techniques such as shorter, more frequent training models or facilitated workshops as opposed to rote one hour lectures from lawyers.
Communications can be made in other, more subtle manners. Consider what are the actual behaviors that the conduct demonstrates? Divers said that at LRN, “We’re not so fond here of tone at the top. We’re more fond of actions at the top, because tone can be one thing and actions are another. Looking at whether managers’ ethical behavior counts in terms of promotion and bonuses, that’s really where the rubber meets the road in a lot of places, and that makes a huge difference. Another aspect of that is making middle managers accountable for ethics and compliance in their business, and the good programs coach people in that aspect. That’s really some of the key aspects we looked at for how you embed in business ops.”
High-performing programs proactively convert regulatory guidance into practice. I found this to be one not often enough discussed as many compliance practitioners struggle to convert DOJ pronouncements, comments or lessons learned from FCPA enforcement actions into practical guidance. The most effective compliance programs internalize such guidance from prosecutors and regulators and continuously improve. Here one might consider an example torn from the headlines: when the Wal-Mart corruption scandal in Mexico broke, I called one CCO the next day who told me he had already put a PowerPoint presentation in front of his senior management about the perils of finding your corporate name splashed across the front page of the New York Times alleging your organization of bribery and corruption.
Divers considered this finding from another perspective. She stated, “You have to look for the actual challenge the people view in the company, whether that’s sales force, or other disciplines. There in lots of different ways and in positive ways, not just negative ways. One of the things we did, which we didn’t just tell people that serious actions meant this, we looked at actual business cases where people had done the right thing and made the right choices to comply with regulations, and that’s very powerful for modeling. Another aspect of that is how you embed your Code of Conduct. Do you just put it out on the website and say, “Great, here it is. Read it,” or you have discussion? Obviously, those are more effective.”
High-performing programs spread their impact broadly, recognizing that it is the whole organization that needs to be engaged in ethics. This finding considers whether an organization has moved away from a “silo-based approach to ethics and compliance.” It did so by reviewing how the different corporate functions work as catalysts for imbuing your organization values in their specific corporate discipline. Here Divers related that “high performing programs aren’t sitting in a closet somewhere, only visited when there’s an ethics issue. High-performing programs are out there. They work across the corporation with human resources, with internal audit, with legal, and even with sales and marketing, and finance and accounting, to make sure that ethics are a part and parcel of business operations.”
This month I have reviewed a variety of innovations in compliance; from innovations in structure, use of social media tools and concepts, to new and different ways to consider your internal resources as ways to innovate in your compliance regime. The DOJ has consistently said that a compliance program must evolve. It must evolve to meet new or updated risks, new opportunities or different regulations. Innovation is one of the best ways to evolve. Finally and perhaps most importantly as a compliance practitioner, always remember that you are only limited by your imagination.
Three Key Takeaways
- Innovation is one of the most overlooked and under-utilized tools in compliance.
- Operationalizing your compliance program will require innovation in your compliance program going forward.
- As with most CCO initiatives, you are only limited by your imagination.
This month’s podcast series is sponsored by Oversight Systems, Inc. Oversight’s automated transaction monitoring solution, Insights on Demand for FCPA, operationalizes your compliance program. For more information, go to OversightSystems.com.