Today, I want to consider what is the role of a Chief Compliance Officer (CCO) in strengthening the ethical culture of an organization.  This blog post is based on, in part in an interview I did with Eric Feldman from Affiliated Monitors, Inc. (AMI) for a five-part podcast series running this week on the Compliance Podcast Network. AMI the sponsor of this podcast series and in it we discuss what is an ethical culture and its relationship to ethics and compliance.

We began by considering that there are multiple levels and roles for those within and outside of the corporate compliance function within an organization. They include the CCO, a compliance practitioner and the compliance function itself. I asked Feldman how he sees the role of the corporate compliance function itself in strengthening the ethical culture of an organization? Feldman said it all begins with the response to a simple question, “who is responsible for culture in an organization?”

Feldman says at the C-Suite level you might get a response that the CEO, head of Human Resources (HR) or perhaps the General Counsel (GC) is. This drives home the uncertainty of who really is responsible for culture, although intuitively most employees understand that everyone is responsible for culture. The point is that you must look at the operations of a company through the prism of whether or not it is consistent with the company’s core values.

Most of the time it falls upon the CCO. This means the CCO and the entire compliance function need to be able to coordinate the various inputs and support mechanisms that guide employee behavior. Ultimately the CCO is responsible for anything relating to the Code of Conduct and employees’ compliance with that code. The CCO is often the face of the ethics program for the company, as Feldman noted, “kind of the spokesperson for the company that helps to drive behavior.”

Feldman believes it is important for the CCO to be proactive in the role of shaping ethical culture, separate and apart from the CCO role in investigations, root cause analysis or ongoing monitoring. The CCO should work to eliminate barriers to aid in driving business success rather than being Dr. No from the Land of No. The CCO can work to coordinate all of the activities relating to building culture in an organization. Feldman provided a couple of examples.

The first was in the area of hiring and recruiting. Obviously, the nuts and bolts of this process is run through HR but the CCO can create a culture where the organization would only hire the right type of persons as employees. These hires would have an attitude and core values that are consistent with your company. A CCO can work to make sure that they understand the organization’s position with regard to fraud and other misconduct and this is incorporated into the interview process. Once a new employee is hired, the onboarding and training begins. Feldman noted that while HR certainly has a leadership role in those areas a CCO or corporate compliance function should also maintain a lead role to make sure the new employees understand their responsibilities in these critical areas. Further, Feldman believes, “it is a serious lapse” if the compliance function does not make clear that the company is quite serious about its Code of Conduct, that employees follow it and not violate it going forward.

When managing upward, the CCO has an equally critical role. Feldman believes that it is a clear best practice for the CCO to have unfettered access to the Board of Directors and to provide information to the Board regarding the compliance and ethics posture at the company, specifically including the culture. It really is up to the CCO to understand and have their finger on what the culture is, where the challenges are, and what needs to be done in order to continually strengthen the culture.

This task is much more difficult without the leadership and the support of the Board. Feldman considers the role of the Board “is to provide leadership.” This is complimentary to the role of the CCO to ensure that the Board is “currently informed about the ground truth of the ethical culture and decision making of the company”. He believes one of the key areas has to do with warning signs, what are the warning signs of an unethical culture. This means it really is up to the compliance professional in the organization to have a good understanding of what is going on in the company and communicate any warning signs up to the CCO, CEO and the Board.

These warning signs can be a wide variety of behaviors and actions. Feldman said, “things like disrespectful attitudes, favoritism or nepotism in promotions or bonuses, low employee morale, lack of teamwork, a large number of anonymous whistleblower complaints which could reflect a fear of speaking up, employees who report that they were uncomfortable talking to their supervisors and are afraid of retaliation.” These are the kinds of things that a CCO needs to be on top of and communicate both the condition and recommended solutions to the CEO and Board.

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, 2018

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