I continue the discussion with Pat Harned, Chief Executive Officer (CEO) of Ethics and Compliance Initiative (ECI), about the firm’s 2018 Global Business and Ethics Survey (GBES). In this series we are considering each of the four GBES reports released by ECI. These include The State of Ethics & Compliance in the Workplace, released in Q1 2018; Measuring the Impact of Ethics & Compliance Programs, released in Q2; Building Companies Where Values and Ethical Conduct Matter, released in Q3 and Interpersonal Misconduct in the Workplace: What It Is, Where It Occurs and What You Should Do About It, released in Q4. We discuss each report in a separate podcast and then in Part V, tie them all together. Today, in Part 2, we consider the survey Measuring the Impact of Ethics & Compliance Programs.

This study was designed by ECI to actually look at data from employees and determine if a higher quality ethics and compliance program makes a bigger difference than having no or a minimum standard program in place. Initially, we began with a discussion of what is a “high-quality program”. Harned said, “over the years we’ve certainly as an industry talked about what does it mean to have an effective program. Often in our industry, by default, you talk about the minimum standard, the expectations of enforcement agencies or regulators or language in regulation or the law. And one of the things that ECI has wondered about over the years is whether that really is an inadequate definition of a very strong ethics and compliance program. So we convened a blue-ribbon panel in 2016 that helped us to work out a definition of what a high-quality program might look like.”

We then turned to the definition of a high-quality program. Harned identified principals elements, because “when you look across companies that really get it right, there are five principles that are essentially their way. First companies see ethics and compliance as central to their business strategy. It is understood within the organization not as an add-on or nice to have but as being primary to the success of the business. The second is that risks are identified and owned and managed and mitigated by leaders across the organization. The third is that leaders at all levels and across an organization recognize that they have an impact and a responsibility to build and sustain a culture of integrity. The fourth is that the organization creates an environment where people are encouraged and protected to come forward and report wrongdoing. And the fifth thing is that people are held accountable if they violate the standards. In past reports we’ve done, we’ve elaborated on that. What are some of the practices? What does it actually look like that’’ all available to the public on our website? But overall, we also look at certain kinds of outcomes of people who observe misconduct. Are they willing to report it? Will they raise bad news? Do they have strong perceptions of their leader’s commitment to integrity? And we call those ethics program outcomes. And what we found was that when an organization has a high-quality ethics and compliance program, those outcomes are 10 times better than in an organization with a minimum standard program or no program at all. And across the board metric by metric. What we found in this study is that the higher the quality of the program, the better the outcomes.”

Corporations have historically organized their ethics and compliance programs around a priority to align with legal and regulatory expectations. Yet increasingly, organizations are going above and beyond historic regulatory risk mitigation. With more and more organizations committing to higher quality programs, it begs the question: does it make a difference when a company dedicates more resources and heightens the priority of their E&C efforts?

Join us tomorrow when we discuss the survey Building Companies Where Values and Ethical Conduct Matter. 

For more information on ECI, check out their website by clicking here.

To obtain a copy of all four of the 2018 GBES surveys, click here.