Given the paucity of leadership coming out of Washington during this crisis, I thought it would be a ripe time to consider some innovations in compliance leadership. While many compliance departments may have begun more as a command and control function, set up by lawyers to comply with anti-bribery laws such as the Foreign Corrupt Practices Act (FCPA), this type of leadership model is now becoming outmoded in today’s world. It is not that employees are interested in the ‘why’ they should do business ethically and in compliance with such laws but it is more that power is shifting inside corporations. In a 2014 Harvard Business Review article, entitled “Understanding “New Power””, authors Jeremy Heimans and Henry Timms explored how leadership dynamics are changing and what companies might be able to do to harness them. I found them to have some excellent insights, which a Chief Compliance Officer (CCO) or compliance practitioner can garner for a compliance function.

The authors begin by noting “new power” differs from “old power” in a bilateral dimension of intersection. This intersection is between the models used to exercise power and the values which are now embraced. It is the understanding of this shift in power, which will facilitate the compliance function moving more to the forefront of a business integration role. The new power models are fourfold. Under sharing and shaping a company is much more integrated with its customers and supply chain. Second is funding which continues this integration by adding a vertical component of funding, whether equity positions or some other type of funding. Third is producing in which “participants go beyond supporting or sharing other people’s efforts and contribute their own.” Finally, there is co-ownership, which is the most decentralized, pushing participation down to the lowest or most basic levels.

But beyond these new power systems, “a new set of values and beliefs is being forged. Power is not just flowing differently; people are feeling and thinking differently about it.” The authors call them “feedback loops” which “make visible the payoffs of peer-based collective action and endow people with a sense of power. In doing so, they strengthen norms around collaboration.” This sounds suspiciously like continual monitoring and continually upgrading your compliance program through incorporation of information to feed innovation.

There were five values laid to help guide leadership. They included the area of governance where “power favors informal, networked approaches to governance and decision making.” Next is in collaboration where power value rewards “those who share their own ideas, spread those of others, or build on existing ideas to make them even better.” The next value is DIO or do it ourselves, which is a “belief in amateur culture in arenas that used to be characterized by specialization and professionalization.” Next is transparency which intones that more permanent transparency between business and social lives will lead to a “response in kind from our institutions and leaders who are challenged to rethink the way they engage with their constituencies” specifically including their employee base. The final value identified was affiliation, which means that new and younger employees are less likely to “forge decades-long relationships with institutions.”

The authors have three prescriptions that I found could be useful for the CCO or compliance practitioner to incorporate into a mature and evolving compliance program moving forward. Compliance functions need to “engage in three essential tasks: 1) assess their place in a shifting power environment, 2) channel their harshest critic, and 3) develop a mobilization capacity.”

Assess where you are. This prong is quite close to something compliance practitioners are comfortable with in their role, a risk assessment. However, the authors suggest that the assessment be turned inward so you should assess the compliance function on this “power compass – both where you are today and where you want to be in five years.” You can benchmark from other companies in responding to this query. Internally, you can begin this process with a conversation about new realities and how the compliance function should perform. More importantly, such an assessment can help you identify the aspects of the core models and values that should not be changed.

Incorporate business unit interests. The authors noted, “Today, the wisest organizations will be those engaging in the most painfully honest conversations, inside and outside, about their impact.” However, I think this question should be asked first by the CCO or compliance practitioner. For it is not only what you are doing to work with your business units but, more importantly, what are you doing to incorporate their concerns and suggestions into your compliance regime. If you are going to ask the business unit to be a significant partner or, better yet, be your business partner, you will need to have a mechanism in place to engage your business unit so there can be an inflow of input before the compliance function has an output of requirements. As the authors wrote, “This level of introspection has to precede any investment in any new power mechanisms” to which I would add any successful compliance function.

Mobilize your capacity. Here, I suggest you consider contracted third parties and business ventures such as joint ventures (JVs) as an avenue through which the compliance function can bring greater benefits to an organization. Compliance expert Mary Jones, the former Global Industries Ltd. Director of Compliance, often discusses her training of the company’s third-parties and how thankful they were when she would personally travel to their locations and put on in-person training. Her efforts to travel to their locations and spend the money required to do so not only directly strengthened Global Industries’ compliance function but created allies for her efforts by giving these suppliers the information and training they needed to comply with their customers’ requirements. By reaching out in this manner, your company can use its contracted third-party suppliers to create a stronger company compliance program.

As the compliance profession matures, it will become more a component of a company’s business function. This means less of a lawyer’s top down mentality of do it because I said to do it, to more collaboration.

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, 2020

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