How to Get Boards to Put Compliance on the Agenda
Tectonic shifts the last five years have changed radically the perception of ethics and compliance in business.
Changes in communications and media mean every tweet, every email, everything once thought private and confidential no longer is. Instead, what companies, executives and boards are doing and saying--in public, in private, even what they’re thinking--much of it is being brought to light.
This exponential surge in transparency means, as more people become aware, the cultures of soft and hard corruption that used to stay in the background are becoming public and no longer are tolerated.
Financial issues remain important and dominant, but these other issues can derail a company, affect its short-term share price, its long-term value, and can impact its corporate reputation in ways they never have before.
“Expectations are also changing; what used to not be a source of outrage is now a source of outrage,” said LRN's David Greenberg, a former compliance executive who now serves on the board of a public company. “The values and reputation of companies are more and more subject to these changes, and boards have to be paying attention and have to step up their game as never before.”
Greenberg teamed with LRN’s Susan Divers to produce a video that gives a compliance chief or general counsel the information, tools, discussion topics and questions they need to lead a meeting with the board on these topics.
The video is part of a new LRN Catalyzing Conversation Toolkit that explores ways in which a board can best support and encourage a strong ethics and compliance program, a culture of ethics and get people to do the right thing.
Greenberg published a report for LRN last year that studied 25 companies for how their chief ethics and compliance officer is overseen by the board. The results found most companies aren’t getting it right, but there were some bright spots.
“Boards that took it seriously devoted time, effort, focus, strategy, thought about outcomes they want to seek, helped develop metrics for those outcomes, and focused on those,” said Greenberg. “Those boards had concrete objectives and accountability for CEO senior leadership, had open strong independent relationship with the CECO.”
Smart companies created a plan for ethics and compliance oversight, just like they put together a plan to oversee finance, marketing or operations, and they stuck to that plan and treated compliance as an equal partner in looking at the business and evaluating the businesses’ success, he said.
Boards also are required under the U.S. Department of Justice Sentencing Guidelines to be “trained” on ethics and compliance--yet few are, and those that are poorly trained, said Greenberg.
“Boards need a different approach than employees yet many boards get nothing or just some of the training provided to employees,” he said. “As our study points out, boards are expected by regulators and courts to oversee ethics and compliance, yet many...do a terrible job. Our course is one of the first we’ve seen that takes on these issues directly."