The E&C Pulse - September 11, 2019

September 11, 2019 LRN Corporation

SEPT. 11, 2019

Keeping Pace With the Rapid Rate of E&C Change


Gerry Zack became chief executive of the Society of Corporate Compliance and Ethics in 2017, after spending three decades in accounting, auditing and compliance.


With the annual SCCE conference set for next week, Zack talks about the speed of change in the E&C space, how companies with what appear to be strong programs still get in trouble, and how digital transformation is changing the way E&C is practiced.

How would you describe the current state of the ethics and compliance profession?


To borrow the popular expression, the pace of change affecting the profession has never been this rapid, and it will never be this slow again. The profession gets more complex, and the expectations heaped upon it become greater, every day. On one hand, repeated failures in the absence of compliance and ethics programs continue to demonstrate their need, while also resulting in increased regulation.


At the same time, excellent compliance and ethics programs are rewarded in a “no good deed goes unpunished” manner, with increased scopes from within, and increased expectations from, regulators. But I’ll take this any day of the week, because it illustrates the value that strong programs bring to an organization. The biggest thing hampering organizations in addressing this onslaught of change is simply a head-in-the-sand mentality that ignores all the warning signs of impending problems.


Many companies that have what are considered world-class E&C programs still find themselves facing problems arising from corruption or other misconduct--are you worried companies spend money to build robust programs for appearance, when they just want to continue business as usual? 


A speaker at one of our conferences recently noted that senior management in her company doesn’t want “best practices” for the compliance program, they want “good-enough” practices. There is a practical element to her comment, in that “best” can imply “costliest” to management, and compliance will never be granted an unlimited budget. There is also a suggestion of the acceptance of mediocrity that I dislike about her comment.


I also dislike using the term “best practices” for another reason–it suggests we can’t get any better. Compliance should always be focusing on improving and doing the best it can within the confines of whatever budgetary constraints it is presented with. And risks are continually changing. A supposed world-class E&C program will have vulnerabilities no matter what it does. Yet that world-class program will still be much better positioned to deal with compliance risks than the organization that does not strive to have such a program. That’s the message E&C folks need to communicate.


Every time I think about this issue I am reminded of the scholar Edward Gross, who said “all organizations are inherently criminogenic” due to a focus on maximizing profits for shareholders. While I think that statement by itself paints an overly bleak picture, there is a truthful element to it that explains the constant tug between mission and compliance that exists within most organizations. And that’s the second part of the message E&C people need to communicate–that you can have it both ways, achieving the organization’s mission in a compliant and ethical environment.


How is digital transformation changing the way ethics and compliance is practiced and thought about? What can organizations do to better encourage conversations about ethics and morality when it comes to the changes being brought about?


The digital transformation is affecting the scope and nature of ethics and compliance, but also how ethics and compliance programs are managed. An example of the former is the impact of new technology in general on compliance risks–whether it be privacy or any of a myriad of other issues. New technology is a driver of compliance risk, and compliance professionals must proactively consider how new technology changes existing compliance risks, and creates new ones.


An example of the latter is found in the use of data analytics in the compliance monitoring process. We could significantly cut back on fraud, corruption, and many other compliance issues--or at least detect them much sooner--if we analyzed all of the data we are legally allowed to analyze. But some of this data, while allowable for use in such analytics, brings with it issues of employee trust, and even privacy concerns. Organizations need to decide how far they want to go in the fight against corruption and noncompliance in using all legally available data. Just because it’s legal doesn’t mean a company should be reviewing it.


What should organizations be doing to prepare for the ethical questions that are being raised by the rising use of artificial intelligence?


These need to be conversations that are held at the highest levels within organizations. We could stop a lot more wrongdoing, and do so within the confines of existing privacy and other laws, but the techniques can look like snooping, and can create a “big brother” atmosphere within an organization. I have seen some amazing capabilities using AI. The ethics and compliance team should have a clear understanding of the corporate tolerance for the use of these techniques before embarking on the AI journey.


What role can SCCE/HCCA play in bringing about workplaces that are diverse and inclusive?


As an association, our role is limited, but there are clearly opportunities for us to help. We represent the entire profession of ethics and compliance professionals. Fortunately, the profession as a whole is one that has generally been open and committed to inclusion. We try to mirror that in terms of how we operate the association, both internally as well as in our programming at our conferences. By being inclusive in our own operations as an association, we can hopefully serve as a good example, and as a catalyst for positive conversations about inclusion in the workplaces of our members.


You've had a few years now at the helm of SCCE, what are two or three goals you have for the organization in the next few years?


It’s been a great first two years at SCCE, and the transition from cofounder Roy Snell to myself as CEO was completed one year ago. Since I started in November 2017, SCCE’s staff has grown by more than 50%, reflecting both our commitment to better serving the compliance and ethics profession, and our own growth in membership.


With our launch earlier this year of Cosmos, our digital platform, we are focused on developing practical tools and resources that compliance and ethics professionals can access quickly anywhere. We’ll also continue to focus on expanding our educational offerings both from a content perspective as well as geographically. In 2019 we are bringing our academies and conferences to 11 cities outside the U.S., and next year there will be even more. It’s an exciting time to be in this profession and I am tremendously excited for the future here at SCCE.


                                                                                                          BEN DIPIETRO




Moral Leadership in Business: Now More Than Ever.

LRN's Emily Miner featured on The Modern Manager, discusses moral leadership in business–what it is, why it’s more important, and how to “exercise” one’s moral muscles. 





Tune into Ashlee Foltz on Integrating Ethics Into the Business and Advancing Integrity Throughout the Organization






A poll from Axios and Survey Monkey found 62% of employed adults said they think it's appropriate for an employer to continuously monitor an employee with technology, and 48% said they would change their behavior if they knew they being monitored.





McDonald's Corp. is initiating new anti-harassment and bullying training in October, the Society of Human Resource Management reports.


Attorneys general from every U.S. state and territory except California and Alabama announced an antitrust investigation of Google, with a focus on online advertising, Washington Post reports. 


Amazon workers in Seattle announced a walkout from work for Sept. 20 to protest what they say is the company's inaction on climate change, Wired reports.  This is the latest example of what BSR's Alison Taylor says in Quartz is the growing empowerment of workers.


Walmart needs to keep talking about gun violence, even after headlines about the latest mass shootings fade, if it wants to show its commitment to the issue, Sarah Halzack writes for Bloomberg Opinion. A growing number of U.S. residents want CEOs to take stronger stands on gun safety, according to an Edelman survey.


Less than a year after removing Carlos Ghosn as chief executive, Nissan is losing another CEO. CNN reports Hiroto Saikawa resigned after admitting he was overpaid through a stock-related payment plan.


The head of the U.S. Securities and Exchange Commission says some of his counterparts around the world aren't doing enough to fight bribery, Wall Street Journal reports.


Brazil's Supreme Court for the first time annulled a conviction of the judge leading the Operation Car Wash corruption probe, Reuters reports.


The U.S. Defense Department is looking to hire an ethicist to deal with questions about the use of artificial intelligence, Federal Computer Week reports.


There are valuable lessons to learn about speak-up culture and leadership from the situation where the U.S. president erroneously insisted Alabama faced a threat from a hurricane, Radical Compliance reports.


Matt Stankiewicz of Volkov Law Group writes in the Compliance and Ethics blog about the state of the partnership between compliance and internal audit.


Can you survive in a work environment where your boss doesn't like you? CNN looks at ways to salvage the relationship.




" The most vocal challengers to most cultures are the first to be shown the door. It’s in human nature to want to eliminate the most disruptive people. And it’s also human nature to want to bring in more people that fit in well. Repeat these two behaviors over time and culture becomes homogeny, even if everyone still believes the culture values diversity."


– Scott Berkun, author 




This is how an organization sets an example and sends a message. The NFL's Oakland Raiders released one of its best players, receiver Antonio Brown, because he was disruptive to the culture the team is trying to create. We talk often about how a real commitment to culture means taking action against top performers, and Oakland did that here, even though it could cost them wins.






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