The E&C Pulse - August 14, 2019

August 14, 2019 LRN Corporation
 

AUG. 14, 2019

Assessing the Power, Access, Independence of the CECO

 

Most conversations about ethics and compliance at some point circle around to discussing how much independence, power and access the CECO has.

 

Joe Murphy, for decades one of the leading figures in advocating for and promoting ethics and compliance as a function, is editor of CEP Magazine. He recently wrote an article in which he raised questions about who’s actually in charge, the specific language used to describe the reporting relationship, and how organizations often overlook one of their biggest potential risk areas.

 

Here’s a link to his post, but to summarize it says look for who controls the CECO--who sets their pay, conducts their evaluations, etc.--and then begin to map out how much influence the CECO may wield. As in many things, it points to the board to exercise effective oversight of the CECO.

 

To follow up, I asked Murphy--who also is a senior advisor at Compliance Strategists, and director of public policy at the Society for Corporate Compliance and Ethics--how an outsider ascertains which CECOs have independent reporting lines. 

 

First, it depends on who the “outsider” is; for example, enforcement agencies would have a much easier time figuring this out than would investors, he said. 

 

The signs can be clear, though, he said. One way to check: If your senior executives and board members don’t know the name of the CECO, don’t know them personally, those CECOs are “officers in name only." Next, talk with employees, as they will have a sense of whether a program is real or not.  

 

“If the CECO is a figurehead only, the employees will know that the program is only paper,” said Murphy.

 

For the government investigator who can go deeper into the company, and who can tell the company this is something they have to prove, paper records--board meeting minutes, executive committee meeting minutes, the CECO’s reporting lines, the position description--will reflect this.  

 

On the flip side, if the CECO has a strong employment contract, is required by board resolution to report to the audit committee in person, and has an office in the C-suite, Murphy said “this is a strong sign that you are dealing with a company that is committed.” 

 

Investors lacking the leverage of a regulator can start by reading the annual report, and checking the list of the top people at the company. Is the CECO among them? 


When it comes to a general counsel who also has the CECO title, check to see if the person has any training in E&C, what and how much it says about E&C in their job description, and whether the word CECO appears on their business card. 

 

Group effort

 

What can CECOs do to gain that independence, to get more face-to-face time with the board? Murphy says E&C people need to work together to make this happen, and that gaining independence and authority for CECOs remains an important mission for SCCE.

 

When governments issue and apply standards for compliance programs they need to emphasize this point, he said. Same for when they evaluate programs; they must let companies know how important this is. 

 

“If a government press release noted that a company failed to get credit for its compliance program, and explained that one major reason was that the CECO had no independence and no power, companies would notice this,” said Murphy.

 

Another way to determine the level of authority of a CECO is to see whether they have the ability to investigate senior executives and the board, he said. Often, organizations fail to realize one of their biggest risks is the C-suite; Murphy said it is a common flaw in organizational thinking.

 

People, especially those who deal with the C-suite, genuinely believe the risk is in the field, not in the executive offices. They want to think their leaders are good people, said Murphy.

 

“Whereas they are often far removed from life in the field and have more suspicions about the field people,” he said. “My own personal experience is more aligned with the field people, whereas I am skeptical about the leaders.” 

 

Murphy understands it may not be politically prudent “to suggest that your bosses or the ones hiring you might be the biggest problem.” But if you follow the cases, and read the news, “it’s the top people who most often make the news for bad conduct, not the working people out in the field.”

 

 

                                                                                                          BEN DIPIETRO
@BENDIPIETRO1
BEN.DIPIETRO@LRN.COM

 

 

FROM THE LRN BLOG

Artificial intelligence is being used in recruiting, hiring and onboarding, with major implications for human resources and ethics and compliance professionals.

 

READ THE ARTICLE  →

 

MIND NUMBERS

52%/71%

KPMG's Global Banking Fraud Survey found 52% of 43 banks worldwide that were surveyed said they don't track the total cost of fraud risk management. And 71% of the banks said they have a documented fraud risk management operating model.

 

THE ELEVEN

 

Facebook is under fire again, this time for hiring third-party contractors to transcribe audio it collected from users, Bloomberg reports.

 

Wired conducted a deep dive into Google's culture, talking to 47 present and former employees.

 

Japan gave the OK to the first human-animal embryo experiments, but not before questions of ethics are addressed, Nature reports.

 

Allegations of sexual misconduct against doctors in California rose substantially since #MeToo, Los Angeles Times reports.

 

A provision of Europe's GDPR law requires companies not to use artificial intelligence as the sole decision-maker for choices that can have legal or other significant impacts on people, and Corporate Compliance Insights outlines what companies need to know.

 

More U.S. job seekers are looking to see whether the chief executive of a company takes stands on serious social issues before deciding whether they want to work there, Fast Company reports.

 

Fashion brands Versace, Coach and Givenchy all apologized to the Chinese government for selling clothing that suggested Taiwan, Hong Kong and Macau are independent territories, Quartz reports. 

 

BSR looks at how businesses can design future-of-work strategies that remove challenges for women who are especially vulnerable to the effects of artificial intelligence, automation, and social and demographic changes.

 

Researchers at the University of Oregon are using mice to help fight against deep fakes, BBC reports.

 

Harvard Business Review looks at why people make bad decisions, and what to do after they make them.

 

It's hard work trying to hide from the surveillance state, Joel Stein writes in Bloomberg.

 

THE QUOTE

"Corporate social responsibility is measured in terms of businesses improving conditions for their employees, shareholders, communities, and environment. But moral responsibility goes further, reflecting the need for corporations to address fundamental ethical issues such as inclusion, dignity, and equality."

 

- Klaus Schwab, German economist

 

 

THE NUDGE

Georgetown University professor Catherine Tinsley and technology executive Kate Purmal write that companies are moving away from only considering women with prior chief executive experience for CEO jobs, and now are taking into account any corporate board experience. In a comparison of 100 women CEOs with 100 male CEOs, they found 59% of the women had prior board experience, compared to 42% of the men. Click to read more.

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