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Patricia Harned

Management

Compliance Is Good But Not Enough

Getting the most from your ethics and compliance program

Published: Tuesday, September 4, 2018 - 11:01

‘We’ve got this,” you say to yourself. “Our organization has a robust compliance program. We can point to myriad ways that we have adhered to all the expected requirements. We’ve dedicated ample resources, and we have implemented a host of internal controls and program initiatives. If we ever have to defend our efforts to uphold a standard of conduct, we’ve done the best that we can do.”

But have you really?

Unfortunately, one need only look at some of the headlines today about organizations facing scandal—senior executives stepping out of line, corruption, conflicts of interest, fraud.

In a number of instances, companies that have found themselves embroiled in controversy have also had robust compliance programs in place. Some of them even had award-winning programs. So it begs the question: Is it worth the effort?

The truth is that if you have implemented a comprehensive compliance program in your organization, you have done a very good thing. Every effort by an organization to encourage appropriate business conduct makes a difference. You are not wasting time or resources.

But that said, according to findings from the June 2018 Global Business Ethics Survey, when it comes to the actual effect of an ethics and compliance program, if all you have done is to focus on compliance, you have not done enough.

The bottom line is this: There is a big difference between an organization with a robust compliance program (a minimum-standard program), and an organization that has taken steps to implement a “high-quality ethics and compliance program.” The difference is evident in the buy-in of leadership and the breadth of the program. It is also evident in its impact. Organizations that have implemented high-quality ethics and compliance programs significantly outperform compliance programs in reducing risk, as well as in preventing and detecting wrongdoing.

According to the survey, which was a longitudinal study of employees in for-profit organizations, there is evidence that a high-quality program is more likely to have a favorable effect on employee behavior than a minimum-standard compliance program. For example, employees in an organization with a high-quality ethics and compliance program are:
• Twice as likely to report suspected wrongdoing to management
• Four times more likely to express satisfaction with their company’s response to their report of wrongdoing
• More than four times likely to say that they work in a strong ethical culture

What makes an ethics and compliance effort a high-quality program? High-quality programs are based on a shared set of business principles and objectives that are recognized and embraced throughout an organization. The way they are framed may vary, but as one example, leaders in an high-quality program say that:
• Ethics and compliance are central to business strategy
• Risks are identified, owned, managed, and mitigated
• Leaders at all levels build and sustain a culture of integrity
• The organization encourages, protects, and values the reporting of suspected wrongdoing
• The organization acts and holds itself accountable when wrongdoing occurs

These types of principles, when implemented throughout an organization, aid in developing and maintaining a strong ethical culture. And the stronger the culture, the lower the risk of noncompliance.

For example, in organizations with strong cultures, employees are:
• 38 percent less likely to observe Foreign Corrupt Practices Act violations
• 76 percent likely to observe False Claims Act violations
• 65 percent less likely to observe other white-collar criminal activity

Results like these can’t be attained in an organization with a minimum-standard program. Taken together, the business world can’t profess a strong commitment to integrity, then implement minimum-standard compliance programs and expect exceptional results. If corporations today want to remain resolute in their commitment to integrity, the quality of their ethics and compliance efforts must improve.

A comprehensive description of a high-quality ethics and compliance program, with supporting business objectives, is available to the public.

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About The Author

Patricia Harned’s picture

Patricia Harned

Patricia Harned is CEO of the Ethics & Compliance Initiative (ECI). The mission of the ECI is to empower organizations to build and sustain high quality ethics & compliance programs. The ECI is an alliance of three nonprofit organizations: the Ethics Research Center, the Ethics & Compliance Association and the Ethics & Compliance Certification Institute.