Despite the passage of the Sarbanes-Oxley Act in 2002, continual scandals in the financial markets within the past few years led to the passing of the Dodd-Frank financial reform act of 2010. The implementation of this legislation now requires thousands of smaller organizations to file with regulatory agencies and has created a marked increase in the need for corporate compliance strategies and executives.
This heavier regulated environment has led many executives to rethink their corporate compliance policies and to implement new strategies. Keeping in mind Jeffrey Skilling’s infamous statement that Enron was in “great shape” shortly before it collapsed, an effective compliance program dives below seemingly calm seas to discover errant currents. Below are three components that are integral to the success of building a compliant organization.
First, it’s crucial that the CEO and other top-level executives support an ethical culture and commit to a code of conduct. This enables the compliance program to seamlessly permeate all aspects of the business. Executives must also model the behavior as rank-and-file employees will immediately dismiss policies if only lip service is paid to ethics and compliance. Also, the program should have clear and measurable goals because truly “we treasure what we measure.”
Second, compliance policies must be effectively communicated to employees, with ongoing training provided. This may include documentation that employees have received the training. For some policies, this could include annual signatures by employees confirming that the policies were reviewed and that they will abide by them. Additionally, there should be ongoing monitoring and auditing of behavior and compliance with policies. This should be prioritized accordingly to the level of risk associated with various divisions and how they impact the organization.
Third, companies should employ a whistleblowing policy and have in place a confidential hotline that is available for employees to report unethical or fraudulent conduct. And, it is essential they institute a clear, nonretaliation policy and demonstrate their commitment behind it. Most importantly, reports of unethical or noncompliant behavior should be fully investigated and confirmed violations should be dealt with swiftly and consistently.
The success of an organization’s compliance program can be directly attributed to the dedication and expertise of the professionals responsible. A heavier reliance on compliance executives is illustrated by a projected increase in those positions of more than 31 percent by 2018, making the area one of the fastest growing in the country as reported by the U.S. Bureau of Labor Statistics projects. Compliance jobs are not only well represented in the accounting, finance and legal sectors, but are also needed for insurance, government regulation and information systems.
Higher demand for corporate compliance positions and expertise creates an opportunity for continued education. While traditional MBA programs were designed to offer a comprehensive curriculum in business management, they do not specifically address the emerging needs of ethics and compliance. A graduate degree focused on ethics and compliance is a unique offering designed to satisfy the needs of today’s more regulated market and places increasing emphasis on updated regulation requirements and risk management.
A more regulated reporting environment dictates the need for a deeper reservoir of well trained executives and stronger compliance and ethics policies. Organizations that specifically recruit seasoned compliance executives or encourage higher education and training within the area for existing employees will ensure greater success.
Executives dedicated to the process should insist on top-level commitment and model the behavior. Policies and procedures should be clearly communicated with a strong emphasis placed on continual training for all employees. Creating or strengthening whistleblowing policies and offering a hotline for employees to report unethical and fraudulent conduct will reinforce the company’s commitment to compliance.
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About the Author
Dr. Marie Gerardin is a professor in the Master’s in Business Ethics and Compliance degree at New England College of Business and Finance (NECB) where she has been an online professor for 11 years. She is an attorney and a member of the Massachusetts Bar Association.