The CLO's new role in compliance and ethics

Comments (0) | 15 Mar 2013 | Rating by Matthew Scott

A panel at the Global Ethics Summit explores how the role of the chief legal officer has evolved when it comes to compliance and ethics.

Last week, Ethisphere Institute and Thomson Reuters presented the 2013 Global Ethics Summit in New York. Kelly Clark, general counsel of Holland America Line, Brian Miller, general counsel of AES Corporation, and Arnold Morse, chief legal officer of CACI International, all featured on a panel entitled ‘How has the role of the CLO evolved when it comes to ethics and compliance?’ 

Moderated by Carrie Penman, president, ethical leadership group, NAVEX Global, the panel explored the changing role of the chief legal officer/general counsel in ethics initiatives. The group first discussed whether it was more effective for a company’s compliance and ethics program if the compliance department was part of the legal department. As Clark quickly noted, ‘There is no one-size-fits-all solution.’ She pointed out the size of a company may dictate where compliance and the legal department fit because smaller companies may not have the resources to separate them.

Miller said compliance and legal should be combined, but acknowledged that it could be done differently. ‘If it is more efficient and you can handle it without the compliance officer in the legal department, that’s fine. But for us it doesn’t work to separate them out.’

Morse suggested that each department in a large entity might have huge compliance responsibilities, so allowing HR to deal with its compliance issues and finance to deal with its compliance issues in cooperation with compliance and legal might be efficient. ‘Each function is responsible for doing it [complying] in a way that the rules apply and the legal department sits above it all,’ he said.

The panel also addressed the question, ‘Should the compliance officer report directly to the board of directors?’

It was agreed that the board should be briefed on key compliance investigations, but this could be done in different ways. Morse suggested the lead investigator on individual cases could brief the board on compliance matters by reporting to a risk committee. The person reporting to the board ‘may not be the chief compliance officer, but they are honestly telling the board what’s going on in that area,’ said Morse.

Miller said the compliance officer could report to the board but also to the chief legal officer, like at his company. None of the panelists pushed for independent reporting to the board. As Miller put it, ‘When you emphasize independence, the more you have employees saying, “Here come the police”.’ 

When asked about the chief legal officer’s involvement in identifying risks – one of the new areas CLOs are being relied on for advice to the executive committee – the panelists offered varied approaches. Kelly said they could conduct enterprise risk assessment: ‘Every other year, conduct a survey of executives, discussing the risks and where they think the new problems will come from.’

Morse suggested the chief compliance officer could take responsibility for identifying the major risks for the company.

Finally, when it comes to the chief legal officer’s role in dealing with compliance and ethics, the panelists each offered their advice.

Kelly said instead of just focusing on legal aspects of compliance and ethics, ‘A large part of my role is to help my colleagues make good decisions about what we ought to do.’

Morse said the chief legal officer has a growing role in setting an ethical tone. ‘Ethical culture is the glue that connects the employees to the company…the piece that keeps them connected to the company is the piece that says “we do business the right way.” When people see that, they follow that, and that is what keeps people connected to the company. 

Miller emphasized the chief legal officer’s role in getting key officers at the company to think ahead. ‘It’s not what you know, it’s what you don’t know, that will get you into trouble.’

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