What is the relationship between leadership and culture?
One view is that the board of directors serves as the ‘curator of a company’s culture.’ As a board member you need to know if there is a clear framework to determine and measure certain key facets of your company’s compliance program. These key facets include:
(i) Tone of the company towards doing business in a compliant manner;
(ii) The company’s ability to understand new compliance issues as they arise;
(iii) The process and dynamics of the company’s compliance program. Your chief compliance officer (CCO) should have ‘good professional judgment’ and be able to communicate to the board about their judgment of ethical behavior in the company.
There are three areas of metrics to measure, which can assist board members in answering the issues mentioned above. They are:
(i) Measures of magnitude;
(ii) Measures of direction;
(iii) Measure of penetration.
By measures of magnitude, a board can obtain information on how well the company’s compliance regime has been communicated throughout the target audience of employees and third parties, or ‘exposure’.
The measures of direction are designed to present information on trends that compliance is seeing within the company. One example often used is the frequent review and summary of hotline reporting.
The final measure, of penetration, is designed to drill down further than the measure of magnitude to provide metrics on how well the compliance program has penetrated the employee base and third parties with whom the company might be working to obtain or retain business.
With these numbers you can begin to determine what the compliance culture of your company consists of and if anything needs to be addressed. But the key is for you, as a board member to ask questions and obtain the information, allowing you to be the curator of your company’s culture.
