Boards urged to seek compliance data reports

Oct 18, 2017
ECI chief recommends proactive compliance and ethics stance by directors

Boards need to ensure they have sufficient oversight of their company’s ethics and compliance policies and procedures, including data on employees – even as the Trump administration pushes to get various regulations off the books, according to Patricia Harned, CEO of the Ethics & Compliance Initiative (ECI).
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|In the wake of major regulatory reforms such as the Dodd-Frank Act and Sarbanes-Oxley Act – and a number of high-profile regulatory settlements – boards have taken a more proactive approach to their company’s ethics and compliance programs to make sure internal controls are in place, Harned tells Corporate Secretary. They’re also starting to realize they have a role in making sure firms have the right culture to uphold certain values, she adds.

Harned advises that, as part of an effective strategy, boards should make sure executives report to them regularly about compliance efforts, including providing directors with survey data on whether employees are feeling pressure to break the company’s code of conduct and on employee turnover, which she says can be an indicator of an ethical breach or bad environment.

The CEO is a crucial ambassador for a company’s compliance and ethics program and the best boards consider this when making compensation decisions, she adds. ‘As a board director, one of the things you should be looking at during compensation conversations is the tone at the top and employee surveys around whether the CEO is setting a good example,’ she says. ‘It’s helpful for holding the CEO and management accountable to ensure a culture of compliance and ethics.’

Creating a culture of compliance is not about asking the in-house legal team to be solely responsible, Harned says. Instead, it’s about empowering each business head to be accountable for compliance and ethics within his or her own group. In addition, employees should be rewarded – not just protected – for providing information of any wrongdoing, she says: ‘In doing that, the ethics and compliance function, the legal function and the HR function are all resources for those business leaders to make sure they have what they need to drive their own efforts.’

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