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What codes of conduct can (and can’t) do

The discussion of a Code for Compliance Officers highlights some of the strengths and weaknesses of the compliance profession.

Consider a situation familiar to COs summarized from readers’ comments:

“I see excellent, competent COs being pushed out of compliance by other COs. Too often, COs who looked the other way when problems occurred remain in their jobs, while good ones resign before they are fired. Many COs have learned that it is better not to make decisions than to make them and risk losing their jobs when the more powerful business line officers complain. And too many COs lack the technical expertise needed to manage the complexities inherent in the CO role.”

Some argue that the SCCE Code mentioned in a prior post could “potentially settle some of the angst and uncertainty within compliance departments. It could help COs explain why they recommend a course of action or a particular candidate for a job, or to make a tough call. It would give them something other than an empty chair to point to for support.”

Rebecca Walker, on the SCCE Board of Advisors, points to provisions in the Code for escalating conflicts up the organization for resolution. The Board (hopefully independent and not packed by management and having a member expert in compliance) is becoming the norm for the final decision.

A company committed to an effective compliance program will sort out disputes in a conflict resolution process that achieves high quality outcomes like any other quality control process. Collaboration among the COs, sales force and the other departments is the norm at well-run firms, but it must give way from time to time when deadlocked camps reasonably disagree in good faith about what is legal or ethical.

To the CO in China who was concerned about “wrong judgment” or “good faith mistake,” this Code-driven procedure would improve working conditions and job security.

A CO Code and conflict resolution procedures support compliance when management wants to do the right thing. But, when it does not, compliance is degraded and clueless COs prosper at the expense of good ones, Code or not. The weakness of these discussions is the failure of the profession to address a root cause: powerlessness and what to do about it.


Michael Scher is a contributing editor of the FCPA Blog. He has over three decades of experience as a senior compliance officer and attorney for international transactions. He is affiliated with ethiXbase, the owner of the FCPA Blog. He can be contacted here.

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