In prior posts for the FCPA Blog, I discussed how compliance officers are subject matter experts for the compliance program and why the board-adopted company code of ethics is a fundamental ingredient of the compliance program.
In this post (the first of a three-part series), I’ll examine how Compliance 2.0 gives management a better tool for ethical decision-making.
Compliance 2.0 is an opportunity to transform business ethics and the way it is enforced. Michael Volkov, a former DOJ official and a compliance thought leader, calls for a business ethics definition that is “relatively practical and simple…with a focus on how to implement the culture, communicate the culture, and make it a reality for its business operations.”
Roy Snell, CEO of the 16,000 member SCCE-HCCA, asks if there is so much confusion and endless debate over the term ethics, shouldn’t “we change our approach…to building an ethical culture?”
Compliance 2.0 does both of these. Compliance officers should not debate general definitions of business ethics. The company has a definition of its ethics. It’s part of the compliance program already. Nearly all companies by law or industry practice have a code of ethics (or conduct) adopted by board resolution. The job of the compliance professional is to be the subject matter expert for the code and to be the excecutive who enforces it.
Tough calls on ethics will be made by compliance officers and some will escalate up to the board to decide. Taking a lessons-learned approach, the compliance officers, as subject matter experts, use all of these decisions for training and for precedents as part of the company’s corporate culture and its compliance program.
Lawful but awful situations often bring out the worst moments of corporate decision-making. Instead of getting all the issues on the table, many go unspoken. The proposed project looks unusually profitable and less risky than it actually is. Other considerations (like reputation, future prosecution, shifts in public opinion and harm to customers) are crowded out of the debate.
When the company’s most needs its best process for careful decision-making, the process falls apart. Why?
There’s a vacuum in this debate that should be filled by the policies and values underlying the board’s code of conduct. The chief compliance officer shows how they apply to the case at hand. The policies and values cannot be forgotten during the debate; they must be part of the presentation to the board so it can make the best decision possible.
In my experience and that of many lawyers and compliance professionals, this kind of vigorous debate does not kill the project; it greatly improves it and creates something much better going forward.
Compliance 2.0 works. Compliance officers and the public never hear about it because the system works and the house doesn’t burn down. Compliance 2.0 transforms business ethics into a critical component of the compliance program and an important management tool.
Michael Scher is a senior editor of the FCPA Blog. He has over three decades of experience as a senior compliance officer and attorney for international transactions. He can be contacted here.