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Susan Frank Divers: Cut jargon and boost compliance

The Guardian newspaper reported in September 2014 that the terms and conditions for signing up for free Wi-Fi in London included a “Herod clause” requiring “the recipient . . . to assign their first born child to us for the duration of eternity.” Nonetheless, people signed up.

The Herod clause showed that few people actually read the long and complex policies they routinely accept as part of doing business.

Similarly, pity the poor employees of most publicly traded companies trying to read and understand the policies that apply to them. Here’s an excerpt from a 2015 Related Persons Transactions policy of a Fortune 10 company recognized for its commitment to ethics:

Any employment relationship or transaction with an Executive Officer and any related compensation solely resulting from the employment relationship or transaction if (i) the compensation is required to be reported in XXXXXXXX’s proxy statement under Item 402 of the SEC’s compensation disclosure requirements (generally applicable to “named executive officers”); or (ii) the related compensation would be reported in XXXXXXXXX’s proxy statement under Item 402 of the SEC’s compensation disclosure requirements if the executive officer were a “named executive officer,” the Management Development and Compensation Committee of the Board of Directors approved (or recommended that the Board of Directors approve) such compensation, and the executive officer is not an Immediate Family Member of a Related Person.

Policies like this — wreathed in legal jargon, defined terms, acronyms, obtuse statutes, cross-references, regulatory references and the like — are generally written by lawyers for regulators, not for employees.

The approach is short-sighted and defensive. The underlying premise is that the company checks the box for a compliance topic by trying to address all possible permutations of a law or rule in an elaborate policy, usually without any reference to values or purpose. If a breach occurs, the policy is trotted out as proof that the company did its duty and should not be held responsible. Employees that speak English as a second language or do not have high literacy will particularly struggle to understand what is expected from such policies.

Even the U.S. government (not generally known as a paragon of simplicity and clarity in the policy area) has recognized the limits of this approach. In early November 2015, the DOJ announced seven metrics by which it would judge the effectiveness of ethics & compliance programs. The third metric asks “are compliance policies clear and in writing? Are they easily understood and translated?” Good questions.

Some leading companies, consistent with their commitment to values-based ethics programs, have invested major efforts in clarifying their policies. Their goal is reversing decades of policy proliferation, jargon, and complexity by simplifying their policies and procedures, before the concept was embraced by the regulators.  What kind of simplification? Radical. Far-reaching. Values-driven. Employee and business-focused. Or, as Al Rosa, Chief Ethics & Compliance Officer for GE put it, “compliance moving at the speed of business.”

Simplification, if done right, strengthens ethical culture by connecting the underlying values and shared goals for each policy clearly and concisely to its actual requirements. Moreover, it can promote respect for employees and foster trust.

As Eli Lilly’s Chief Ethics and Compliance Officer Melissa Stapleton Barnes has articulated, Lilly’s three core values of integrity, excellence, and respect for people underlie their three-year policy review and simplification process. The goal is to increase understanding and, at the same time, transparency and openness.

An essential feature of Lilly’s effort involves employee review —  both by a panel of subject matter experts for all policies and procedures emanating from the simplification process as well as a set of international focus groups. These employee litmus tests have proven to be a powerful tool for employee engagement and policy simplification.

For General Electric, the emphasis has been on encouraging employees to use good judgment, rather than trying to craft a rule for every conceivable situation that might occur. GE’s effort looks at operationalizing policies and procedures so that business gets done more efficiently and compliance is embedded in the effort.

LRN’s work for Allstate Insurance helped incorporate the company’s values into streamlined versions of its policies as part of Allstate’s effort to update and invigorate its Code of Ethics. Knowing what is expected, why it is expected, and how to meet those expectations can be powerful drivers of employee engagement as well as enhancing a company’s compliance. 

A global commitment never to compromise integrity in winning business lays the basis for specific guidance prohibiting bribery, kickbacks or improperly obtaining competitors’ information. Respect for people underlies anti-discrimination, fair labor practices and zero tolerance for harassment or bullying without regard to jurisdiction or location. These values make it easier for employees from different cultures and backgrounds to understand their obligations.

Policy simplification, when done right, is a journey, not a project. Working to incorporate values, engage employees and drive clarity can add value to business while cutting back the jargon jungle.

For more examples and specific guidance, check out my post about policy simplification here.

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Susan Frank Divers is a member of LRN’s Advisory Services Practice where she advises LRN partners on ethics and compliance programs, communications and training. Mrs. Divers’ background includes more than thirty years of legal experience in the area of international compliance. Prior to LRN, she served as AECOM’s Assistant General Counsel for Global Ethics & Compliance and Chief Ethics & Compliance Officer. She resides in Northern Virginia and is a frequent speaker, writer and commentator on ethics and compliance topics in the media.

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