Compliance and ethics programmes: risks and opportunities

Ethical practice and social responsibility are increasingly important to corporations, but there are inherent risks involved in a global reach

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Your company has devoted serious time and attention to being socially responsible, and operating on a principle of sustainable development. You monitor the work practices of your vendors, and participate in environmental forums. You have personally given presentations on the role of corporations in society, and have been applauded by major NGO’s. Your company’s media coverage has been excellent.

But in one corner of your company’s operations a manager is paying a bribe to local government officials to ensure that your company wins a major contract. In Europe your chief of sales has just concluded an illegal meeting with three of your top competitors to help keep prices up. And your distribution manager in China has reached a deal with local distributors to warehouse your products that they do not really need, so that this manager can falsely show increased sales and enhance his numbers. Unfortunately, while you have been focusing on being socially responsible, others in the business were being criminally irresponsible.

When these violations emerge, where will the enforcement authorities draw the line?  Will the public and the government recognise your positive efforts despite the company’s legal violations elsewhere? The reality is that no amount of socially responsible activity will likely balance out even one instance of corrupt or collusive misconduct. Even a robust social responsibility campaign can be completely overshadowed by charges of corruption or collusion.

How great is the risk that a company will suffer through one of these legal and ethical meltdowns? Based on the number of once well-regarded companies that have fallen, it seems that for any large company it is just a matter of time before a serious legal infringement surfaces. And in today’s global economy, a misstep anywhere on the planet can reach computer screens worldwide instantly. How can any company operate safely in today’s world of increasingly complex regulations?  How safe can a company feel when enforcement authorities around the globe seem to be competing with one another to track down corporate violations?

How is a company’s CEO to address this environment? The answer is one that is simple to state, but takes serious attention to bring about. The analysis starts with this fundamental fact: companies succeed in their businesses because they know what steps are necessary to manage their operations. It is the use of sound management practices that brings business success. Not surprisingly, the same point applies to keeping out of trouble and obeying the law. Success in managing this risk takes sound, time-tested management steps, or what is commonly known as a ‘compliance and ethics programme’.

What makes up a compliance and ethics program?  There is no mystery to this; it is a commitment by management to do the right thing – to act legally and ethically. But it is more than words – it is the use of sound, strong management steps to make this happen.

The management steps start with basic points:

Set standards for people to follow, and practices and controls to act as checks on misconduct;

Put someone in charge of this effort (the compliance and ethics officer) and have senior management actively support this commitment;

Be careful who you hire and promote, and who you use as agents;

Train your people and communicate what is required;

Check what is going on – audit, monitor, give people an easy way to raise concerns, check to see if the programme is working;

Hold people accountable, through discipline and incentives;

Investigate when things go wrong and prevent recurrence; and

Evaluate what your risks are and address them.

These basic steps then form the foundation for developing an effective ethics and compliance programme. Over the years a wealth of experience and knowledge has been accumulated that enable those managing these programmes to learn from the efforts of others. The field of compliance and ethics has been emerging as a new profession, essential for companies that are really committed to doing the right thing, protecting their hard-won reputations, and avoiding ethical debacles.

A key for any such programme to work is to have it run by people who are committed to the task and who understand the field. This calls for professionals who can bring vision, passion, and objectivity to the task. One resource that is available for guidance for such professionals is the Society of Corporate Compliance and Ethics (SCCE), a non-profit membership organisation of people who do compliance and ethics work. This organisation is dedicated to promoting professionalism and effectiveness in compliance and ethics programmes.

Bringing compliance and ethics to life in all corners of a multi-national company is a daunting task. The professionals who undertake this effort need to understand this field, the legal standards that apply, and the techniques that create successful programmes.  The SCCE exists to provide this guidance, through such steps as training, conferences, and sharing of resources through its website ( Perhaps most important of the steps SCCE has taken is development of a certification programme for compliance professionals. The Certified in Compliance and Ethics Professional (CCEP) designation requires compliance professionals to meet professional standards for education, experience, and knowledge in this field.  Successful completion of the requirements, including a rigorous exam, means that a company’s compliance people are committed, educated, and know what is required for compliance and ethics programmes to work and meet governmental expectations. The CCEP designation for its compliance and ethics staff signals to all that a company is serious in its commitment and in how it staffs its programme.

For those not familiar with the emergence of this new profession, it may be surprising to learn how rapidly this field has developed, almost in the absence of press or public awareness.  Perhaps this is simply because people who devote their attention to ensuring that companies act legally and ethically are not typically the types of people who seek media attention. But the reality is that this profession is rapidly taking its place in companies that have recognised the need to prevent ethical and legal debacles. The parameters of this exciting new profession are spelled out in a recent book published by SCCE, Building a Career in Compliance and Ethics. Who these professionals are, what they do, and what the field is about are all explored in this book. Managers in leading global companies have increasingly looked to members of this emerging profession to help ensure that their companies’ commitment to law and ethical conduct is translated into reality.

Will your compliance and ethics programme prevent your company from being the next front page business scandal? One factor in this is how the enforcement authorities view your efforts. The existence of compliance and ethics programmes has played an increasingly important role in the eyes of government officials around the world. For example, in competition law cases the UK’s Office of Fair Trading has said compliance programs can mean reduced penalties. The EU’s competition law authority has made the same point in its enforcement cases. In Italy the existence of a compliance programme can be a defence for companies in corruption cases.

Nor are these benefits limited to Europe. The US has an extensive system of benefits and incentives for companies to have compliance programmes. Standards Australia has adopted a complete set of standards for compliance and ethics programmes. Canada, India and South Africa all have recognised the importance of compliance programme elements, either at the governmental level or in stock exchange rules (information on all of these references can be found on the SCCE web site). If businesses ignore this message they can increasingly expect the harshest treatment from government and society.

In today’s global economy responsible companies and their managers will step up to their duties as members of society, and take the actions necessary to prevent and detect corruption and other forms of illegal and unethical conduct. Insightful business leaders will also realise there is competitive advantage in approaching this proactively.  Companies with strong reputations for integrity and that successfully avoid the grinding experience of hostile government investigations and litigation will have tangible advantages in the capital, customer and employee markets. Who will socially conscious customers, skilled employees, and risk averse investors favour – companies facing years of legal battles, or those known for their commitment to honesty, integrity and fair dealing?

In short, not only is an effective compliance and ethics programme governments and society expect of business executives, but it is also what these senior managers owe their own companies and investors as responsible leaders who expect the best of their companies, their people and themselves.

About the author
Joe Murphy is of counsel to Compliance Systems Legal Group, co-founder of Integrity Interactive Corporation, and an editor of Ethikos. He is also an author of Building a Career in Compliance and Ethics.  He can be reached at