The Compliance Program Problem & Solution 12:00, August 1, 2016

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The Compliance Program Problem & Solution

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There is no shortage of articles telling us great ways to improve workplace culture, the intangible cultural fabric that defines and propels an organization’s mission, talent, strategy, and profitability. Both the volume and thrust of the literature suggests the importance of creating a solid workplace culture. One element that is not emphasized enough is including “compliance” and ethical conduct into a company’s culture. Here’s what you need to know.

Problem: Check the Box Programs Don’t Work

Doing what’s minimally required will not produce results. Studies, regulators, and legal scholars have all found “check-the-box” training and unenforced company policies to be patently ineffective at promoting compliance. There’s a gap between what a company implements and improvement. For example, it is not uncommon for sexual harassment victims to avoid reporting abuse out of fear of retaliation, despite explicit promises of protection in a company’s sexual harassment policy. Companies with code of ethics policies have nonetheless settled charges of securities fraud with the Securities and Exchange Commission and misrepresentation with the Consumer Financial Protection Bureau and Federal Trade Commission.

In his 2016 article in the NYU Journal of Law and Business, Professor David Hess explains that this dynamic is informed by many reasons, such as messages from the top that ethics compliance isn’t necessary, unequally applied internal policies, and unethical behavior that is unchecked, persistent, and yet unreported.

Solution: Companies Must Combine Compliance with Culture

Hess’s solution is combining compliance with culture. This is the game. For example, financial regulators have consistently urged big banks to improve their workplace cultures while the Department of Justice has issued compliance standards for complying with the Foreign Corrupt Practices Act (FCPA), further noting that “Compliance is a Culture, Not Just a Policy.” It is apparent that companies hear the call, but are not sure how to go about it.

Here are some tips:

(*)   Involve compliance professionals. Compliance officers and talent managers provide a variety of functions such as conducting internal audits, training, and investigations. Unfortunately, Hess and other legal experts maintain there is much resistance to this role, as some company leaders don’t view ethics as a problem in their business (most would probably be wrong). As a result, compliance professionals need to be incorporated into both C-level suite strategy and day-to-day operations to be effective. The Society of Corporate Compliance and Ethics is a well-known organization that provides companies ways to do that.

(*)   Be Accountable. While it’s highly suggested, no one is forcing companies to form a compliance culture. That takes some bite out of the regulatory bark. However, that mentality truly misses the point. Empirical evidence shows that relying solely on external motivation (i.e. the threat of liability or federal investigation) does not speak to positive interventions in the workplace, which a culture is supposed to provide. Airbnb’s campaign to eliminate discrimination and bias is a great example of a company being public and transparent about its efforts to go beyond the legal threat calculus.

(*)   Training. Companies can train their employees about workplace ethics, the foundational precept to compliance. However, it needs to be handled well. For example, research shows that poor decision making can lead to unethical behavior. Training should identify and resolve what causes compliance problems in the first place. 

Enhancing workplace culture involves taking many actions, one of which is instituting effective online compliance training. To learn more, check out this white paper on ethics training.

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Douglas Kelly
Douglas Kelly is EverFi's lead legal editor. He writes on corporate compliance and culture, analyzing new case law, legislation and regulations affecting US companies. Before joining EverFi, he litigated federal and state employment cases and wrote about legal trends. He earned his JD from Berkeley Law and BBA from Emory University.

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