Compliance and Ethics: Ideas & Answers. Edition 13

Dear friends,?

Welcome to the thirteenth edition of Compliance and Ethics: Ideas & Answers!

This week we will look at an essential element which is usually missing from companies' compliance and ethics program. After that we'll understand Conflict vs. Compliance vs. Commitment.

As always, there's more content on?our website?so please do visit that to read our other articles.

Thank you, Joe.

Is this essential element missing from your compliance and ethics program?

by Joe Murphy

1. What if your compliance program had no training?

2. What if a consultant advised you on a compliance program that included no training?

3. What if you tried to get credit from the government for your program, but had no training?

4. What if an academic wrote an article analyzing compliance programs but with no reference to training?

Ridiculous, right? Who would ever do that? Training is part of compliance program standards, so how could anyone omit that? Who would ever leave out a core element of compliance and ethics programs?

But here is what is almost consistently overlooked. Training is just ONE element of compliance programs. There is another essential element of compliance program standards that is routinely omitted (or at best short changed). What is that compliance program core requirement? Coverage of incentives!

And if you look at the 4 “what ifs” above and put in “coverage of incentives” to replace “training” you will find stark examples of a core compliance program element being ignored or given almost no attention.

Yes, including incentives in compliance programs is a core element of compliance programs. And paying attention to incentives is critical if you want to have a culture of ethics and compliance and you want to convince enforcers and regulators that you have a real program, and are not just checking boxes. If you want a program to be effective and credible, it needs to include coverage of incentives.

So how can you approach this? I have written a “how to” white paper for SCCE on this topic, Murphy, “Using Incentives in Your Compliance and Ethics Program” (SCCE; 2012), This was, in fact, cited by DOJ and the SEC in their FCPA guide.

Here are some of the key elements relating to incentives:

1. Make commitment to and promotion of the compliance & ethics program an element of personnel evaluations.

2. Make a commitment to compliance & ethics a requirement for promotions, and give the compliance officer input on promotions.

3. Require review by the compliance officer of all incentive and reward programs. (Imagine how different Well Fargo would have been if someone with any sense had power to torpedo their ridiculous incentive program).

4. Provide rewards and recognition for those who support/assist the compliance and ethics program and its objectives.

5. Provide rewards and recognition for the compliance and ethics program staff.

There are many ways to approach these different elements. It is ok to start modestly and build up. But what is inexcusable is to do nothing. A compliance program that ignores incentive deserves no more credit than one that ignores training. And any participant in our field who ignores incentives is missing one of the core elements of an effective program.

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Conflict vs. Compliance vs. Commitment

by Adam Balfour

I recently read a book that talked about conflict, compliance and commitment. It is an interesting spectrum and one that can be useful and relevant to ethics and compliance.

Organizations sometimes see conflict with the standards and values they are required to meet or otherwise set for themselves - essentially when people don’t, won’t or can’t comply with the standards/values for whatever reason. This is the equivalent of a “fail” in a “pass/fail” exam. The expected standards are not being met.

Most organizations aim for compliance with the standards and values they are required to meet or otherwise set for themselves. Compliance is not a bad thing if the standard set is high enough or meeting the standard is considered enough, but often compliance means that the minimum is done to meet or pass the standard. This is the equivalent of a “pass” in a “pass/fail” exam.

Commitment is the ideal level of engagement and organizations should aim to have a culture that is based on a commitment to integrity. When you have a commitment to integrity, people are not motivated to do the minimum but instead pursue integrity as an objective and purpose. This is the equivalent of an “A+” in an exam.

Does your organization prioritize conflict, compliance or a commitment to integrity? Is your Ethics and Integrity program focused only on compliance or pursuing a commitment to integrity?

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