General counsel as chief ethics and compliance officer

Woody Allen once wrote: “Why pork was proscribed by Hebraic law is still unclear, and some scholars believe that the Torah merely suggested not eating pork at certain restaurants.” Something similar can be said about general counsels serving as chief ethics and compliance officers.

The dispute about GCs wearing the CECO hat as well also has porcine-related origins – Senator Charles Grassley’s famously saying: “It doesn’t take a pig farmer from Iowa to smell the stench of conflict in that arrangement.” But based on my experience with hundreds of companies’ C&E programs,  the Senator’s sweeping proclamation doesn’t hold up for all organizations. While  there are indeed certain situations where the CECO should be independent of the GC – e.g., the company is in an industry where the government has voiced a preference for such reporting structures – plenty of times  the opposite is true and the principal effect of  being “independent” is being powerless.

Earlier this month LRN made a significant contribution to this debate with its 2015 Ethics and Compliance Effectiveness Report (which is available for download here). The survey which served as the basis for that report found that: “Among our respondents, 29% are led by CECOs reporting to the CEO, but not all of them get the same-sized seat at the C-Suite table. Roughly half of them also serve as general counsels, and these two-hatted stalwarts run programs significantly more effective than those of their one-capped colleagues.”

I won’t try to summarize the study’s methodology or  all of the specific findings on program efficacy, but one result really stood out for me: “Fully 68% of the GC/CECOs see the primary mandate of their programs as ensuring ethical behaviors and the alignment of decision making and conduct with core values, while that is true of only 41% of the dedicated CECOs. By contrast, 59% of those full-timers see their primary mandate as ensuring compliance rules and regulations, a position taken by only 32% of the GC/ CECOs. As we have previously determined, values based programs outperform rules-based programs by almost every measure.”

There’s plenty more in the study that challenges the orthodox view on this topic, and I encourage you to read it.


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