A big step forward for compliance & ethics officers

A long time ago, I learned of a company at which – I was told – an individual had been hired into a compliance role precisely because he would be unlikely to notice (and thus stop) the crimes in which the company was engaged.  I could not then tell if this explanation – which seemed to be based more on informed speculation than hard fact –  was true. Still, years later the company and its executives were prosecuted but the compliance person was not – perhaps because the government concluded that he had in fact been in the dark. (Presumably this wouldn’t be featured on a resume, but it  beats going to prison.)

C&E programs are not machines that run by themselves.  It takes the involvement of many – and, on some level, all – employees to make a program truly effective. But in any company the quality of the C&E officer is central to the effort.  Oddly, however, this aspect of efficacy has historically not been part of the principal official definitions of an effective C&E program.

Last week, the Department of Justice issued a new pilot policy to encourage self-reporting of FCPA violations. Here is a link to the announcement.  Much will doubtless be written about the self-reporting aspects of the policy but for me of greatest interest is the definition of an effective C&E program.

While  containing various items that are typical for lists of this sort (such as compliance culture, risk assessment, auditing and discipline for violations) it also includes the following two elements that are now to be considered by the government in assessing C&E programs:

– The quality and experience of the compliance personnel such that they can understand and identify the transactions identified as posing a potential risk.

– How a company’s compliance personnel are compensated and promoted compared to other employees.

The inclusion of these items on this list is – to my mind – a big step forward for the C&E profession.

Of course, the ways in which they are assessed by the government in investigations remains to be seen – and note that the one about promotions will be hard to apply to small organizations.   But, as a general matter, placing these items on the assessment agenda should lead to companies having more top-notch programs by recruiting and retaining top-notch people.

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