Debunking Compliance Myths

Screen+Shot+2015-04-09+at+10.57.20+AMI’ve recently read with great interest a blog series by Michael Scher, senior editor of the FCPA Blog, on the common myths that persist about compliance. In three parts (one, two, and three), Scher takes on views on compliance that once might have been accurate but no longer fit the new notion of what compliance should be. He calls this more evolved version Compliance 2.0 where “compliance officers [are] untethered from the general counsel, working directly with C-Suiters, and participating in many of the company’s most important business decisions.”

In other words, greater levels of independence and influence within the company are now increasingly expected of compliance officers in order for them to be able to do their jobs effectively. The process of moving from Compliance 1.0 to Compliance 2.0 is by no means universally complete but more and more businesses realize that this is where compliance is headed. In that context Scher talks about nine myths that may still prevent some companies from moving forward:

  • Myth #1: Lawyers should always make more money than compliance officers. Lawyers have been traditionally perceived as key defenders of the company, in contrast with compliance officers’ more clerical tasks of communicating policies, training employees, etc. But today compliance officers are equally dedicated to staving off corporate crises and risks – and should be compensated accordingly.
  • Myth #2: Compliance officers don’t do as much as lawyers. In many cases legal departments are too entrenched to conduct the most sensitive investigations or resolve the most controversial violations. Compliance officers, with their broader view of business norms and ethical standards, are often better equipped to address such difficult situations.
  • Myth #3: Surviving in a compliance job means being ineffective. That might be the case in places where a compliance program is purely meant as window dressing but that type of compliance doesn’t help anyone avoid liability. While it always takes fortitude to stand up against powerful executives if needed, effective compliance officers are able to do just that. And smart executives listen for their own – and their company’s – good.
  • Myth #4: The chief compliance officer has to be a lawyer from the legal department. Many CCOs are lawyers because of the history of compliance departments often starting out as a part of legal, or at least being staffed by lawyers. There is nothing wrong with a compliance officer who is a lawyer. But it’s important to keep in mind that this is not a job requirement. Professionals coming from other fields, ranging from finance to HR, make great compliance officers as well.
  • Myth #5: Compliance is ultimately a political battleground where compliance officers can’t win. Not so. As Michael Scher put it, “Compliance is really about the welfare of the entire company and all of its stakeholders. Compliance officers worth their salt aren’t fighting for turf, they’re fighting to protect their fellow employees, the shareholders, the suppliers, the lenders, and of course the customers.”
  • Myth #6: Everything you need to know about compliance is contained in the Federal Sentencing Guidelines. The Sentencing Guidelines are of course important but many other great sources of information exist and more are out there every day. Scher mentions the DOJ/SEC Resource Guide, the OECD’s Anti-Bribery Recommendation, or the International Chamber of Commerce’s Rules on Combating Corruption among examples. I would add, for instance, the wealth of information and best practices available to compliance professionals through the Society for Corporate Compliance and Ethics.
  • Myth #7: Board oversight isn’t effective. That’s the view held by those who don’t believe that corporate boards could ultimately focus on anything other than boosting profits. But this type of behavior led to corporate transgressions in the first place – and in many cases resulted in harsh punishment. Insufficient board oversight was one of the key factors in the rise of Compliance 2.0 where boards are now clearly held accountable for ethical business conduct.
  • Myth #8: Ethics and compliance are two different topics. Not really, the two are deeply intertwined. Without an ingrained sense of ethics, compliance becomes an empty box-checking exercise. Under Compliance 2.0 “lawful but awful” behavior cannot be tolerated precisely because it is unethical.
  • Myth #9: Compliance officers have to be Americans. Definitely not true! Compliance has gone global and to be done well it needs local expertise. Compliance is increasingly becoming the international language of business. Last September, for one, I attended Ethisphere’s first-ever Europe Ethics Summit where the growing geographic diversity of the compliance profession was on full display among nearly 150 participants. Similar events are now regularly organized by Ethisphere and others around the world.

I would add another myth to Michael Scher’s excellent list – Myth #10: Compliance is only for large multinationals. In CIPE’s experience, key emerging market firms are also highly motivated to put in place anti-corruption compliance programs as a way to join global value chains and access Western capital markets. It is with these companies in mind that CIPE created a simple but comprehensive anti-corruption compliance guide and has been training companies in countries ranging from Ukraine to Pakistan on how they can introduce or improve their existing compliance programs. Compliance 2.0 is a global force indeed – and it’s becoming a reality.

Anna Nadgrodkiewicz is Director for Multiregional Programs at CIPE.