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Tuesday, November 15, 2016

Strategic CSR - Ethics and compliance

The field of ethics and compliance has long been conflicted. This is demonstrated in the range of titles assigned to people responsible for ethics/compliance in organizations – are they Ethics Officers or Compliance Officers or Ethics and Compliance Officers (or any of the other myriad of titles assigned to people essentially doing the same job)? This conflict is also apparent in the name of the leading association representing these managers, which was originally the Ethics Officers Association (EOA), then it became the Ethics and Compliance Officers Association (ECOA), and now, for some reason, is called the Ethics and Compliance Initiative (ECI) – an "initiative," to me, seems much weaker than an "association."
 
But, anyway. In general, my sense is that the tail has been wagging the dog a bit. In an effort to broaden their appeal to as many managers as possible (and, therefore, maintain or increase membership), the ECI has twisted itself to reflect the morphing field, rather than standing on principle for something 'pure' and shaping the field. The article in the url below supports this argument, suggesting that the consequences of this passive approach might be causing confusion in the executive suite about the role of these essential managers (note: the SCCE is a separate organization representing ethics and compliance officers):
 
"A survey of compliance and ethics professionals by the Society of Corporate Compliance and Ethics found 50% said promoting an ethical culture is the top job for an ethics and compliance program, while 35% said it is to prevent and detect misconduct."
 
In particular:
 
"When asked what they thought management believed the top objective is, 43% said meeting regulatory requirements, while 29% said preventing and detecting misconduct. When asked what they thought the board believed, 28% said to prevent and detect misconduct."
 
These survey results reflect confusion as to whether the role of these officers is to build an ethical culture that is likely to prevent misconduct (ethics) or to comply with existing legislation that minimizes the impact of any misconduct should it occur (compliance). While it is clearly more effective for a firm to prevent misconduct, that is also the more expensive option since it involves investment across the whole organization in multiple initiatives, some of which may help prevent misconduct while others are probably unnecessary. The cheaper (and more cynical) option is to wait for misconduct to emerge and then act to minimize the fallout. While this latter approach might be cheaper in the short-term, however, the danger is that it generates much longer-term issues that can seriously threaten the organization's viability (e.g. VW, Wells Fargo, etc.). My suggestion to the ethics and compliance field, therefore, is to start shaping the field in a way that corrects misunderstandings among firms' senior ranks, rather than merely trying to reflect it.
 
Take care
David
 
 
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Differing Views on Ethics & Compliance
By Ben DiPietro
July 25, 2016
The Wall Street Journal