Number of high profile corporate scandals at some large and supposedly sophisticated companies has, if nothing else, driven home the fact that no matter how strong you think your corporate compliance and ethics program is, the risk of failure is still there.
ICAS want to look at this issue from the standpoint of the board of directors.
Right now, there are a number of very concerned directors asking themselves whether they have done all they could, or should, have to prevent this and what are the ongoing risks, not only to the company, but to them personally. True, directors should always be thinking about the institutional risk to the company, but nothing motivates effectiveness like the risk of personal liability.
Ordinarily directors are protected by the business judgment rule which provides that well informed decisions of directors taken after due consideration and in good faith will not be attacked by a court because the decisions turned out wrong. In cases of compliance failures – whether issues of foreign bribery, cartel activity or environmental hazards, to name a few – the issue for a board is usually one of omission. Rarely has a board approved such activity. Rather, the issue is whether it has done everything possible to avoid such conduct. Here are four ideas that can help strengthen the effectiveness of the board in these situations and thus, limit risk.
The Board of Directors & Compliance: 4 Ideas for Improving the Effectiveness of & Reducing the Risk to Directors
1st. Training
Interestingly, in many companies directors do not necessarily receive the same compliance training that employees do. Directors may claim they are too constrained by time, or that they, of course, know this material already. Perhaps they do, but even if the directors are compliance experts shouldn’t they know how the employees are trained? How do you measure the effectiveness of a program you have opted out of? In short, directors should go through, at a minimum, the same training employees receive.
But that is not enough. Directors need specialized training, not just in the nuts and bolts that line employees receive but also in the issues at the center of compliance and ethics. Directors need to be focused on the big picture of why a company has a compliance program. They need to know what questions their compliance professionals should be asking, and if directors don’t see this happening, they need to act quickly.
Moreover, at least some of this training should be external to the company. Even if management is well intentioned, it is vital that directors get an occasional different perspective on compliance from that which prevails in the company.
2nd. Structure
A long discourse of the various pros and cons of possible compliance structures would fill several of these columns. There is an active professional debate out there as to whether or not the chief compliance officer should be separate from the general counsel? Should both ethics and compliance roles be rolled into one position? Where does internal audit fit in? I won’t attempt to evaluate these debates here. Indeed, there may be no one right answer. But the way in which your company structures these roles is vital to your governance and your ability to address compliance and ethics.
Boards of directors should be intimately involved in planning for these issues. Directors should regularly review the existing structure and make sure they are comfortable with it and it is serving the company’s interests. Whatever the specific structure chosen, those primarily responsible for compliance must have direct access to the board or a compliance committee. Given this dictate, you can decide what works for your company. Is your organization hierarchical in nature? Are managers expected to closely follow superiors with little questioning? If so, asking a G. compliance who reports directly to the CEO to also serve as CCO and report to the board may place him or her in an unworkable position. If the CFO uses internal audit as a personal resource how comfortable can the board be that the head of compliance would bypass that CFO if the situation called for it? On the other hand, where a company operates in a matrix environment with multiple reporting lines standard, such dual roles and reporting may come naturally.
3rd. Seek Advice
Most boards of directors do not have separate counsel from the entity they serve. Directors typically rely on the general counsel and regular outside counsel to do their job except in the rare situation such as the need for a special committee and counsel thereto. In general, most boards do not need regular and continuing counsel involved in every decision they make. But that does not mean such outside advice may not be useful some of the time.
Every board should have a relationship with counsel independent of the company and its management; someone who can be called upon in those rare times when the directors feel that they needs a truly independent voice. Directors need to avoid making this counsel into a crutch to which they turn for validation any time they have a tough decision to make. But at the same time, they need to be willing to seek outside advice when the situation demands. Setting up this relationship in advance makes that all the easier.
4th. Evaluate
Evaluation of the efficiency of a compliance program is commonplace. The CCO does it. Compliance plays a role. Board members weigh in regularly. But who evaluates whether the board is doing its job when it comes to compliance? Company officers are unlikely to risk angering the board by criticizing their work in this area. Often, the only judgment comes when there has been a compliance failure and the inevitable derivative action.
Instead of waiting for disaster and trial by fire, boards should consider bringing in a consultant to work with them in evaluating how they fulfill their compliance and oversight role. This should be something the board does for itself and can be combined with the training discussed above. Whether the evaluator be an outside law firm or one of the many consultants available in the compliance field, an outside voice can be a great check on the natural tendency to overestimate are own effectiveness.
The board of directors has a difficult role in this area. They need to protect the company and themselves. These four steps will make that job easier and make them more effective in their role with less risk.
ICAS BOARD MEMBERS
Simon Charles Bates MScSimon started his career in business and industry in 1990. He worked as a highly experienced Strategic Manager with over fifteen years’ operational level experience of managing multi-million pound operations, budgets and people. He then developed his passion for learning and moved into a teaching and educational role. Over the last ten years Simon has worked as a course manager and associate lecturer at a university and a college. He has taught on many business and management programme including BTEC at all levels, BSc, HND and ILM (Institute of Leadership and management). For the last six years Simon, has worked for Pearson as an International Standards verifier and has worked across many countries helping to improve the quality of the BTEC provision in centres of all sizes and standards. Simon also works as an expert marker for Pearson and each year marks A Level Economics and Business papers. Simon is a confident and motivating leader who has a proven track record of success in recruiting and developing people. Has the personal focus to develop large teams and achieve difficult goals in challenging situations. He has been able to use these skills in a teaching and moderation role. |
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David Wilson KnoxI am a very self-motivated and professional person as a managing director of my own businesses for over 15 years. I am qualified as a trainer and A1 assessor in specialist areas such as Employability, Facilities Management, Entry Level Management Workshops, Electrical and Domestic Engineering, Business Administration, Customer Service, Warehousing and Distribution, Folk lift truck instructor. I have recently being working with a training provider in the North East of England training and assessing in relation to facilities industry including employability and clearing and support. |
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Claire Patricia KnoxI have experience at managing and developing a business and also several years’ experience in the field of training taking on the roles of Manager, Designer, Moderator, Internal Verifier and Assessor. I have occupational competencies up to degree level in the areas of Management, Team Leading, Administration, Policing, Customer Service, Contact Handling, Teacher delivery such as PTLLS, CTLLS and DTLLS , Learning and Development, Cleaning, Hospitality (Catering), Employability and Personal Social Development. With previous occupational competence in Retail and warehousing and distribution. I have good connections with awarding bodies such as City and Guilds, OCR, Edexcel , and more recently EDI and Skillsfirst. Having good feedback at External quality assurance visits that I have ran as a result of my role within the companies that I have worked for. My current role is Training manager for two centres one base in Newcastle the other Peterlee. I have a wealth of experience within NVQS and training qualifications and feel that I will be more that useful to your university should you need someone to quality the process within the UK. |
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Dr. Jatin TekriwalSince the start of my career in 2008, I have never had the cause to look back or regret one moment. I have found myself in a dynamic environment of ever evolving disciplines.A result oriented professional with 5 years International exposure in American, European and Chinese Markets. I have developed and implemented procedures and policies for educational marketing in Europe and Middle-east as well as North east Asia. I have also led efforts for streamlining customers and generating business operations for the many of the corporate clients and I have help them to set the bench mark for their quality by training their HR department. To add breadth to my experience, I embarked upon a teaching career in one of the most proactive Colleges of Further Education, where I was employed as a Course Team Leader and received the highest graded status as a lecturer London College of Law and Management. I have completed all my higher education from UK, I have done my PhD from from UK as well as my Masters from PRIFYSGOL CYMRU UNIVERSITY OF WALES ( U.K) Traveled mostly to Europe and USA and established good relation with corporate in China & South East Asia Specialties • Developed and implemented procedures and programmes in Europe and America. I have a tremendous amount of energy and am always looking for ways to increase my knowledge, so that I can pass it on to clients and the industry.” |
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Ms. Alison F.C. WernerI have been a Cambridge University qualified TESOL teacher for over 10 years and have taught English for several years across the globe. I am passionate about equipping my students with the best possible language skills and particularly enjoy inspiring them to look at learning language as a lifelong adventure in discovering other cultures and as an open door to many opportunities rather than just as a means to an end, or an exam to be passed! Over 20 years of experience in various industries, including manufacturing, insurance, I.T. and banking has given me insights into different aspects of business including project management, software development and maintenance, staff management, team building, customer service and call Centre management. I particularly enjoy the challenge of bringing teams together to achieve the best that they can and developing individual staff members by identifying and encouraging their strengths. I have lived and worked/studied cross-culturally for a significant part of my life, starting when I was 2 years old and in places as varied as Ireland, South Africa and India, so I enjoy getting to know and adapting to new cultures and different ways of life and work. |
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Peter BowyerPeter Bowyer is an experienced professional in the education and training sector. He is the CEO of UK Learning Services, a company dedicated to the development of education and training services across the world. UK Learning Services is about “Knowledge to transform and perform”. Experienced in teaching, designing, assessing and verifying management and related qualifications, he has played a significant role at a senior level in management related qualifications both in the UK and worldwide. His experience extends to a government department, the qualification regulator, and the largest awarding body and educational publisher in the world. This experience is extended across the world via a network of contacts across continents,cultures,corporations and educational organisations. Peter Bowyer is a solution oriented professional; an expert in quality assurance for vocational qualifications; an outstanding trainer; and a dedicated customer driven owner of a growing business who is keen to work with others. |