Joe Murphy – Compliance and Ethics Professional – October 2019
The Wall Street Journal reported on Carnival Corporation’s settlement of a case with the government, noting that the company would add “a board member with corporate compliance expertise.”
For years, Dan Roach and I have made this point: Companies should be recruiting compliance officers from other companies to be on their boards, just as they recruit those with financial expertise. What a great option—someone not afraid of risk, who understands what makes companies tick, and who will ask the right questions to ensure that the company’s approach to its compliance risks makes sense. But it hasn’t been happening.
For compliance people, having the chief ethics and compliance officer (CECO) report directly to the board is a key step for ensuring that the program is effective. It is true that having a strong, direct relationship to the board is an essential element for CECO independence and empowerment. This is also an element that seems to have appeal when dealing with the government.
But there is an assumption behind this conclusion: that the board knows what it is doing when it comes to compliance and ethics. We want a board that understands the issues we are raising and knows why it matters if management resists important steps in the program.
Compliance and ethics is a field where expertise is essential. But because it is multidisciplinary, people with expertise in only one related field may think they know more than they actually do. Unless you have learned the field, you would not know why the program has to focus on incentives, or why the compliance “officer” cannot be a middle-level lawyer buried deep in the law department, or why a count of how many employees took the training is not a meaningful evaluation of the compliance program.
A board member who has worked in the field will know all this and will not accept a “report” that just lists how many helpline calls were received and how quickly investigations were closed.
Yet for years we have seen no progress. Companies pledge that they are committed to having an effective program, but don’t have anyone on the board who knows what questions to ask. If a company were serious about compliance, its first call would be to recruit Roy Snell to be sure it has an expert.
Let’s hope others follow in Carnival’s wake.