Companies like to tout their “culture of compliance.” Sometimes companies have it and sometimes they do not. As a Chief Compliance Officer, make sure you check under the hood when you join a company which hires you promising a commitment to a “culture of compliance.” These words are critical but they can be empty promises.
There is a fundamental disconnect between a “culture of compliance” and the bottom line profits. Corporate actors have not made the connection between profits and compliance. If you are a compliant company, you do not necessarily earn profits. Even the flip-side may not be true – if you violate the law, you will not make a profit. One thing we can all agree on – a non-compliant company will to overcome at least reputational harm to its brand and its image. That can translate to the bottom line.
If profits do not necessarily track compliance, then how do you create a “culture of compliance” and what are the benefits of doing so? Academic research in this area is needed – far beyond anecdotal evidence, but quantitative models and measurements are needed.
I would suggest looking at this issue in a more holistic way. Officers and employees often identify with the organization they work for as a part of their own self-image. When I work for a company, I consider myself a part of that company, with a stake in that company, and an interest in its future. Not just for my own selfish motivation for a continued paycheck but as part of my identity.
The trick to creating a “culture of compliance” is to appeal to each officer and employee’s self-image and translate that into an organizational image which everyone can embrace. I am willing to bet that companies with a “culture of compliance” have fewer incidents of fraud, thievery or other corporate misconduct. Companies that pay lip-service to a culture of compliance will suffer higher rates of fraud and misconduct. This is a profound grasp of the obvious.
Companies which foster a culture of compliance will likely benefit far more then the cost of designing and implementing programs required to create such a culture. I am sure that productivity increases with such a culture but I am waiting for such a study to confirm such a conclusion.
What is well known is that a CEO statement of commitment to compliance is only a beginning step, and a very small step, in creating a culture of compliance. A commitment to follow though is the only way to ensure a culture of compliance. In this respect, the tone-at-the top needs to filter down through actions, not words, to compliance.
A Chief Compliance Officer is the leader of this effort – not the General Counsel, not the Internal Auditor. From the Board, down to the employee, the CCO and his or her office has to make this a daily priority – where and how will the message be delivered today?
If the CCO has the backing of the Board and senior management, the message will be communicated. If the CCO does not have the support of the Board and senior management, it is time for the CCO to find a new job at a new company. In the words of Monty Python and the Holy Grail, “Run Away! Run Away!” CCOs would be well-advised to make sure they are walking into a true corporate culture of compliance.
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Michael Volkov is a former federal prosecutor with almost 30 years’ experience in a variety of government positions and private practice. Michael’s practice focuses on white collar defense, corporate compliance, internal investigations, and regulatory enforcement matters.
Michael has experience in the Foreign Corrupt Practices Act, compliance counseling, special committee representations, money laundering, Office of Foreign Asset Control (OFAC), export controls, sanctions and International Traffic in Arms, False Claims Act, Congressional investigations, online gambling and other regulatory enforcement issues.