Perspectives of Chief Ethics and Compliance Officers on the Detection and Prevention of Corporate Misdeeds: What the Policy Community Should Know

By Michael D. Greenberg | Go to book overview

SUMMARY

The worldwide economic collapse of 2008 has aroused the interest of U.S. policymakers in the mechanisms of corporate governance, compliance, and ethics, and their collective role in preventing and mitigating excesses and scandals in the corporate sector. Earlier rounds of corporate scandal gave rise to the Sarbanes-Oxley Act of 2002 (SOX) and to the Federal Sentencing Guidelines for Organizations in 1991, which reflected attempts to drive better corporate oversight and compliance through a combination of government mandates, incentives, and standard-setting. It remains to be seen whether the current financial meltdown in the U.S. mortgage and banking sectors will ultimately be attributable, in significant part, to failures in governance, compliance, and ethics. But regardless, 2009 is a year in which legislators and regulators are closely scrutinizing existing policy in these areas, with an eye toward addressing any lapses, loopholes, or inadequacies in the regulatory framework.

It is in this context that RAND convened a March 5, 2009, conference entitled “Perspectives of Chief Ethics and Compliance Officers on the Detection and Prevention of Corporate Misdeeds: What the Policy Community Should Know.” The purpose of the conference was to draw on the perspectives and insights of chief ethics and compliance officers (CECOs) — senior corporate officials charged with responsibility for running compliance and ethics programs, and persons with a unique “insider” perspective on the challenges and opportunities involved in implementing them. The conference also included stakeholders with other, complementary viewpoints, including current and former legislative and executive branch officials, academics, and leaders from several nonprofit compliance and ethics associations. In convening this group for discussions about corporate ethics and compliance, the aim was to provide expert input to the policy community about the current state of ethics and compliance initiatives within corporations today — particularly as policymakers contemplate new avenues for regulatory oversight of corporations in the future.

Several major ideas emerged from the conference discussions. First was the observation that chief ethics and compliance officers occupy a unique position in corporate management, and in principle, they can be at least as important to successful ethics and compliance performance as are any of a host of programmatic initiatives like compliance hotlines, ethical codes of conduct, or formal training. In practice, the effectiveness of a CECO is likely to depend on how his or her specific role is defined, whether he or she has direct access to the board and to C-suite decisionmakers, and whether he or she oversees an ethics and compliance function that is independent of other corporate groups, such as legal or human resources. A second general theme arising from the conference was the importance of organizational culture, as a vital part of what a CECO is supposed to oversee. Culture refers to an intangible set of shared understandings about how a corporation operates and what its chief values are. To the extent that trust, honesty, and fairness become embodied in a company’s brand promise and in the shared understanding of its workers, then that in turn can be a powerful prophylactic in

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