A year-over-year comparison shows the percentage of CIOs reporting to the chief executive has been trending upward for the past three years (Figure 1). For many corporations, there is now a new “C” in the C-suite—the chief compliance officer, or CCO (see “The Emergence of Compliance: A new profession?”). Ultimately, a focus on culture and informal norms may have more potential to meet the public’s objectives than a focus on organizational structure. Many GCs of publicly traded companies either oversee or serve as the heads of compliance—for instance, Mark Chandler of Cisco holds both the GC and CCO titles. In 20+ years of practicing in the field, both as in-house CECO and outside advisor, I’ve encountered countless programs that have, on paper, all the elements of an effective program, as envisioned Collaboration is required at every step: it’s important for identifying and weighing risks, for devising solutions, and for execution. Although it is true that multidisciplinary and multifunctional collaboration is possible between two separate departments within an organization, having compliance departmentalized from the people who interpret the law and gauge the risks hinders the department’s ability to create effective programs and secure the commitment and cooperation from employees around the globe. But [because] a number of major companies have done it over the years, it starts to look like a best practice. While that is most likely true, it is also probably true, as one interviewee explained, that the tone set at the middle—the intersection of social networks—matters just as much: I don’t worry about the tone at the top; I worry about the tone in the middle, and that’s what I focus on. Ethisphere has released another analysis of its World’s Most Ethical companies, finding a move toward a more clearly defined chief ethics & compliance officer role and more direct reporting to senior leadership. the Chief Compliance Officer .....18 Corporate Responsibility and B. (4) Amending the annual report. Ultimately, my analysis indicates that we shouldn’t rush to put a new “C” in the C-suite. Titles and reporting lines do not equate to power and influence. Yet departmentalization—like codes of conduct, revisions to mission statements, and formal training programs—is merely a formal exemplification or structural manifestation of a commitment to compliance. . While no one disputes the importance of compliance and those who do the work, it can indeed be lonely. The C-suite has a new denizen. Once in that position, it becomes hard for a major corporation to explain why they don’t need a compliance department. ... consulting with management and reporting. Most enterprises combine a number of functions under the Office of the CFO; the most … Chief risk officers and chief compliance officers are board members who work in corporate settings. The study, released on Thursday, is the second in a series of reports Ethisphere is publishing about the 128 firms that made its WME list for 2018. . On the other hand, 28 percent still report to the general counsel; and within the 24 percent who report to “Other,” that includes some portion of CCOs who report to both the chief executive and the general counsel simultaneously. I’m not acting as an in-house lawyer on behalf of the company. The structural manifestations put the corporation and its employees at ease that compliance and ethics are being covered when the manifestations are actually ineffective at creating real change and, indeed, have been identified as the weakest part of the ethical infrastructure of an organization. The spy – The spy is most akin to an independent monitor. Do any of these characters sound familiar? Departmentalization silences the “lightning-rod man” and decreases the emphasis on risks. Compliance Hotline: 443-481-1338; Email: compliance@aahs.org; Mail: Compliance Officer, 2001 Medical Parkway, Belcher Pavilion, Suite 203, Annapolis, MD 21401; Deneen Richmond: Chief – Quality, Patient Safety & Population Health Officer – Luminis Health. Average staffing levels are drifting upward overall, from 28 employees in 2017, to 30 in 2018, to 31 this year — but that’s the average for all WME firms together, so I’m not sure how useful that point of data is given the large disparities that exist among different types of firms. In other words, the WME firms offer a glimpse of what other firms might aspire to do. This issue is exacerbated by the fact that the CCO profile is still relatively new, and management has little to no experience in hiring this unique profile. Now we have this report, showing that more CCOs among this group have input into strategic issues. The obvious question, then, is: what’s wrong with that? Even if we accept this view as true, it does not necessarily follow that less information about corporate misconduct will be able to be shielded by claims of privilege. Chief Compliance and Ethics Officer Health Care. Sometimes in this model, the Compliance Officer or Director is the only member of the Compliance Department. Such a move may, in some circumstances, generate consequences that subvert the potential benefits of departmentalization and create a false sense of complacency that distracts from substantive cultural change. Departmentalization ostracizes compliance and creates a “C” in the C-suite without the requisite influence. . As one CCO interviewee (who was formerly the associate GC) explained: Even if the chief compliance officer reports to the [board] or CEO, [he or she is] going to have the same problem, because chances are, the CEO is going to want to listen to the [GC] . If the only things wrong with departmentalization are what opponents emphasize—such as the risks of turf wars, inefficiencies, and the demonstrated success of lawyers in managing the conflicts of interest that exist between compliance-reporting obligations and protecting the corporation—then what’s the big deal? On the other hand, 28 percent still report to the general counsel; and within the 24 percent who report to “Other,” that includes some portion of CCOs who report to both the chief executive. Historically, in large publicly traded corporations, the compliance and ethics function was overseen by the chief legal officer (CLO) of the company (which could be the CLO or the GC). We use cookies to ensure that we give you the best experience on our website. Not only are the large publicly traded U.S. corporations on the line, but so are the individuals who are specifically tasked with leading compliance and ethics programs within their corporations. The cop – Cops are there to help and to make sure employees are behaving. That reflects, I hope, an awareness among board directors and senior executives that. Six Keys to Compliance: Perspectives from the field, HLS Center on the Legal Profession Retweeted, © 2021 Harvard Law School Center on the Legal Profession. As one CCO interviewee aptly explained, for some, “compliance is the world’s longest four-letter word, and it initiates a negative response in people.” The interviewee went on, “Compliance officers are often seen as outsiders, not good team players.” The last person employees want to see strolling down the hall is the CCO. On staffing levels, a huge different exists (understandably) between highly regulated firms and everyone else. The involved parent – In this role, compliance officers view themselves as ethics coaches. Common Policy Enforcement job titles: Compliance Officer, Compliance Enforcement Officer, Compliance & Ethics Specialist, Compliance Investigator Regulatory Reporting (Non-Financial) The Regulatory Reporting Group defines data collection procedures (related to compliance), then compiles and files reports for management and government institutions. Twenty-six percent also hold the title of general counsel — which really means that those people are general counsels, who moonlight as their firm’s chief compliance officer. Many, though not all, of the agreements with governmental agencies and regulatory bodies state that the CCO “may seek legal advice from internal or external attorneys outside the Compliance Department without waiving any applicable privilege.” Arguably, before departmentalization, corporations padded their argument for privilege in much the same way by hiring external counsel. And this often remains true today. Most often found in healthcare and banking, compliance officers are an important component of corporate governance, determining how an organization is managed, directed, and governed, including the relationships between stakeholders and the structure by which company objectives are set and followed. Such structural reorganization may applaud form over function, thereby creating a false sense of complacency that distracts from the substantive cultural change that should be integrated throughout all levels of the organization. Thus, the risk is that an economic incentive can induce people to choose the quicker road over the higher road. found that lawyers are not as adept as other professionals at creating effective programs and procedures to prevent risk, their research supports a structure in which the lawyers are the ultimate superintendents of it. To provide more detailed reporting of hours, law firms had to create more and more codes and labels for the services lawyers provide to clients. By separating the lawyers from compliance oversight, this fear of regulatory capture might dissipate. I spent a decade thinking about and writing this book, often in conversation with many of you here, and it is finally going to be out in the world @PrincetonUPress in a few weeks. The report shall include a certification by the chief compliance officer or chief executive officer of the registrant that, to the best of his or her knowledge and reasonable belief, and under penalty of law, the information contained in the annual report is accurate and complete in all material respects. The main responsibility of the CCO is to focus on mechanisms and processes to implement the policies of the bank and ensure that the institution complies with The compliance officer should also be able to contact the Board chair directly should there be an issue involving the CEO. In the News: Highlighting key stories about the profession you may have missed. Although they are motivated by external or economic incentives (“carrots”) to perform routine tasks, this is not necessarily the case when it comes to more complex work or decision making that involves using judgment, ethics, and creativity. In some companies, Compliance does not have its own Officer. But in my job, I say, “I think you should fire this person,” and they just have to unless [they can] give a really good reason why they shouldn’t. As mentioned above, one of the three goals of departmentalization is to create a culture of ethics that is ingrained in the organization so that malfeasance is deterred and prevented. A CCO of a large bank described the compliance department’s role as to: … raise awareness among employees that we do have policies and procedures that cover a lot of what they do and [they have a] responsibility to be aware of them and [that] claiming to be not aware when violating [them] is not a defense we accept. People do not necessarily recognize an ethical dilemma as an ethical dilemma when it is presented to them. The new guidance, entitled: “Evaluation of Corporate Compliance Programs,” updates and expands a prior version that the Criminal Division’s Fraud Section released in February 2017 (2017 Compliance Guidance). Indeed, Pink posits that incentives can sometimes serve as horse blinders narrowing off the bigger picture and future forward thinking. Often, the compliance function reported to the GC, and sometimes the GC simultaneously served in the CCO role. For example a chief compliance officer cannot be exiled to the basement office while reporting to the legal officer. As one CCO interviewee explained, “A lot of times I will retain counsel to advise me or to help make sure that the work can be privileged.” After departmentalization, the corporation gets the same benefit without the costs. She is also the founder and director of LawWithoutWalls and the founder and content curator of the Compliance Elliance Journal. And that “Other” category at 38 percent includes lots of “vice president of…” titles, but substantively, those people are devoted to ethics and compliance full-time. A chief data officer (CDO) is a corporate officer responsible for enterprise-wide governance and utilization of information as an asset, via data processing, analysis, data mining, information trading and other means.CDOs usually report to the chief executive officer (CEO), although depending on the area of expertise this can vary. Although Rosen et al. Vice President of HR. From the Journals: Compliance in an interconnected world. 2. Among WME firms, 37 percent of CCOs report directly to the chief executive officer, and another 7 percent report either to the board of directors or the chair of the board — so that’s 44 percent who somehow report straight to the top. . Also, despite budget freezes (including on legal), corporations are putting significant resources and funding into compliance and ethics initiatives—or what might be better called the legal risk of business. That said, the broad direction of these WME firms’ practices all make sense. They aren’t a sample of “normal” firms that might portray what companies, the first Ethisphere analysis published last month. Policies/ Procedures. officer are fulfilled when the compliance officer is absent, and adequate arrangements to ensure that the responsibilities of the compliance function are performed on an ongoing basis3. care regulatory compliance context through a careful look at the roles of the general counsel and the chief compliance officer, to a specific look at corporate responsibility and health care quality. First, news about job titles: at 76 percent of WME firms, the person with overall ownership of the ethics & compliance program has the title of chief ethics and compliance officer — although only 35 percent of firms have that person solely in charge of ethics and compliance, with no other title. 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