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Monday
Nov182013

Unlocking the C-Suite for Compliance Officers

The recent Rand Report on senior executive criminal misconduct recommends that companies elevate Chief Compliance Officers as a critical step toward effective compliance. And the compliance profession itself is pushing for CCOs in the C-Suite. Despite all that, the business world isn't in any hurry.

But could McKinsey & Company help open the door to the C-Suite for Chief Compliance Officers? A recent McKinsey report called “Mobilizing your C-suite for big-data analytics” considers arguments for expanding the C-Suite to include a Chief Analytics Officer (CAO). The same arguments set out in the report apply to Chief Compliance Officers (CCOs).

Expanding the C-Suite isn't a radical idea. Thirty years ago CFOs, CMOs and CSOs (Chief Strategy Officer) did not exist. A bigger C-Suite is an established response when companies need “transformative” change to cope with a new business environment.
 
Right now, compliance requires transformative change. And it's striking how well the McKinsey study’s methodology supports adding a CCO to the C-Suite. Consider the following quotes from the report, in which I've replaced “data-analytics” with "[compliance]": 

  • “The often-transformative nature of … change places serious demands on the top team. There’s no substitute for experienced hands who can apply institutional knowledge, navigate organizational hazards, make tough trade-offs … and signal that the leadership is committed to a new [compliance] culture.”
  • “Establishing new mind-sets: Senior teams embarking on this journey need both to acquire knowledge of [compliance] … and to embrace the idea that [compliance] should be core to their business. Only when that top-level perspective is in place can durable behavioral changes radiate through the organization.”
  • “As a top-team member, the [CCO] …operating from within the business unit [has] a deeper understanding of what makes it tick – its priorities, patterns of working and ongoing challenges …  and a keener sense of the skills that training programs need to foster. The fact that the business unit leaders are engaged with the [CCO] on a day-to-day basis helps keep them focused on their [compliance] and adoption agendas.”
  • “At all companies, top teams, and probably Board members as well, need a better understanding of the scale of what’s needed to ensure [compliance] success… They must notch these responsibilities against their existing management capacity in a way that’s sensitive to the organization’s core sources of value and that meshes with existing structures.”

I don't know if McKinsey would endorse a new CCO position in the C-Suite. But what the CAO study shows is that there is an existing methodology and precedents for enlarging the C-Suite. A McKinsey endorsement for CCOs would certainly help the compliance profession gain traction in the business world. While companies use McKinsey and others for important business studies, most don't analyze compliance as they do other business issues.
 
Making room for CCOs in the C-Suite is in everyone's interest. If it takes a McKinsey study to command attention from the business world, then the compliance profession should commission such a study.

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Michael Scher is a contributing editor of the FCPA Blog. He has over three decades of experience as a senior compliance officer and attorney for international transactions. He is affiliated with ethiXbase, the owner of the FCPA Blog. He can be contacted here.