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Thursday
Nov192015

Mike Scher asks the bosses to support Compliance 2.0

In this final post of my three-part series about Compliance 2.0, I'm asking corporate executives and board members to support a chief compliance officer who is untethered from the general counsel, who reports to the board, and who oversees compliance officers who are themselves executives and subject matter experts.

That's Compliance 2.0.

Some executives see compliance work as a game of gotcha. That's not what compliance work is or should be. But some executives who learned about compliance in the old days see it that way.

“I won’t spend one dollar more on compliance than I have to," they say. They view compliance officers as the nags and the cops. Their world view is of regulators and prosecutors who are out to harm the company and its executives. They believe others cheat to beat them out of contracts around the globe. But they can't cheat because the compliance officers and their allies (the prosecutors and regulators) are out to get them -- gotcha.

Those executives need to take a close look at Compliance 2.0. It's built on two decades of lessons learned by compliance professionals. Sometimes those lessons were painful -- corporate scandals that harmed or killed innocent people, caused environmental damage, wrecked the housing market, and bankrupted millions of poeple, including retirees and workers pension funds.

From that experience, compliance professionals have worked to understand how to help companies perform better for all stakeholders. That’s not gotcha. It's the development of a powerful management tool to protect the company and those it employs and serves.

Compliance professionals can't force management to use Compliance 2.0, or to stop gaming it, as though they're still playing on the other side of a game of gotcha. That approach prevents compliance from being successful and growing into Compliance 2.0. It also disheartens compliance professionals, who have a tough job even in the best of circumstances.

Let me say again: Compliance officers are no longer lawyers in the law department. They are senior independent executives who work in the C-suite and report directly to the board. They are subject matter experts in the field managing all of the elements that make up a compliance program, from global training to protecting whistleblowers.

Compliance officers know things about the company that others in legal, human resources, marketing, audit, or finance don't know. That’s why management needs Compliance 2.0. And it's why many of the world's leading companies have already left the gotcha mentality behind and are committed to supporting Compliance 2.0.

Direct reporting between the board and the chief compliance officer -- a hallmark of Compliance 2.0 -- is the biggest step ahead. Compliance 2.0 restores internal checks and balances and ensures escalation to the board of the toughest situations, like whistleblower reports or decision-making on lawful but awful proposals. Support for Compliance 2.0 is urgently needed from directors, CEOs, and the professionals who advise them.

Based on my three decades of experience and plenty of scars to show for it, I say “beware” to companies and boards that still want to do compliance on the cheap with a gotcha attitude. Compliance 2.0 arose out real problems -- from the collapse of Continental Bank (when I had my first job at another bank before there was an FCPA or in house compliance programs) to VW.  

I have some final advice for CEOs and directors who feel harassed by never-satisfied prosecutors and public opinion: Have lunch with a chief compliance officer and listen carefully to what Compliance 2.0 has to offer.

Then join the effort to make it the best management tool it can be.

________

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