Every once in awhile I see something happening at a company that surprises me—in a good way—about its corporate approach to compliance and culture.
Most recently it was a comment from the audit committee chairman for a global foods company, describing the company’s practice of planting ‘false tips’ within its organization to see whether those concerns will be reported and rise to the top. It was similar to another company that routinely drops complaints into its confidential hotline to verify the performance of its third-party provider in different parts of the world. After many years in the trenches of compliance and ethics, and as an observer of how organizations can sometimes lack political will to ‘walk the talk,’ these developments are heartening.
That said, people at the very top of an organization—whether they’re in the boardroom or the C-suite—always have a difficult time understanding what really happens on the ground when an employee decides to use the company’s confidential hotline to report suspected wrongdoing. (And make no mistake, for almost all employees, reporting a complaint on the hotline is a very big step.) In fact, once a call is logged into the system, there are 1,001 ways the process can go awry. (I won’t even address all the ways employees can be discouraged from making that important call in the first place; that’s a topic for another day.)
So for the benefit of that global food company board member and many other CEOs and corporate directors I’ve spoken to in the course of my work, here’s a list of just a few ways in which that one critical employee—the one that the drafters of the Sarbanes-Oxley Act had in mind when they required boards to establish a channel for ‘confidential, anonymous submission’ of employee concerns—can fail to reach the very people at the top of the company who want to know about it:
Some of these possible ‘spoilers’ may seem farfetched, but each represents an actual event from a real company hotline case. Knowing what we know, many current and former chief compliance officers would not be surprised if less than half of the matters that should reach the top actually get there.
And if that’s not bad enough, surveys indicate that only about 3 percent of employee concerns are raised through the company hotline. If hotline cases are vulnerable to derailment, what hope is there for the remaining 97 percent raised through other channels, where fewer formal procedures and oversight are likely to be in place?
But the news is not all bad. The development and operation of an effective confidential employee helpline, like many aspects of a meaningful, well-constructed compliance and ethics program, is a multidisciplinary effort requiring senior-level oversight, expertise, experience, and coordination.
Companies truly serious about their approach to compliance and ethics can take a giant step forward by establishing a senior-level chief compliance officer. That person should have direct access to the board as well as the experience, clout, resources, mandate, empowerment, and ‘seat at the table’ to make things happen within the organization. This one action can do more to mitigate the effect of ‘spoilers’ like those above, set the proper tone at the top regulators want to see, and ensure that other key elements such as risk assessment, monitoring, enforcement, training, and reporting to the board, all work as intended.
So I’ll end this open letter with an undeniable truth for CEOs and boards: It’s a perilous world out there for the business of integrity; many factors (and actors) threaten to derail your best-intended processes. You can have all the right bells and whistles, such as a confidential hotline, a ‘false tips’ audit, or state-of-the-art compliance procedures. But without an empowered compliance and ethics leader, beware a false sense of security. Putting a senior-level chief compliance and ethics officer at the helm of your company’s approach to integrity isn’t just a nice addition in these difficult days; it’s simply the intelligent thing to do.
Donna Boehme, Former BP Group Compliance & Ethics Officer—May 5, 2009
Ms. Boehme is a contributing editor of Ethikos, the leading business ethics publication, and has published many articles on compliance, ethics and governance issues. She is a frequent speaker to business and professional groups including Practicing Law Institute, Conference Board, ECOA, Society of Corporate Compliance & Ethics, Ethics Resource Center, Compliance Week, Association of Corporate Counsel, and Institute of Business Ethics.
Ms. Boehme has been quoted The Wall Street Journal, Boston Globe, the Economist, New York Law Journal, and Compliance Week.