Talking with Your Feet – The CCO’s Ethical Dilemmas

eth2Chief compliance officers are optimistic and committed to “doing the right thing.” It is in their blood and may be at the core of their professional fabric.

My guess is that there are far fewer CCOs who like to push the envelope than their legal counterparts. Some lawyers are capable of accepting certain levels of risk for defined benefits. CCOs are more risk averse.

The difference in perspective reflects the different perspective of the professions. Lawyers avoid government enforcement and litigation risks. CCOs take a much broader view of organizational risk, including company culture, profitability and sustainability.

With the continuing growth and education of the compliance profession, it is expected that there will be bumps in the road. CCOs often encounter a CEO who does not understand the importance of compliance, let alone the benefits of a culture of ethics. On occasion, and less frequently today, CCOs will run into a general counsel who views compliance versus legal as a zero-sum equation – compliance resources and authority are allocated at the expense of legal resources and authority.

All of this can occur in an environment where there are typical internal corporate turf wars. CCOs, as the new person on the block, will inevitably face resistance from a number of different functions in a company.

CCOs, however, dread certain scenarios where their ability to continue in their position will be called into question.eth3

One that is frequently is discussed is when a CCO has to report directly to the board, relying on his or her dotted line authority, to inform the board of misconduct or issues involving the CEO and other senior executives. This may occur once or twice in a CCOs career, but when it does happen, the CCO is well aware that this may be one of their last acts at the company, depending on how the matter is handled by the board.

Another situation that occurs more frequently is when the CCO is denied the authority and/or resources to carry out his or her responsibilities. For example, a CCO may be required to report to the general counsel, and for some reason, the general counsel will preclude the CCO from any responsibility or involvement in carrying out, monitoring or exercising control over the internal investigation function. For example, I have encountered companies in which internal audit conducts all internal investigations, with the assistance of human resources for employment matters. When a new CCO appears on the scene, the CCO is denied any authority or monitoring capability with regard to the internal investigation function.

In these two situations, the need to report directly to the board or the denial of authority and resources needed to carry out the CCO responsibilities, a CCO has little leverage besides persuasion. If the CCO is unable to persuade the organization to handle a serious matter involving the CEO or senior executives, or is unable to secure adequate independence and resources, the CCO is left with the last choice – to leave the company.

ethJust to be clear, the CCO is not a spoiled child in this situation who grabs his or her marbles and goes home. The CCO will only reach the decision to leave as a last resort, when persuasion has not been effective and when the CCO has lost the internal battle to secure adequate independence and authority.

In this situation, which occurs far more frequently than acknowledged, the CCO speaks “with his or her feet.” The CCO leaves the organization for greener pastures.

When you watch the CCO professional notices and see a CCO who leaves the organization, shortly (less than three years) after arriving on the scene, there is a good chance that one of these two scenarios is the reason for the CCOs departure. In the case of a short-term departure, it is often the second scenario, where promises from the board and CEO to the CCO on independence and authority have not been fulfilled.

So long as CCOs are not fully embraced and an organization fails to commit to the compliance and ethics function, we will continue to see CCOs speaking with their feet. When CCOs commit to doing the right thing, they mean it and they live by the credo. Let’s hope that we “hear” and “see” fewer CCOs put into this difficult position. 

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  1. September 20, 2016

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