Elevating Board Performance: The Importance of Compliance Expertise
Compliance professionals are not used to the world we live in today. They are used to being a second-class citizen in the corporate governance structure. That is all changing.
Compliance and ethics professionals are the fastest rising stock on the corporate landscape. Unfortunately, this has not yet translated into the corporate board nominations and appointment process.
Every anti-corruption violation can ultimately be tied back to a corporate governance failure – a misguided priority, a failure to ask a follow-up question or to obtain additional information. Companies can avoid these mistakes not through any full-proof action but by taking one simple step – adding a compliance professional to the corporate board.
This is not a radical step. In fact, most audit committees are headed by a board member with extensive corporate financial experience. For the same reason, a compliance professional, or someone with extensive experience in the compliance field, should be a must-add to every corporate board.
Why has that not occurred yet? Why are corporate nominating committees not reaching out to compliance professionals and bringing them on board, especially in this era of risk management and compliance program focus?
It seems like a modest step but one that has so far escaped corporate boards. If a careful study was conducted on this issue, the nominating process for board members would be seen as deficient in failing to ensure that corporate boards include the right mix of expertise in relation to the surrounding risks.
Every board should have members who are familiar with the market, have expertise in the market, as well as related functions of board management, financial and regulatory expertise, risk assessment and management, and compliance and ethics training. Instead, the nominating process appears to be distorted by corporate relationships, business needs, and social relationships.
If a priority is assigned to appointing a compliance and ethics professional to the board, the structure for the supervision and monitoring of that function is less important. Whether the company has a separate compliance committee or not, so long as the committee is led by a compliance professional, the board will be in a position to exercise effective oversight of the compliance function.
A compliance professional adds significant value to the board by ensuring that the board exercises appropriate oversight of the compliance functions, monitors senior management compliance activities, and devotes significant time and resources to the compliance and ethics function.
In too many cases, companies do not understand the importance of proactive compliance program and the importance of such programs to protecting the company. Sadly, it often takes an enforcement action to wake the company up and underscore the importance of compliance and ethics programs.
Adding a compliance professional to a board is likely to make sure that the wake-up call prevents an enforcement action and saves the company a lot of pain and frustration.