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Corporate Culture – The Foundation of Compliance

culture of ethics4The bedrock of a compliance program is corporate culture.  Let’s all agree to throw away the following often-repeated phrases: ”tone-at-the-top” and “buzz at the bottom.”  I would argue that we replace those trite and meaningless phrases with the all-important one – “culture of ethics.”

There is no rational reason to continue segregating culture into distinct levels of the company — top or bottom.   A more holistic approach is needed, one that focuses on the entire organization, top to bottom, in a unitary fashion – a corporate culture of ethics.

If anyone has observed, worked in or otherwise come into contact with a company with a culture of ethics, they will immediately understand my point.

CCOs can lost in the details of the development, implementation and maintenance of policies, procedures and guidelines.  Instead, they need to focus greater attention of corporate culture.

A corporate culture of ethics is the most effective strategy to mitigate risk.  There is no comparison nor is the calculation of costs and benefits even close.

When a company officer or employee acts, you want them to consider and acknowledge the culture in which they are operating.  It is the best way to restrain officers and employees from violating the code of conduct or even the law.

It is easier to get your arms around policies and procedures.  They give CCOs a feeling of comfort that officers and employees will abide by the policies and procedures once they are created and implemented.culture of ethcis

Unfortunately, the real world does not operate like that.  Corporate wrongdoers are best contained by the culture they work in not by the existence of a paper compliance policy – as many FCPA violators can tell you, they had a paper policy, with detailed guidelines, but the bad actors easily circumvented the policy and procedures.

A company with a culture of ethics stands for something that is ingrained in every aspect of its business operations.  Officers and employees feel responsible for adhering to this culture and often emulate the CEO and/or other senior mangers who reflect that culture.

A company’s culture is not as amorphous as everyone believes.  The best way to measure a company’s culture is to conduct surveys and focus groups.  A list of simple questions that focus on basic culture questions provides important indicators of a company’s culture.

Some of these questions include:

cultureWould an employee feel comfortable reporting misconduct to his or her immediate supervisor?  Or someone else up the supervisory chain?

Has the employee observed misconduct and reported it?  Or decided not to report it?  Why?

Would an employee report misconduct using an anonymous reporting hotline?

Would an employee report misconduct to a Human Resources official?

Does the employee believe that senior managers adhere to a code of ethics?  If not, why not?

These are just a few of the questions that can be asked as part of a culture survey.

CCOs have to measure their culture once a year or every two years.  Once measured, they have to take steps to address deficiencies in the culture.   Survey results can provide important indicators of where attention is needed.

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