Happy Talk and CCO Reporting to the Board

ac2Everyone likes to talk. For most people, it is hard to listen. Chief Compliance Officers have to be proficient at both, especially listening.

I have often criticized CCOs who engage in Happy Talk when reporting their boards. It is a practice that reveals much about the CCO, the company’s ethics and compliance program, and the overall corporate culture.

CCOs committed to honest board reporting reflect their own confidence, and the overall corporate commitment to a speak up culture that encourages open and honest discussions about corporate conduct.

A CCO should spend at least 30 minutes each quarter with his or her reporting board or committee. The report has to include an executive session during which honest and candid questions and discussions can occur. Frankly, a CCO who reports for longer than that – up to an hour – is a better practice, especially in today’s multi-risk environment.

The substance of a CCO’s report is also important. Many CCOs report on a limited range of subjects, such as hotline reports, major investigations, training programs, certifications and culture surveys. Unfortunately, CCOs with a limited report do themselves and the board a great disservice.

There is an art to effective reporting. It is important to provide only relevant information to the board, to capture a variety of topics, to acknowledge weaknesses in the program, and identify strategies and possible solutions to these weaknesses. CCOs also have to be candid about the participation and support of top management, and the need for additional resources and capabilities.

A CCO cannot sit back, provide a limited report, and then develop a laundry list of excuses when deficiencies occur in the company’s compliance program.report

A CCO should be committed to continuous assessments, improvements, audits and benchmarking of the company’s program. That is an important issue on which to report to the board. Here is a basic list of issues for CCO reporting. Keep in mind this list is basic and does not include specific issues that may develop in the specific company’s operations.

The basic issues include:

  • Ethics and compliance program audits, assessments and benchmarking
  • Code of conduct updates, revisions and training
  • Overall program performance
  • Ethics and compliance risk assessments
  • Training initiatives and statistics
  • Misconduct investigations and resolutions
  • Significant legal and regulatory updates
  • Upcoming program initiatives
  • Misconduct reporting statistics
  • Policy management and updates
  • Industry trends and best practices updates
  • Culture communications initiatives
  • Ethics culture employee assessments
  • Third party risk management
  • Supply chain risk management

This is just a basic list of topics for discussion, some of which may be more relevant than others.

rep3Effective reporting translates into effective oversight and management, and both the CCO and the board will be able to execute their responsibilities based on full information.

Happy talk is a significant problem in the compliance profession. Boards have to hold the CCO accountable but they have to encourage open and frank reporting. If a CCO only tells the board what it wants to hear, the CCO and the company ultimately will suffer. When the CCO has a candid working relationship with the board, the company is in the position to succeed and implement an effective ethics and compliance program.

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