Two Steps Forward, One Step Back – Mixed Bag of Compliance Progress
Companies are embracing the value of compliance and ethics. Interestingly, companies are implementing robust compliance programs, and enhancing such programs with a focus on ethical business values and decision-making. These are welcome signs of improvement and underscore the continued growth of compliance and ethics strategies as a basic part of corporate governance frameworks.
A recent survey conducted by Ethisphere and Convercent, 2017 Ethics and Compliance Survey, available here, reported some positive developments but contained some surprising results. Two key results reflect the elevation of the Chief Compliance Officer in the corporate governance landscape – 30 percent of CCOs report directly to the CEO, up from 16 percent as reported two years ago; and 49 percent of CCOs are now participating in strategic business decisions, suggesting that more CCOs have line of sight across the organization, and which is up from 39 percent as reported two years ago. Nearly half of all CCOs meet with CEOs more than one time each month.
CCOs continue to suffer from outdated technology and disconnected reporting and data systems. Incredibly, 88 percent of CCOs reported they are relying on handwritten spreadsheets to assemble and analyze data. Over 70 percent of CCOs rely on emails to collect data from other functions, and a large number of CCOs have to reach out to individual functions for data. Companies do not maintain seamless compliance reporting and data systems.
A large number of CCOs, approximately 65 percent, reported that they do not have sufficient time or resources to analyze compliance data, while 52 percent reported that compliance data is housed in disconnected systems.
A significant percentage of companies track employee complaints through hotline or website systems, but only 40 percent track in-person complaints through open door policies and procedures. The failure to track in-person complaints is troubling given the fact that almost three quarters of all employee complaints are reported in person by employees.
Just over 60 percent of CCOs report on company compliance programs to the CEO each quarter; 53 percent of CCOs report quarterly to the General Counsel; to percent of CCOs report to the internal Ethics and Compliance Committee; and 50 percent of CCOs report to the Audit Committee.
On the substance of CCO reporting, the survey revealed that CCOs generally report on training completion rates (78 percent); hotline statistics (74 percent), and investigation statistics (74 percent).
Ethisphere and Convercent provide several significant recommendations based on the survey results.
First, CCOs have to push companies to update technology and data systems to break down silos, increase coordination, and provide seamless access across reporting sections and functions. With the elevation of the compliance functions, companies are far behind the curve on available technology and unnecessarily burdening CCOs with outdated data systems.
Second, CCOs have to track open door employee reporting systems to analyze in-person complaints and concerns, as well as follow up investigations. Given the importance of in-person reporting systems, companies have to mine such data for important trends and concerns.