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4 Signs of a Poor Relationship Between a CCO and the Board

Chief compliance officers have to devote more time to establish and maintain a positive relationship with the corporate board or audit/compliance committee. CCOs have a lot of responsibilities and feel a lot of pressure to address internal operational issues. It is easy to “ignore” the importance of a positive relationship with the corporate board.

A CCO who has a strong relationship with the company’s board has an important trump card than can be played on important issues – resources, senior management cooperation, or other significant issues. In the absence of such a relationship, CCOs can end up toiling too much time and attention to issues “beneath” them and get lost in details.

There are four important indicators of a weak CCO-board relationship:

No CCO Training of Board: A CCO has to conduct at least annual training of the board on ethics and compliance issues. Such training should not be the same content as provided to employees but should be tailored to the audience. One hour at a minimum should be set aside for the training program.

If the board rejects such training or the CCO fails to request a training session, the CCO’s relationship with the board is troubled. A CCO has to ensure access to the board for this training session as a critical opportunity to promote the importance of compliance and educate the board on its oversight responsibilities.

Inadequate Opportunities and Time Before the Board: A CCO has to personally report to the board or audit/compliance committee at least quarterly on significant ethics and compliance issues.   Such reporting should last a minimum of 30 minutes and preferably between 45 and 60 minutes.

A CCO who submits written reports to the board and does not personally appear before the board cannot perform adequate reporting obligations. A written report will not suffice.

A personal appearance for less than 30 minutes does not provide adequate time for a presentation and meaningful discussion of issues. If a CCO’s report does not include a comprehensive review of issues, ongoing projects, and detailed reports on important issues, a board cannot exercise appropriate oversight responsibilities.

No Executive Session: Equally important is the opportunity to conduct an executive session with the board. During an executive session, the board chair usually asks the CCO if there are any issues to be discussed. The CCO should not be reluctant to raise even if there is some question about the importance of the issue. It is better to raise the issue rather than keep silent unless there are potential political repercussions within the company.

No Informal Communications with Board or Audit/Compliance Committee Chair: A CCO has to spend time, outside of the formal board or audit/compliance committee meeting, to informal discussions with the board or committee chair. In fact, many CCOs will meet informally once a month with the board or committee chair for coffee or a meal to discuss issues. Some CCOs have the ability to pick up the phone and schedule a call with the board or committee chair. A CCO has to devote time to cultivating such a relationship so that the CCO can informally raise issues of concern without brining the specific issue to the formal board or committee meeting.

These four issues are critical indicators. Of course, there are other factors to be considered. For example, a board or committee member who has prior compliance experience is a natural board or committee member to cultivate.

CCOs who operate with some of the weaknesses outlined above need to address the issue. Some of the weaknesses outlined above should be addressed personally with the board or committee chair.   A CCO cannot ignore these issues and must take action.

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1 Response

  1. Your blog post hits on critical points… historically, corruption and crime over-ruled compliance in the boardroom, and for many financial organizations, such behavior was, and continues to be, business as usual. The only so-called protection board members thought they had was ignorance of the facts. If they cold stick their heads in the sand, crime and corruption in their organization never happened.

    To propose that the CCO actually plays a role in directing corporate non-compliant activities away from the norm, in the board members minds, is ludicrous. In many cases, the CCO maintains an office not floors distant from the C-suite, but multiple states away. One organization in Iowa has their CCO stuck in an office in NYC…. where he cannot cause trouble.

    I applaud your efforts, but until the DOJ actually sentences at least one CEO from a company that historically was treated as “too big to jail,” to prison for stealing investors funds,the crime spree will continue.