Change before you have to – Jack Welch

The key to change . . . is to let go of fear – Rosanne Cash

Corporations are slow to change. Unless forced by government prosecutors or regulators, companies inherently resist change, even when such changes can make a business more profitable.  Corporate behavior often reflects individual human perceptions and conduct.  Individuals are slow to change unless motivated to do so by the human experience.

Chief compliance officers, as one constituent in the corporate governance landscape, regularly experience resistance to change.  CCOs are a significant change agent – ethics and compliance programs, if effective, incorporate change processes: risk assessments are updated, policies and procedures are revised, business operations may change in response to market forces, misconduct is uncovered requiring modification of surrounding controls, and compliance programs are committed to continuous improvement. 

CCOs have to align themselves with allies who themselves may favor change.  It is important to identify those like-minded functional heads and enlist them to the cause.  At the same time, CCOs quickly discover who will resist or fight change – constituencies can resist and depending on relationships with key senior executives can take steps to undermine the CCO’s mission.

CCOs are, in fact, political actors, and alliances are critical.  Besides the obvious important allies – board members, audit committee, CEO and other senior managers, CCOs have to win over leading business executives – heads of regional operations.  CCOs have to look for win-wins, meaning compliance initiatives that benefit both compliance and the business.  CCOs have numerous tools that can advance business interests by improving compliance processes to reduce delay and burden on the business, providing important market information to business development and marketing staff, and developing market advantages reflecting the company’s commitment to ethics and compliance. 

Aside from business heads, CCOs have natural partners and allies in several functional areas. 

First, internal audit is a natural ally that shares a commitment to identifying weaknesses in corporate operations and overall improvement. 

Second, human resources and compliance share so many common interests that a failure to coordinate and cooperate can cause serious harm to corporate culture.  Unfortunately, I have observed several instances when HR resists compliance efforts to bring together common tasks and initiatives.

Third, the procurement function shares a common interest with compliance – managing third-party risks by creating an efficient and effective process to onboard vendors and suppliers, monitor their activities, and mitigate potential risks.  The combination of procurement and compliance interests in this area is a powerful force multiplier than can result in immediate savings and improvements.

Fourth, and perhaps the most difficult constituent to enlist, the Chief Financial Officer who stands atop the company’s internal accounting controls and finds little reason to cooperate with compliance.  CFOs are very protective of their Sarbanes-Oxley mandated financial controls and authorization matrix.  CFOs resist compliance entreaties to coordinate and cooperate despite the fact that several compliance controls are indeed built on financial controls – e.g. ordering to invoice to payment processes; marketing fund allowances, rebates and discounts; travel, gifts, meals and entertainment expenditures; charitable contributions; and sponsorships. 

These are just examples of constituencies and opportunities to advance alliances and bring force to potential change.  CCOs have many challenges and have to align themselves with political skill.