Choose to be optimistic. It feels better.” – Dalai Lama

Forgive me for my optimism.  It is the only way to live a meaningful life.  Or as some would say – being a pessimist is too much of a burden. 

We begin a New Year — and I am optimistic. To turn the corner here on relevance, ethics and compliance professionals, are by definition, optimists. Give me a chance to explain.

Ethics and compliance professionals believe in their mission – if they did not, they would not be in the field. E&C professionals believe in the power of positive thinking, ethical conduct, and in the overall ability of an organization to operate as an “ethical” company.  They work for their mission and it is a positive mission. 

The New Year is a great time for E&C professionals to take stock on their compliance programs and to plot out a path forward.  Luckily for most compliance professionals, there are lots of opportunities to advance their objectives.  E&C is poised for another big jump on the corporate governance ladder, and this is a big year for E&C professionals to push their respective companies to support such efforts.

There are three significant trends that will continue to play out this year that create opportunities.  These three trends, which I will discuss in greater detail are: (1) the continued emphasis on the importance of corporate culture; (2) the importance of ESG and in particular the “G” element; and (3) the current Administration’s aggressive enforcement and regulatory initiatives.

Corporate Culture

The E&C movement in the global business environment has been perhaps the most significant development in the last decade.  Business leaders, politicians, and significant stakeholders now have embraced the importance of corporate culture as a company’s most important intangible asset. Many business leaders were at the forefront of this movement and they understand that the key to sustainable growth and success depends on a culture of ethics and compliance. 

The government played a key role in pushing this issue but in the end it was economics that ultimately resulted in broad acceptance of this concept.  Perhaps there is a more cynical explanation for this phenomena – as the public lost faith in its political leaders as moral representatives, the public has turned to their immediate business leaders to represent and advance their common set of values.  That may be true but whatever the impetus, E&C professionals have to recognize this trend and use it to their advantage to identify opportunities to manage and promote their companies ethical cultures.

In this environment, E&C professionals have to embrace the need for building a robust ethical culture assessment and risk management process.  In this respect, E&C professionals should devote more time to measuring and promoting their companies ethical culture, and report on this issue to senior leadership and the board of directors. When needed, E&C should push culture remediation as a positive and necessary priority for compliance programs.

ESG and the Big “G”

The ESG movement is an opportunity for E&C professionals.  It is not a threat in any way to the importance of ethics and compliance programs.  To the contrary, E&C professionals have to couch and rephrase their work in the overall context of corporate governance improvements.  An effective ethics and compliance program is an essential part of overall corporate governance.

As a result of this development, E&C professionals should take advantage of this opportunity to secure a robust reporting and collaborative relationship with senior leadership and the board.  By doing so, E&C professionals can elevate the importance of their program and the need for investment in the program as a key to attract investors, build the company’s reputation for integrity in the marketplace, and maximize protection against government investigations and enforcement.

E&C Professionals who understand this opportunity will continue to push and support ESG programs as a force multiplier for ethics and compliance programs. It is a once-in-a-lifetime opportunity and those who recognize that are bound to gain.

Aggressive Enforcement and Regulatory Oversight

The legal, ethics and compliance paparazzi (from La Dolce Vita of course) has continued to push “negative” or “fear-based” marketing strategies. These client alerts, whitepapers and other writings are all designed to “scare” corporate leaders into buying legal. Ethics and compliance services.  This is a mistake, and those who have followed my writings know that I have avoided this perspective.

E&C professionals know that pushing a negative message in support of requests for additional resources or improvements for their compliance programs is not a good idea.  It is a message that ultimately falls flat.  On the contrary, EE&C professionals have done a great job in refashioning their messaging to the positive benefits of an effective ethics and compliance program.  This message is based on a simple proposition that is backed up by research – ethical companies perform better in the marketplace.  Case closed.  No Mas.

Nonetheless, E&C professionals have to acknowledge that the risk environment for detection and prosecution by the Justice Department and regulatory agencies has increased.  That does not mean that the messaging or planning for your compliance program should be radically altered.  But like other risk management factors, this particular risk of enforcement has to be adjusted to reflect the new reality.

The Justice Department intends to increase enforcement of the FCPA, export controls and sanctions, and money laundering violations. To the extent a company’s risk profile touches these areas, E&C professionals will need to focus additional efforts to manage these risks – not out of fear or threats of going to jail, but as a proper response to an overall risk environment.

The SEC has also demonstrated its commitment to increasing penalties and additional regulations surrounding ESG disclosures.  These new regulations should have a dramatic impact on corporate disclosures, internal management of ESG programs, and overall corporate risk management on ESG issues.  E&C professionals, as a significant partner in the ESG program, will play a critical role in this area.