LRN conducts an annual Ethics and Compliance Program Effectiveness Report (“LRN Report”) that is a must-read for business leaders, managers, investors, compliance professionals and other stakeholders. LRN’s annual report has addressed key issues surrounding the impact of the COVID-19 pandemic on companies and ethics and compliance programs.  Last year’s report, which was divided into two parts, and this year’s 2022 Report provides fresh data on important issues.  The LRN reports are “board-worthy” (as Donna Boehme, the Lion of Compliance often states) and should be reviewed and summarized at board and senior management reporting sessions.

The 2022 LRN Report is based on a survey of 1,200 ethics and compliance and legal executives and professionals at organizations around the world.  Nearly all respondents are employed at organizations with at least 1000 employees and 60 percent are located outside the United States.

LRN cited its key finding that a values-based approach to governance builds and sustains an ethical culture, which is the essential element and differentiator for effective ethics and compliance programs.  As LRN stated, “[v]alues transform culture and impact behavior; rules merely set the minimum standards.” As one chief ethics and compliance officer stated, “Rules tell us what we must do’ values tell us what we should do.”

LRN’s Report demonstrates that an organization dedicated to sustainable human values will exhibit superior performance across operations and be significantly more successful at integrating ethics and compliance into its day-to-day operations. Values-based governance is also an important foundation for ESG objectives (environmental, social, and governance). LRN’s conclusion has been validated repeatedly over the last two years, during the pandemic and the period of social unrest.

In 2021, LRN found that organizations relied upon the power of values to meet the pandemic and remote work challenges. The robust response by organizations’ leaders, employees, and ethics and compliance programs achieved sustainable ethical performance in the face of these serious challenges. 

The 2022 report confirms that organizations continued to rely on values-based leadership to respond to COVID-19 and related disruptions as an effective guidepost for strategy and navigating social and work disruptions.  In these difficult times, LRN’s Report provides important evidence that effective compliance programs work in practice in responding to the stress created by the pandemic.

The bottom line, as stated by LRN, is that an effective values-based and ethical culture, if translated into shared values and common behaviors, is a more effective system than a rules-based carrot and stick approach to compliance.  This finding is an important reminder of the importance of an ethical culture as a critical control to prevent misconduct.

LRN’s data demonstrated that: (1) 78 percent of surveyed organizations relied on positive, values-driven governance models rather than rules-based models; (2) 83 percent of surveyed organizations reported that ethics and compliance considerations played an important role in shaping their organization’s response to COVID-19 challenges; and (3) 66 percent of the survey respondents indicated that senior leaders integrated ethics and compliance considerations into their decision-making during the crisis. 

Aside from this strong, positive news, the LRN Report identified areas of weakness:  (1) only 49 percent of respondents prioritized their E&C Program by making it more employee-focused and user-friendly; (2) only 40 percent of organizations surveyed indicated that their Ethics and Compliance team strengthened risk controls to address cybersecurity, privacy, and donations of critical equipment or third-party compliance; (3) only 35 percent of respondents reported that the company simplified or modified compliance procedures to meet new business challenges; and (4) only 25 percent reported that their organizations are currently using mobile devices to deliver training content.

On the plus side, many companies reported that the expected negative effects of the pandemic on ethics and compliance functions have significantly diminished.  In particular, respondents expectations of negative effects all fell significantly for such issues as travel restrictions, resource cuts, increased misconduct in work from home environments, investigation and audit obstacles, and reduced oversight and monitoring. 

LRN’s Report concluded that high-performing ethics and compliance programs significantly outperformed medium and low performing programs by proactively using all available tools and making their programs more employee-centered and user-friendly.  For example, two-third of high-performing companies made it easier for employees to complete remote training, in contrast to low-impact programs rate of 44 percent offering remote training.

The striking difference between high-performing and low-impact ethics and compliance program was demonstrated by the role that values play in the organization’s governance and the importance placed on ethics and compliance considerations in decision-making during the COVID-19 crisis.  This finding confirmed LRN’s consistent research demonstrating year over year that integrating values at the heart of an ethics and compliance program is the key determinant in making programs more effective.