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Barriers remain as compliance goals move to promoting ethical behavior

Paul Korzeniowski

Compliance programs initially emerged to help companies meet a checklist of requirements set by the government, industry groups and corporate legal teams. Recently, compliance officers’ focus has shifted to fostering the development of an ethical corporate culture.

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Paul
Korzeniowski

Many compliance programs started because of necessity. Industry or government regulations arose, so companies put processes in place to meet the guidelines. Rapidly changing technology and growing business complexity, however, made these processes less and less effective. Consequently, there has been a freshening of approach.

“Companies have experienced compliance fatigue -- they put in new business processes and purchased various tools but did not make as much headway as they desired,” said Friso van der Oord, head of ethics and compliance solutions at Los Angeles-based LRN. “We have seen a dramatic shift in how compliance officers view their job in the last 12 months.”

The firm’s fourth annual Ethics & Compliance Leadership Survey polled compliance leaders at more than 100 companies -- most of them global operations with more than 7,500 employees and $1 billion in revenues. The survey found that 58% of ethics and compliance leaders now think their primary mandate is promoting ethical behavior. In contrast, 42% believe that their job centers on ensuring legal and regulatory compliance.

The new outlook has permeated the boardroom. In fact, only 22% of ethics and compliance leaders worry about senior management’s ability and desire to demonstrate and promote ethical conduct. Sixty-eight percent of the respondents stated that promoting an ethical culture creates long-term value for the business.

Though the new mind-set sounds promising, a lot of work remains before such thinking is present throughout the corporation. While a growing number of compliance officers now view development of an ethical company as their primary responsibility, they often run into organizational and management barriers as they try to transform that desire into action.

In an era where analytics is king, challenges arise in monetizing the impact of promoting ethical behavior. “In some ways, ethnical behavior now is viewed like quality and safety were in the past,” van der Oord said. Corporations wanted to promote these ideas within their walls but lacked the businesses processes needed to track the bottom-line impact of the initiatives.

The lack of such capabilities may have lead to a disconnect between leadership and other layers of management’s interest in promoting ethical behavior. While top management has begun singing an ethical values tune, other layers of management are not in harmony. In fact, 45% of respondents are concerned that middle managers are not as invested in ethics initiatives as their superiors.

There are a couple of possible reasons for the gap. First, development of ethical behavior has not been tied to management metrics. In fact, most companies (57%) do not give ethical behaviors the same weight as other business outcomes. So while managers are asked to develop such values, they are not being held accountable for employee adoption of such initiatives. Even if these managers promote ethical behavior, most corporations (54%) do not formally recognize or celebrate their actions. In sum, there are no formal or informal, positive or negative stimuli in place to prod managers into promoting ethical behavior.

Corporate constraints also play a role in the chasm. While senior managers view the organization as a cohesive whole, employees see themselves playing specialized roles. “In corporations, management silos have emerged,” van der Oord said. Managers often focus on other issues and ignore top management’s desire to promote ethical behavior.

The various challenges are typical. First, new ideas emerge and later businesses develop supportive business processes. Similar scenarios unfolded with initiatives, such as diversity training.

In sum, even though most compliance officers want to encourage ethical behavior, few companies are. These firms come from a variety of market segments, with technology and manufacturing leading the way. Once these businesses have blazed a new trail, other corporations are expected to follow that path.

Paul Korzeniowski is a freelance writer who has been covering technology issues for two decades. He is based in Sudbury, Mass., and can be reached at paulkorzen@aol.com. Let us know what you think about the story; email Ben Cole, Associate Editor.


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