Article 4 min

The Recalibration of Compliance: What is the Definition of Success?

recalibrating compliance

November 23, 2016  

recalibrating compliance

We often hear a chorus of criticism relating to the compliance function. How do you define success?

Some of this is the result of a political backlash. Chief compliance officers are the darlings in the corporate governance world, and there are forces aligned to challenge the importance of the compliance function. There are a number of internal political forces that want to undermine the growth of the compliance function, partially out of a selfish concern that they may lose influence in the adjustment of corporate governance forces.

Let’s admit the obvious about the profession – defining success is difficult. It is not preventing a potential act of wrongdoing – that is too hard to confirm and define. A successful compliance program promotes and ensures that the company maintains a culture of compliance, or a culture of commitment to ethical conduct as defined by the company’s corporate values.

The compliance function cannot concede the opposition’s argument. Success is defined not by the prevention of all legal and code of conduct violations (which is impossible) but by the maintenance of a culture of compliance.

Too often, CCOs are willing to argue that they prevented a violation, or ensure that wrongdoing was detected in advance of an actor’s conduct. That is far from what the compliance function is trying to accomplish.

We have to define success in a much broader context. A corporate culture is the most valuable intangible asset that a company can promote and maintain – a reputation for ethical conduct in all of its operations. I know that sounds namsy pamsy in terms of definition but compliance officers have to broaden the context and the argument. If they allow corporate actors to define success in terms of prevention and detection of wrongdoing the actual definition of such conduct is nearly impossible.

A recent survey reported in the Wall Street Journal attempted to define success by compliance heads reporting prevention of wrongdoing. That is a dangerous avenue to pursue – self-congratulatory or self-reporting of prevention incidents is great so far as they are reliable and accurate.

The compliance team has to take a broader view and educate the board and senior management that the success of a compliance program does not depend on the occurrence of a violation of law or the company’s code of conduct. A narrow view focused on these issues ignores the obvious importance of promoting a culture of compliance and the need to embed ethical values in the company.

I have written on this issue on many occasions but compliance has to embrace a broad view of success and educate key stakeholders on this broad definition. CCOs have risen in the corporate governance framework and they have much to lose if they fail to define the measure of success. Compliance heads have several internal opponents who are happy to see compliance fail in their objectives.

Compliance managers have to abide by a delicate balance – educate on the importance of an ethical culture and defined themselves against unrealistic expectations. It is a difficult balance, especially when so many stakeholders are expecting immediate and tangible results from the compliance function.

The compliance department also has to recognize that their rise in the corporate governance political world means that there are numerous political opponents who want to see the CCO fail. Internal politics is a reality and compliance officers have to recognize that these forces are a threat to their ultimate success.

Chief compliance officers live in a troubled and difficult landscape – if anyone can handle it, they can. I am cautiously optimistic that CCOs will ultimately succeed. 

This article was originally published in Corruption, Crime & Compliance. It is reposted here with permission.