Setting a Board Strategy for E&C: The E&C Pulse

October 21, 2020
Ben DiPietro

For all the talk about ethics and compliance, most boardrooms still don’t have a real strategy to serve as the foundation for their oversight of E&C. 

The fact the majority of boards spend two or fewer hours annually in committee or full board oversight of ethics and compliance is just one of the more glaring signs there is much work to do to make the talk of stronger board engagement with E&C more into a reality.

What can boards do to change this dynamic, and to set aside time to give E&C matters serious attention? A report from LRN offers some best practices for how to create the proper structure, and how to then hold leaders accountable to expectations.

For a board to be able to guide E&C strategy, the chief ethics and compliance office must present the board with a comprehensive strategy that includes relevant metrics, and accountability measures. Then set a reporting schedule to gauge progress.

The board needs to carve out more time for E&C, plain and simple. Directors must ensure there is time on board and committee agendas to discuss and debate E&C matters. Relegating E&C to “pre-read” materials, or waiting until the last five minutes to jam E&C talk in, won’t work or lead to better oversight.

Often, the audit committee is the home for E&C matters, but audit is the home of many responsibilities, and E&C often slides to the back of the pack when up against questions related to earnings statements, 10Q filings, and other regulatory must-dos. It might be wise to house E&C in a committee with fewer time pressures.

Once the structure is configured, and a plan is put into place, it’s the board’s job to hold senior leaders accountable for how well it is being implemented, and how well it is working. 

There are two strong ways to achieve this. One is to undergo root-cause analysis of misconduct, and require corporate and operating unit leaders to detail any ethics and compliance issues on their teams, and then present plans on how to fix them. 

Make sure to check up and see how the remediation plan is working, and put in place metrics to help ensure problems are being addressed effectively.

The most effective way to hold senior leaders accountable for ethics and compliance and culture is to tie their compensation in part to meeting clear and measurable E&C objectives.

“Few companies set clear expectations for senior executives on ethics and compliance,” stated the LRN report. “Unless senior leaders regularly insist that business decisions incorporate company values, the correct tone at the top will never be set.”

                                                                                                        BEN DIPIETRO
                                                                                                       @BENDIPIETRO1
                                                                                       BEN.DIPIETRO@LRN.COM


THE ELEVEN

The World Bank will join the DOJ in adopting a policy to evaluate an organization's compliance program during an investigation. 

The Business Roundtable released new plans to fight racial injustice. One economist estimates the cost of racism in the U.S. at $16 trillion. Economies grow when women and people of color are given opportunities

J.P. Morgan Chase will spend an additional $30 billion to fight systemic racism. Starbucks links executive compensation to diversity goals. A leader in the effort to bring D&I to corporate America isn't impressed with the progress being made. 

Whether the CEO is trustworthy is more important than the company's financials.

Fortune pays homage to the most powerful women in business.

About 5% of Coinbase employees took a buyout offered to those who no longer felt aligned with the company's mission. What does purpose mean?

Arrest warrants were issued for the founders of the law firm at the center of the Panama Papers scandal. Wells Fargo fired more than 100 employees it says defrauded the government's COVID-19 relief program.

Four auditors were killed in Liberia during one 10-day period. What's going on?

Mexico's former defense minister is accused of helping to ship tons of cocaine and of providing protection to drug cartels. The U.S. Drug Enforcement Agency is accused of discrimination against Blacks in the agency's training program.

Ethics questions rise about the use of experimental drugs during the pandemic. What does it mean to be an AI ethicist?

Office politics when no one's in the office.

About the Author

Ben DiPietro

Joined LRN in October 2018 after 30 years as a journalist, including seven years at The Wall Street Journal, including Risk & Compliance Journal and was a creator of the WSJ Crisis of the Week column. In 2015 was named one of the 100 most influential people in business ethics by Ethisphere Institute. Spent 14 years as a reporter in Hawaii, 11 with The Associated Press.

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