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How Ethics and Compliance Programs Train Employees

The vast majority of programs (88 percent) target at least some part of their education and communication at the entire enterprise. Marginal improvement is observed in average PEI scores when education and communication are functionally targeted, and more still when targeting is activity-based. But the 23 percent of respondents who reported individual targeting had the highest average PEI; an impressive 0.68. Just about half of the most highly effective programs use activity based targeting of education, compared to fewer than one in five of those in the bottom quintile. And while half of the top quintile also assign education on an individual employee basis, virtually no program among those in the bottom quintile does so.

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Topics: 2014 E&C Program Effectiveness Report

Effectiveness of Ethics and Compliance Education Programs

As we have seen in examining the impact of E&C program goals and the importance of their alignment with the company’s goals, what leaders set out to do greatly influences their overall impact. The same holds true in education and communication, as evidenced by the much larger number of goals identified by those running more effective programs. See Figure 17.

Also noteworthy, goal by goal, is the difference between the average PEI of those who have identified a goal and those who haven’t, as seen in Figure 18. By that measure, reinforcing the code, an emphasis on personal accountability, and relating requirements and standards to daily activities have the clearest association with program effectiveness.

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Topics: 2014 E&C Program Effectiveness Report

Goals, Compliance Metrics, and Tools Matter to E&C Programs

As Figure 16 makes abundantly clear, highly effective ethics and compliance programs set out to accomplish more. They measure more, and they use more tools than their less effective counterparts. It is not likely a coincidence. The lesson might be simple, and familiar to many in the profession. It is hard work to impact the behavior of thousands of employees. The effort has many facets, and they require a great deal of attention. But it seems to pay off.

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Topics: 2014 E&C Program Effectiveness Report

Ethics and Compliance Program Effectiveness: Program Management Matters

The mechanics of E&C program management translate into impact in a variety of ways, and that translation illustrates two key themes emerging from the data. First, doing the hard work of paying close, thoughtful attention to the program pays off. Second, programs that are built into the very structure of the organization far out perform those that are bolted on as control mechanisms.

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Topics: 2014 E&C Program Effectiveness Report

The Hallmarks of an Effective E&C Program: Not All Programs Are Created Equal

Not surprisingly, highly effective programs are far closer to completing the hallmarks overall than are their underperforming counterparts. Figure 8 illustrates the percentage of all programs and of the top and bottom quintiles having completed or substantially completed each hallmark.

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Topics: 2014 E&C Program Effectiveness Report

The Hallmarks of an Effective Ethics and Compliance Program

In November of 2012, the Securities and Exchange Commission and the Department of Justice issued their joint guidance on FCPA enforcement. The discussion of compliance programs it contains, though focused on anti-corruption efforts and firmly rooted in the approach previously taken in the Sentencing Guidelines, has been adopted as the definitive overall statement from the regulatory community of best practices for ethics and compliance programs.

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Topics: 2014 E&C Program Effectiveness Report

Ethics & Compliance Program Goals Matter

By a ratio of three-to-two, more programs pursue as a primary mandate “ensuring ethical behaviors and alignment of decision making and conduct with core values” than pursue “ensuring compliance with rules and regulations.” Those in the “values camp” have a higher average PEI (at 0.61) than those focused on rules (0.58). More telling is that more than two out of three of the most effective programs are values-based, which is true of fewer than half of the programs in the lower quintile.

Program goals appear to matter most when they reflect a positive integration with the entire company’s operations and priorities. Thus, we see particularly low PEI scores for programs for which adapting to meet changing business needs is not high on the agenda (0.57), for those for which third party oversight isn’t a priority (0.57), and even more so if risk management isn’t a program priority (0.52). The poor performance of programs not focused on ethical leadership (0.55) or the use of company values as a framework for decision-making (0.54) likely also reflects both the importance of connecting the program to the essential elements of the company’s operations, as well as the consequences of failing to do so.

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Topics: 2014 E&C Program Effectiveness Report

The Impact of Celebration on Ethics & Compliance Programs

Among the surprising findings of last year’s PEI analysis was the clarity with which one set of behaviors, the celebration of ethical conduct, stood out as the most telling measure of program effectiveness.* This year the case is even clearer.

We asked how often respondents’ companies celebrated acts of ethical leadership and in what ways. The percentage of the top quintile who said that they did so “often” or “very often” in each category is as follows:

  • Awards, 55 percent;
  • recognition in team meetings, 45 percent;
  • recognition in company communications, 42 percent; and,
  • job promotions, 23 percent.
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Topics: 2014 E&C Program Effectiveness Report

The 2014 Ethics & Compliance Program Effectiveness Report: Reporting Structures and Tone at the Top

Recent years have seen considerable discussion of whether or not the compliance function ought to report to the general counsel, which is true of just less than half of this year’s sample. Most of the discussion hinges on avoiding the potential for conflict of interest between the two functions, but the PEI analysis suggests there may be more to it than that. Programs led by an individual reporting to either the CEO (22 percent of the total) or the board or one of its committees (16 percent of the total) have average PEIs of 0.63, substantially outperforming those reporting to the general counsel (average PEI scores of 0.58.) The point is made clearer with the comparison of quintiles. Among the more effective programs, far fewer report to the general counsel, and far more to the CEO or the board than at less effective programs.

It seems likely that a more prominent “seat at the table” for chief compliance officers reflects the greater importance accorded to their role and the issues in their organizations. Although many factors are likely at play, it is hard to overestimate the many benefits to the E&C program arising from proximity to the CEO; not the least of which is the message it sends to the organization as a whole.

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Topics: 2014 E&C Program Effectiveness Report

The 2014 E&C Program Effectiveness Report: Compliance Programs Overall

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Topics: 2014 E&C Program Effectiveness Report