Every CEO cares about compliance, but not every CEO makes compliance a top priority. Recent legislation proposed by U.S. Sen. Elizabeth Warren could change that. Warren’s Corporate Executive Accountability Act would hold CEOs directly responsible when their companies expose customer data. That means compliance wouldn’t be just a company issue, but also a personal one.
Pressure to strictly follow the rules comes from other directions as well. The U.S. Securities and Exchange Commission has warned that it may hold compliance officers legally liable if the CEOs above them are caught flaunting regulations. Lest this seem like an idle threat, the SEC has already upheld a fine and suspension imposed against the former chief compliance officer of a noncompliant investment firm.
These moves are not entirely unexpected. Various regulatory bodies have long signaled their intentions to hold executives individually responsible. Nevertheless, this new development is troubling for everyone in the C-suite, especially the CEO. Unlike before, executives accept the responsibility for compliance. Even more significantly, they now will accept the risk of noncompliance. Meeting that standard will require a lot of adaptation, and it needs to begin now.
Building Beneficial Partnerships
It’s unrealistic to expect CEOs to bear the entire compliance burden, as fellow C-suiters are significant parts of the equation as well. The CEO gets help from the chief compliance officer in achieving compliance.
No matter the company’s regulatory requirements, it’s vitally important that the CEO works to supply the necessary tools and resources to enable the CCO perform his core duties, as well as serve as a primary point of communication and guide for ensuring a culture of compliance within the business.
Again, comprehensive support is key. Consider the breadth of responsibility a CCO assumes, including serving as in-house expert to stay up-to-date about the latest regulatory revisions; acting as program director to build the company’s specific compliance policies; communicating the importance of compliance across the entire organization; and evaluating and continuously monitoring compliance performance.
Each of these roles is important, and together they lead to consistent compliance. Increasing the compliance department’s budget is one way the CEO can help to strengthen compliance efforts. Additional funds could be used to hire staff, bring in consultants and managed service providers, or pay for professional development. These investments are necessary to stay compliant, and therefore necessary to keep executives out of hot water.
When the company does well by its customers in areas of compliance, after all, it receives a committed customer base in exchange.
Staying Away From Trouble
To be sure, the reason regulators are getting tough is not to penalize executives; it’s to underline the importance of compliance even in the midst of today’s fast-paced, ever-disruptive economy. In that context, staying compliant is an urgent obligation, but it’s also an opportunity for executives and their companies who embrace it. Here are a few strategic steps to ensure compliance is a consistent priority:
- Build a compliance dashboard: Compliance is a systematic process. A number of third-party organizations sell compliance checklists tailored to specific industries and even individual companies. Following one of these governance checklists (under the supervision of the CCO) is an effective way to “check off the boxes” of compliance. As the CEO, emphasize that your company’s compliance policy must align completely with the checklist guide.Then, increase the maturity of your program by adding monitoring and compliance KPIs, which can be presented as a dashboard. This will provide you data that demonstrates your compliance program works. KPIs might include metrics regarding training completion, compliance-related reports, investigations, and remedial actions taken. Finally, make time to review your checklist and dashboard with the CCO periodically to stay on the right side of ever-changing regulations.
- Make compliance part of the culture:One reason companies have neglected compliance is that the penalties have been relatively small. Now, in addition to executive penalties, compliance breaches lead to bad publicity and lost consumer confidence. The simple fact is that compliance breaches hurt companies in deep and lasting ways, so they must be avoided at all costs. Talent, technology, and policies can serve that effort. In the end, however, compliance is consistent only when the company culture mandates it. As the steward of the organization, the CEO can do a lot to cultivate that culture: Regularly talk about the importance of compliance, participate in compliance planning and training, and provide a personal example for your company
- Fully support the CCO:The CEO should be eager to support the CCO at every turn. That becomes especially important if and when a compliance investigation starts. The CEO should oversee the investigation process, ensuring that it’s conducted fairly and transparently. Satisfying the requirements of investigators is a lot easier if CEOs are also willing to invest in effective technologies, such as information archiving. That way, any documents requested by regulators are easily retrievable from a searchable database. The right tools make compliance easier on everyone.
A new era of accountability is coming, and CEOs must adapt. It’s time to stop thinking of compliance as an obscure subject or noncompliance as a minor setback. It affects the entire organization, and it starts at the top. CEOs who get in front of this issue place both themselves and their companies in greater positions to succeed. For those who don’t, compliance is about to get a lot more contentious.
Written by David Wagner.
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