Transforming Compliance

Emerging Paradigms for Boards, Management, Compliance Officers, and Government

by Michael D. Greenberg

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Research Questions

  1. What is the emerging paradigm for compliance programs of the future, and what are the implications?
  2. How can boards, management, compliance officers, and government respond in support of more-effective compliance?

Recent decades have witnessed a notable trend in corporate compliance and governance oversight. Many companies have made considerable progress in strengthening their corporate compliance programs. That progress has been achieved, in part, in response to the Federal Sentencing Guidelines. In the wake of policy developments, compliance programs, and the chief ethics and compliance officers who helm them, have gained in visibility and prominence. The voice of the compliance officer is increasingly being heard at board and C-suite levels, in part as the tactical head of an empowered compliance effort and also as a focal point for building an ethical culture within the corporation.

With these developments in mind, RAND convened a symposium on May 28, 2014, entitled "Transforming Compliance: Emerging Paradigms for Boards, Management, Compliance Officers, and Government." The objective was to stimulate a forward-looking conversation about compliance as a field, factors that are likely to contribute to its transformational change, and practical implications for key stakeholder groups.

Several of the participants presented white papers on selected transformational pressures now affecting the compliance field. The following session of the symposium involved a moderated discussion on the emerging paradigm for compliance programs of the future and the broad implications that can be gleaned from transformative factors now operating on the field. The final session was a moderated discussion of related concerns and next steps from the varied perspectives of boards, executives, chief ethics and compliance officers, and policymakers. These proceedings summarize the discussions and include the white papers.

Key Findings

Compliance Is a Field in Flux.

  • The field that is undergoing change in several different ways at once. These ways include the sources of the compliance burden, the professional identity of compliance practitioners, and the posture of government enforcement efforts.
  • All of these vectors are important to understanding how the field is likely to evolve in the future.

Chief Ethics and Compliance Officers and Compliance Programs Operate in Tandem with Boards and Senior Executives, So Any Transformation of Compliance Will Also Have an Effect on Boards and Senior Executives.

  • To the extent that compliance programs (and chief ethics and compliance officers) grow more effective within their companies, the burden of compliance risk for boards and C-suites will presumably be reduced.
  • To the extent that compliance becomes less effective, the burden of compliance risk for boards and C-suites will presumably be amplified.

The Discussion of Compliance Transformation Takes Place in a Broader Corporate Governance Context, in Which Many Large Public Companies and Boards Have Identified Reputation Risk as a Priority Concern.

  • Corporate reputation risk is at least partly tied to the compliance function, and to the risk of failure in compliance processes leading to crisis events.
  • Any discussion about the transformation of compliance invites reflection about business reputation risk and the future ability of the compliance function to help mitigate that risk.

Recommendations

  • Boards should take steps to strengthen compliance and ethics capability and monitoring efforts.
  • Management should focus on both structure and culture in the organization.
  • Government should help by setting consistent standards and leading by example.
  • Compliance officers can strengthen the field through improved efforts on role definition, professional development, education, and communication.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Invited Remarks from Symposium Participants

  • Chapter Three

    What Is the Emerging Paradigm for Compliance Programs of the Future, and What Are the Implications?

  • Chapter Four

    How Can Boards, Management, Compliance Officers, and Government Respond in Support of More-Effective Compliance?

  • Appendix A

    Symposium Agenda

  • Appendix B

    Symposium Participants

  • Appendix C

    Invited Papers from Symposium Participants

This report was funded with pooled resources from the RAND Center for Corporate Ethics and Governance, part of the RAND Institute for Civil Justice, with additional support provided by New York Stock Exchange Governance Services, an Intercontinental Exchange company.

This report is part of the RAND Corporation conference proceeding series. RAND conference proceedings present a collection of papers delivered at a conference or a summary of the conference.

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