The Business Guide to Effective Compliance and Ethics

Why Compliance isn't Working - and How to Fix it

Andrew Hayward, Tony Osborn, Thomas Hickey

• Publisher: Kogan Page
• Year: 2019
• Print ISBN: 9780749482978
• eBook ISBN: 9780749482985
• Edition: 1
• Topic: Business
• Subtopic: Business Ethics
• Index: Business

Across the world, organizations continue to be damaged and brought down by systemic non-compliance or the misdeeds of a few, and newspapers abound with examples of corporate and NGO scandals and crimes. This is despite the increasing ethical demands stakeholders are making of business, the exposing power of social media, the proliferating requirements of compliance laws and regulations, and the burgeoning numbers of policies, procedures and compliance officers that have been put in place in response. So why isn't compliance working? The Business Guide to Effective Compliance and Ethics examines how rules-based, tick-box, defensible compliance continues to fail, and lays out a new approach for organizations seeking to flourish and succeed.Written for any organization and businesses, this book provides clear, thorough and practical guidance for practitioners and decision-makers. It explains in layman's terms the skills, tools and mindset needed to develop and deliver a best practice compliance and ethics programme - one that meets the requirements made by law, stakeholders and society, and protects your organization from risk of fines, penalties and reputational damage. But this is also a book for all those interested in how to build employee engagement and motivation. The Business Guide to Effective Compliance and Ethics demonstrates the value - including competitive advantage, career satisfaction, employee and customer loyalty, and brand enhancement - that a truly effective compliance and ethics programme can bring, when it works hand in hand with a values-based culture of shared ownership.

Part one

May you live in interesting times.

Today capitalism and globalization are under increasing scrutiny. New and searching questions are being asked about the role of businesses in our societies.

What is their purpose? How are they benefitting us? What role are they playing in issues like sustainable development that are more and more on the minds of employees, customers and stakeholders? Is what businesses say they do actually what they do? And do they actually do it in the way they say they do it? Are they an organization with genuine integrity? Do they conduct their business ethically and treat their employees well? Are their compliance programmes and values just window dressing, or do they do everything they can to live by them?

In the era of fake news and false stories, can we believe in them? Can we trust them?

This scrutiny is setting a radical and challenging agenda that is shaping the future of business in the field, in the high street, online, on the floors of the world’s stock markets and in the hearts and minds of consumers increasingly in touch with and united by shared information and insight on the internet.

It’s an agenda about ‘authenticity’ – and it’s only recently that business has begun to wake up to just how real and urgent it is. If you want your business to thrive, your actions and your behaviour must comply with your values, and the terms – both ethical and regulatory – that you set out in your compliance programme must be demonstrably true and alive in your culture, and clearly lived and supported by all who work for and with you.

And yet... we continue to see the destruction and harm caused by systemic non-compliance or the misdeeds of a few, and newspapers abound with examples of corporate and NGO scandals and crimes.

In many of these cases organizations have implemented credible, determined compliance programmes that have simply not been up to the task and have failed to achieve their goal.

But research also tells us that much of this aberrant behaviour is the direct result of organizations ignoring their duty to stakeholders and society, forgetting their mission and failing to make sure those working for them are both mindful of, and motivated by, it.

Indeed, some corporate compliance breaches have been cynical – and inevitable.

Time again we are led to conclude that the organization did not really aim to prevent illegal or unethical conduct; it just wanted to hide behind the defensive curtain of its policies and procedures so it could turn a blind eye.

At other times, the conduct in question was not downright unlawful (even though prosecutors may have subsequently held them to account for it), so the organization did not have policies and training to prevent it. Quite the opposite – they put their pursuit of profit before their mission and their duty to clients, stakeholders and society, and their incentives encouraged their employees to do the same.

So what’s going on here? How do you make compliance effective?

Part One of this book sets out to redress the long-held perception of compliance as a dour and tedious restraint holding back innovative ideas and commercial performance – a defence bulwark via which the lawyers can isolate an organization from excessive damage when the inevitable scandal happens.

Our purpose here is to change minds. To establish the critical and central importance of what we and many others call ‘compliance and ethics’ in helping to deliver, grow and maintain the reputational and commercial success of an organization in this challenging environment. And above all, to show how those organizations that go in authentic pursuit of effective compliance and ethics will gain real advantages in the marketplace over those competitors who continue to see compliance as a tick-box, lip-service, merely defensible exercise.

We look at why compliance is failing. How it has evolved from its first faltering steps. What it actually means, and what it can potentially deliver. What the obstacles and barriers are – including prevailing attitudes – that prevent it from fulfilling that potential. And how organizations – and all those involved in leadership positions – can start to build and harness the benefits of an effective compliance and ethics programme and a culture that supports and lives it.

Whoever you are – whether you are a compliance champion, a compliance sceptic, or simply indifferent and largely bored by the whole subject – we hope to change your mind, and open your eyes to a whole new world of expectations and possibilities.

01

Why compliance isn’t working

In this chapter we discuss the underlying causes that make compliance fail, and what organizations can do about it.

Fatal flaws and collateral damage

Horatio: To what issue will this come? Marcellus: Something is rotten in the state of Denmark.

HAMLET

History is littered with companies that have collapsed or been significantly damaged, not because their commercial strategy has failed, but because they have failed to comply with the law and the ethical values and expectations of their stakeholders and broader society.

When an organization fails like this, it will be punished with the imposition of fines and penalties and receive negative coverage from the media and angry consumers. That will often have catastrophic consequences for all those who work within it and rely on it. Real people are affected. Employees lose their jobs. Investors take a hit. Pensions suffer. So do partners and suppliers and consumers.

But it’s not just commercial enterprises that we’re talking about...

For decades the aid sector was one of the most highly regarded areas of all human endeavour. Within it were some of the most trusted names and brands in the world. Professionals and volunteers proudly belonged to cultures whose purpose and vision was unquestionably ‘good’.

Then, quite suddenly, stories began to leak into the media. Stories about individuals and groups who were able to hide behind the perceived goodness of the organization they worked for to do bad things to the very people they were supposed to be protecting.

That’s not all these stories revealed. Even more worryingly, they exposed structural flaws at the very heart of these non-governmental organizations’ (NGOs’) cultures. It became clear that people did not feel safe or empowered to report the misdeeds of the few – despite knowing about them – and if they did, management and leaders did not act on what they were being told, and tried to keep it quiet.

Why would people fail to stand up and speak out when they saw the values and mission of the organization they so proudly worked for being betrayed? When they did speak out, why didn’t those in power act immediately to stop what was happening?

We see this knock-on devastation happening again and again. So what keeps going wrong? Why do organizations keep getting it wrong?

The human factor

Try this…

THE £10 MILLION QUESTION

You’re a manager. You’ve just discovered a way to make £10,000,000. It’s illegal. But it’s foolproof. Really. No one will ever know.

A couple of people working under you may suspect, but they’ll never be able to prove it. Besides, their jobs depend on you, and their families depend on them keeping their jobs.

This is £10,000,000. Guaranteed. You absolutely know you’ll get away with it. You absolutely know you can keep people silent. So come on, what would you do? Honestly!

Can you really legislate against human nature? Absolutely. You can, and you must. But that’s not enough – you also need to work with it.

Consider any of the corporate scandals in the news today. When the dust has settled, what do you see?

Alone, or collectively, employees have been able to act, or to fail to act, in unlawful or unethical ways – and spread chaos, incur enormous cost and cause so much despair as a result.

Are they incentivized? Authorized? Self-motivated? Or is it the surrounding facts and circumstances – what we will call ‘culture’ – that influence their behaviour, and make them believe they can, and will, get away with it?

Culture

Culture isn’t just a given set of circumstances over which we have no control. It is we – our colleagues and our leaders – who define, shape and ‘own’ the culture in which we live and work.

This is what we will be exploring through the pages of this book: how to implement a compliance and ethics programme that isn’t just a stand-alone within an organization. Instead, it is part of building a culture whose values leaders and employees are invested in, and which is genuinely responsive to the requirement that people behave according to those values and principles. A culture that defends them robustly and lives them fully.

As a result, the organization as a whole becomes trusted and recognized for its integrity and performance. And that gives it a commercial advantage in the marketplace.

In short, this is the practical business guide to implementing an effective compliance and ethics programme that doesn’t just protect reputation, but enhances it, and delivers commercial success.

So why isn’t compliance doing that? Why isn’t it working?

How to be ineffective

Almost invariably, compliance is based on the premise that if you can get people to be compliant at all, it is out of obedience to a policy. No matter if it’s mind-numbingly dull – just lay down the law and show them the sharp end of the stick.

As a result, much of compliance doctrine – and much that is written about it, and much that is done – ends up being routine, tick-box, rules-based stuff. An unengaging necessity.

Fear and boredom.

Our policies, your obedience.

The problem with this approach is that it just doesn’t work – because people don’t work like that. Yet the idea of creating something that is genuinely effective – because it is gen...

Table of contents

• List of figures and tables
• Preface
• About the authors
• Acknowledgements
• How to use this book
• Part One
• 01 Why compliance isn’t working
• 02 The meaning, origins and role of compliance and ethics
• 03 Barriers to success
• 04 Looking for answers
• Part Two
• 05 The anatomy of a compliance and ethics programme
• 06 Top-level commitment
• 07 Risk assessment and due diligence
• 08 Code of conduct and policies
• 09 Communication, education and training
• 10 Whistle-blowing hotline and speak-up culture
• 11 Procedures and controls
• 12 Investigations, remediation and enforcement
• 13 Assurance and continuous improvement
• 14 Implementation: The Compliance and Ethics function – and everyone else
• A final word: So what’s the future of compliance and ethics?
• Index