We in the GRC community know the value of an empowered compliance function: a CCO with authority, sufficient resources and the ear of the top brass. And to further ensure compliance success, experts are now calling for compliance expertise in the boardroom. Companies who have a director on the board with a background in compliance are instantly more likely to have a strong compliance program.
Sounds simple, doesn’t it? Sometimes common knowledge isn’t common practice, however.
Today I’m sharing with you a particularly thought-provoking article by Michael Volkov. If you don’t read Volkov regularly, you should. And particularly these days, as he writes frequently about the pressures compliance officers (and the CEOs and Boards they serve) are under due to increased regulations that not only challenge them in their day-to-day duties — but also challenge them to re-think their chosen profession in the first place.
Volkov explores a new model for board composition that puts the compliance officer’s mission at front and center.
After reading, I hope you’ll weigh in below. The compliance officer’s changing role is an important topic for all of us, as we’re all stakeholders of one kind or another. I hope you’ll join in the discussion.
Enjoy.
By Michael Volkov
In this era of corporate accountability, regulators and prosecutors are looking for opportunities to hold board members, individually and collectively, accountable for corporate misconduct. The list of improper oversight, bordering on recklessness to deliberate intent, is well known in the Department of Justice. You can rest assured when presented with the right set of facts and evidence, the Justice Department will pull the trigger and charge a corporate board member with a criminal offense.
In response, many have advocated for improvement of corporate governance, increased training of corporate board members and specific guidance on the board’s obligations to oversee and monitor a company’s compliance program. No longer can companies rely on the old model of inserting outside counsel to make sure that the board embraces a defensive strategy aimed at avoiding litigation and risks. Instead, a new model is being crafted with the push from compliance advocates, prosecutors, shareholders and other key stakeholders that advances corporate accountability and responsibility for a company’s ethics and compliance program.
One important aspect of this new approach to corporate governance is to insist on appointing a board member with compliance expertise.
I have witnessed firsthand that companies that have a board member with compliance expertise usually have a more aggressive and effective compliance program. In this situation, a Chief Compliance Officer has to answer to the board for the company’s compliance program, while receiving the resources and support to accomplish compliance tasks.
Companies spend time and resources to nominate board members who bring a real value to the boardroom. The mix of board members reflects the company’s overall strategic priorities and focus for governance. For example, the nominating committee will locate a board candidate with financial reporting, audit and SOX expertise to manage the audit committee. Each board member should be considered for a strategic purpose and benefit.
A board member with a compliance background advances a company’s compliance program by multiple factors. It is an investment with significant benefits to the compliance program and the company overall. The board member can educate other board members on compliance issues, facilitate CCO presentations and communications to the board and improve the company’s tone at the top, as well as its ethical culture and other elements of a compliance program.
A requirement to include a board member with compliance expertise is fast becoming a governance best practice. While it is easy to brush aside compliance in favor of other significant topics and risks – cybersecurity, financial reporting, SOX – relegating compliance to a lower priority is a real and significant missed opportunity.
Chief compliance officers have to maintain a robust reporting relationship with the audit or compliance committee. A CCO cannot be afforded 10 or 15 minutes at the end of a quarterly meeting. Rather, a CCO has to be treated in a manner commensurate with the importance of compliance to the company’s operations. If there is no tone at the top, the CCO will probably be given a short slot at the end of the meeting.
A board member responsible for compliance with prior experience in compliance will ensure that the board devotes adequate time and attention to the company’s compliance program. No longer will the CCO have to devote energy and time to “educate” the board on the importance of compliance issues. The CCO will have a built-in support system and advocate for compliance issue on the board itself.
Michael Volkov is the CEO of The Volkov Law Group LLC. His practice focuses on white collar defense, corporate compliance, internal investigations, and regulatory enforcement matters. He is a former federal prosecutor with almost 30 years of experience in a variety of government positions and private practice.
Michael maintains a well-known blog: Corruption Crime & Compliance which is frequently cited by anti-corruption professionals and professionals in the compliance industry. Michael has extensive experience representing clients on matters involving the Foreign Corrupt Practices Act, the UK Bribery Act, money laundering, Office of Foreign Asset Control (OFAC), export controls, sanctions and International Traffic in Arms, False Claims Act, Congressional investigations, online gambling and regulatory enforcement issues.
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Note: if you’re on the other side of this equation and have an open position to fill in your organization, contact me today to learn about my network of governance, risk and compliance professionals
Maurice Gilbert is Managing Partner of Conselium Executive Search, which specializes in placing Compliance Officers and Legal Counsel for clients in the U.S., Europe, Latin America and Asia Pacific. Maurice is also CEO of Corporate Compliance Insights, a worldwide publication devoted to governance, risk and compliance issues. Maurice can be reached at maurice@conselium.com
Published by Conselium Executive Search, the global leader in compliance search.
