FRA joined forces with Richard Bistrong, Nordic Business Ethics, and Ropes & Gray partners Amanda Raad and Sean Seelinger to bring together legal and compliance professionals to exchange ideas on the topics of personal accountability and increased regulatory expectations.
Through events in London and Stockholm, FRA's Derek Patterson and Anushka Ram heard from companies in a range of industries, and shared their own insights from helping companies build strong corporate compliance programs that stand up to regulatory expectations.
Ensuring compliance professionals have a real seat at the table
A key theme discussed with our colleagues and clients was the extent to which real emphasis was being placed on individual accountability and personal responsibility in corporate compliance programs. This element of a successful program has been flagged by US Department of Justice (DOJ) Assistance Attorney General Kenneth A Polite Jr, who said in March that when companies were asked about whether they were "adequately creating, maintaining, and supporting an ethical culture, the question again goes to individual accountability" (read Polite's full speech here).
We heard from some participants about their own experience and efforts to ensure that enough status and support was being given to those who owned the company's compliance and ethics programs, in order for those individuals to meet increased regulatory expectations. This suggests the shift in the DOJ's evaluation focus is indeed encouraging leadership to be on the front foot in meeting expectations, rather than wait to deal with repercussions.
With this change in attitude, more compliance professionals will be able to act as business partners for growth rather than policemen. They can work with senior management on holistic business questions such as assessing the best measurement of a successful compliance program, how to tailor it to the business, and identifying the critical approval and decision points across the business.
What culture means in practice
Encompassing this shift towards individual accountability is the larger question of how culture underpins a successful compliance program. Our discussion touched on how the right commitment from key individuals was enabling some programs to favour the carrot over the stick, encouraging employees to proactively flag the relatively smaller issues as they arose, to pre-empt larger more systemic problems occurring. When employees feel comfortable or incentivized to talk about the "broken windows" they spot, it is more likely that these problems can be fixed before bad actors spot opportunities to exploit those weaknesses.
One trend to watch will be how shifts within the financial services sector impact others. In a recent speech by Senior VP James Hennessy of the Federal Reserve Bank of New York, he spoke of emerging factors across the financial sector that were deepening "the study and analysis of culture", and briefly outlined the work New York Fed's Culture Initiative (read Hennessy's full speech here). At our roundtable in London, we also heard how the expansion of the Senior Managers and Certification Regime in the UK financial sector was already positively impacting culture and accountability, and how this success might be a sign that it would only be a matter of time for best practice to translate to other sectors.
This signals growing regulatory interest on how culture is a true underpinning factor to a successful compliance program. It remains to be seen how the DOJ will concretely factor this into their dealings with corporations outside the financial services, but from a behavioural science perspective, it will be difficult to draw a line between the question of culture and the focus on individual accountability for long.
Chart your own course with the right advice
While regulatory evaluation of culture does seem to be taking steps forward, led by the US, it is important to remember that companies in different sectors and geographies will have compliance programs of varying maturity. For many, the immediate focus should be on implementing compliance programs and policies that measurably demonstrate an "investment in compliance", in the words of Assistant AG Polite. It is therefore important to engage advisors who can understand your current position, have their eye on regulatory demands, and can help your company find the right strategy and targets for you.