How to reduce risk and outperform with your ethics and compliance program

Editor’s Note: Patricia Harned is chief executive officer of the Ethics & Compliance Initiative (ECI) and her experience and knowledge speaks for itself. She is an expert in this subject, so pay attention. Her article below answers tells us how companies can make ethics and compliance programs effective. As Harned points out, companies with high quality E&C programs “significantly outperform compliance programs in reducing risk, as well as in preventing and detecting wrongdoing.” Let’s take a look at how.

“We’ve got this,” you say to yourself. “Our organization has a robust compliance program. We can point to a myriad of ways that we have adhered to all the expected requirements. We’ve dedicated ample resources, and we have implemented a host of internal controls and program initiatives. If ever we have to defend our efforts to uphold a standard of conduct, we’ve done the best that we can do.”

But have you really?

Unfortunately, one need only look at some of the headlines today about organizations facing scandal — senior executives stepping out of line; corruption; conflicts of interest; fraud.

In a number of instances, the companies that have found themselves embroiled in controversy have also had robust compliance programs in place. Some of them even had award-winning programs. So it begs the question: Is it worth the effort?

The truth is that if you have implemented a comprehensive compliance program in your organization, you have done a very good thing. Every effort by an organization to encourage appropriate business conduct makes a difference. You are not wasting time or resources.

But that said, according to findings from the latest Global Business Ethics Survey, when it comes to the actual impact of an ethics and compliance program, if all you have done is to focus on compliance, you have not done enough.

The bottom line is this: There is a big difference between an organization with a robust compliance program (a minimum standard program), and an organization that has taken steps to implement a “high-quality E&C program.” The difference is evident in the buy-in of leadership and the breadth of the program. It is also evident in its impact.

Organizations that have implemented high quality E&C programs significantly outperform compliance programs in reducing risk, as well as in preventing and detecting wrongdoing.

According to the June 2018 Global Business Ethics Survey, a longitudinal study of employees in for-profit organizations, there is evidence that a high-quality program is more likely to have a favorable effect on employee behavior than a minimum-standard compliance program. For example, employees in an organization with a HQP are:

  • Twice as likely to report suspected wrongdoing to management;
  • Four times more likely to express satisfaction with their company’s response to their report of wrongdoing; and
  • More than four times likely to say that they work in a strong ethical culture.

What makes an E&C effort an HQP? HQPs are based on a shared set of business principles and objectives that are recognized and embraced throughout an organization. The way they are framed may vary, but as one example, leaders in an HQP say that:

  • E&C is central to business strategy;
  • Risks are identified, owned, managed and mitigated;
  • Leaders at all levels build and sustain a culture of integrity;
  • The organization encourages, protects and values the reporting of suspected wrongdoing; and
  • The organization acts and holds itself accountable when wrongdoing occurs.

It is these types of principles that, when implemented throughout an organization, aid in the development and maintenance of a strong ethical culture. And the stronger the culture, the lower the risk of noncompliance. For example, in organizations with strong cultures, employees are:

  • 38% less likely to observe Foreign Corrupt Practices Act violations;
  • 76% less likely to observe False Claims Act violations; and
  • 65% less likely to observe other white-collar criminal activity.

Results like these cannot be attained in an organization with a minimum-standard program. Taken together, the business world cannot profess a strong commitment to integrity, then implement minimum-standard compliance programs and expect exceptional results. If corporations today want to remain resolute in their commitment to integrity, the quality of their E&C efforts must improve.

A comprehensive description of a high-quality E&C program, with supporting business objectives, is available to the public.

Article originally published on SmartBrief.ethics and compliance initiative


By Patricia J. Harned, Ph.D.

Patricia Harned is chief executive officer of the Ethics & Compliance Initiative (ECI).  The mission of the ECI is to empower organizations to build and sustain high quality ethics & compliance programs. The ECI is an alliance of three nonprofit organizations:  the Ethics Research Center (ERC), the Ethics & Compliance Association (ECA) and the Ethics & Compliance Certification Institute (ECCI).

As CEO, Dr. Harned oversees all of ECI’s strategy and operations.  She also directs outreach efforts to policymakers and federal enforcement agencies in Washington, DC and she speaks and writes frequently as an expert on ethics in the workplace, corporate governance, and global integrity.  Dr. Harned advises senior leaders on effective ways to build an ethical culture and promote integrity in organizational activities.  

Dr. Harned chaired the ECI’s Blue Ribbon Panel on High-Quality Ethics & Compliance Programs, which established a new industry standard for effective ethics and compliance efforts in organizations.  She has served as a consultant to many leading organizations; among them Penn State University, Daimler AG, and the New York Stock Exchange.  Dr. Harned has testified before Congress and the U.S. Sentencing Commission, and she has provided briefings to U.S. Secretary of Defense Ash Carter, the OSHA Whistleblower Protection Advisory Committee, and the Federal Bar Council on strategies to increase effective reporting of suspected organizational misconduct. 

Dr. Harned has been featured in media outlets including the Wall Street Journal, Washington Post, USA Today and CNN, and has been a guest on Federal News Radio and the “Diane Rehm Show.”  She was selected by Ethisphere Magazine as one of the 100 Most Influential People in Business Ethics in 2014 and 2015, and was named one of the Top 100 Thought Leaders in Trustworthy Business Behavior in both 2010 and 2011 by the nonprofit organization Trust Across America.

Dr. Harned holds a bachelor of science in education degree from Elizabethtown College in Pennsylvania, a masters of education degree from Indiana University, and a doctorate in the philosophy of education from the University of Pittsburgh.

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