Key Compliance Issues in 2015 Include Pressure to Show Returns, Conflicting Law

Bloomberg BNA’s Corporate Law & Accountability Report is available on the Corporate Law Resource Center. This news service keeps corporate practitioners informed of legal developments of...

By Yin Wilczek

Jan. 23 — This year, ethics and compliance professionals can expect to face increasing pressure to maximize returns from corporate compliance programs, tackle a plethora of conflicting U.S. legal requirements and perhaps take part in debates regarding board diversity, a recent report states.

They also should be aware of U.S. regulators' increasing scrutiny of smaller companies and the Securities and Exchange Commission's ever-expanding whistle-blower bounty program, according to NAVEX Global's white paper, “Top 10 Ethics & Compliance Predictions and Recommendations for 2015.”

This year, there also likely will be a “dramatic leap” in the use of technology for corporate compliance and ethics functions, the paper states.

Compliance departments may want to start assessing how they can use technology to improve their management and distribution of corporate compliance policies, training and management of third-party risks, said NAVEX Vice President Ed Petry, who authored the white paper.

Understand Your Budgets 

In a Jan. 22 webcast to discuss the report, Petry said that compliance departments—to be able to show tangible results from their programs and policies—must ensure they have a clear and complete picture of their budgets. Given the multi-departmental nature of compliance functions, looking alone at expenditures labeled “compliance” will not give the full picture, he said.

Compliance departments also should “improve the cross-departmental visibility” of compliance-related matters, Petry said. Further, to obtain the support of other departments, compliance officers should ensure they fully understand how much time and resources other departments devote to supporting ethics and compliance efforts, “both in terms of real dollars and intangibles,” he said.

“It's about getting a better sense of how to get that buy-in from key managers,” Petry said. “The more you can be aware of the nontangibles” and the big budget picture, the better.

Petry is a former executive director of the Ethics and Compliance Officer Association (ECOA) and a former member of the U.S. Sentencing Commission advisory panel.

Diverging Laws

In other discussions, Petry said that federal and state law continue to diverge on matters such as guns in the workplace and the treatment of same-sex spouses. “There's this matrix of overlapping and conflicting laws that are a nightmare for companies to sort out,” he said. He suggested that smaller companies learn from multinational corporations, which have navigated similar conflicts and complexity in moving beyond the U.S. for business.

Petry also warned that some of these conflicting laws are “in flux and likely to change,” precisely because they are hot button issues on which public opinion differs. Compliance officers must recognize that employees in their companies may have different and strongly held opinions that differ from other employees and from them, he said. Given the impact on morale this may have, compliance departments must be aware of and sensitive to how employees feel about hot button subjects and temper their communications accordingly, he said.

‘Culture Trumps Compliance.'

Meanwhile, culture trumping compliance is a perennial trend that will resurface again this year, Petry said. He explained that unwritten norms and behavior that govern the workplace will always trump compliance rules and regulations. Concurrent with the trend is an ongoing crisis of trust between workers and corporate senior leadership, Petry said.

Even more disturbing, employee cynicism “has gone underground” so that workers may hide how they really feel about ethics and compliance requirements, he said. “That can have a corrosive impact on an organization's culture.”

Petry also noted that social media is a relatively new factor that has emerged over the last couple of years to expose corporate bad behavior. “This may not seem like a new trend but it really is,” he said, citing, for example, the video purporting to show NFL football player Ray Rice assaulting his then-fiancée in an elevator. Social media is “so dominant now that it really can have an impact on how” cases surface and the amount of attention paid to them, he said.

Gender Quotas?

In other trends, Petry observed that a growing number of countries are establishing quotas to accelerate the number of women on boards and holding top corporate positions. Following Norway, countries such as Malaysia, the Netherlands, Spain and Brazil have imposed gender quotas for boards, and the European Commission is considering such quotas across European Union members, he said. If gender quotas continue to gain traction across the world, this could spark vigorous debate in the U.S., he said, and “the ethics committee should be part of that debate.”

Petry also suggested that gender diversity is not an issue discussed in any detail by the compliance community. He called on compliance associations, including the ECOA and the Ethics Resource Center, and academics to address questions such as:

• is the ethics office becoming a place where high-achieving female employees are moved to keep them off other tracks?

• are there differences in the way men and women approach business ethics and pay equity issues?

 

‘Seat at the Table.'

As to the high-profile issue of cybersecurity, Petry said he ranked it 10th on the list because even in the wake of the Sony hacking, “it doesn't bump any of the other items” off the list for ethics and compliance officers.

“The main thing here” for compliance officers is to understand that they “need to have a seat at the table,” he said. If ethics and compliance issues are implicated by cybersecurity, review the “things that you can do to make sure the risk is taken into consideration,” he said.

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bna.com

To contact the editor responsible for this story: Ryan Tuck at rtuck@bna.com

The NAVEX paper is available at http://www.navexglobal.com/resources/whitepapers/Top-Ten-EC-Predictions-Recommendations-2015.