Compliance, as it has been traditionally known, is dead. Training mandates, accepting statements like “that’s how it’s been done,” and keeping up appearances to avoid scrutiny are unsustainable practices. Look at any major scandal that has hit the news lately, be it fraud, data security, gender discrimination, and you will find echoes of the old way of doing compliance.
Compliance practitioners should be aware of this by now. “Culture of compliance,” “tone at the top,” and “ethics” are oft-used terms to describe effective compliance programs. However, just saying these words doesn’t mean the workplace understands effective compliance, and even more, doesn’t mean it helps the workplace become compliant.
Ethics Must Be the Foundation for Compliance
Ethics is a necessary foundation for modern compliance programs. Ethics means a lot of things. Merriam-Webster clarifies: “While ethics can refer broadly to moral principles, one often sees it applied to questions of correct behavior within a relatively narrow area of activity.” For organizations, ethics is especially narrow. The “moral principles” to follow are the values of the company, which are further defined by the organization’s mission.
When employees (including executives) do their jobs according to an organization’s moral principles, and do “what’s right,” they effectively “comply” with ethical standards. This also makes for an ethical culture. To be sure, social expectations and mores can impact how ethical a company appears. For example, a company that reveres and follows the value of “making money at all costs” would not be viewed as ethical to millennials. For the purposes of compliance, organizations should focus on the values they believe in.
How Ethics Leads to Compliance
The above explains the “what,” but it doesn’t explain the “how.” First, compliance means adhering to external laws, internal policies and practices, and of course ethical standards. Some practitioners may wonder how being ethical translates to following specific laws, such as the Foreign Corrupt Practices Act (FCPA), or a company’s conflict of interest policy.
Employees must know about the law. For example, being a bastion of “honesty and integrity” pursuant to an organization’s values may not prevent an employee from violating record keeping and internal control requirements under the FCPA. At the same time, mere knowledge about the law doesn’t change behavior. To be effective, knowledge of the law must be incorporated into a larger ethical framework. “[I]n a specific type of culture, characterized by specific values such as openness, trust and honesty, employees are more likely to engage in compliance behaviours which collectively will contribute to organizational compliance,” says Lisa Interligi in the Journal of Management & Organization.
Finally, compliance must resonate with employees not just on a professional level (“company policy tells me to do X”) but on a personal level (“doing X is the right thing to do.”) “Research has shown that when the organization and employees [sic] values are in sync and when there is trust, employees view other employees’ transgressions as a personal affront – an affront against themselves,” states researcher and University of Miami law professor Michele DeStefano. When employees intrinsically believe in their organization’s purpose and values, ethical behavior should drive their everyday actions.
It Starts With Training
Where to start? Effective ethics training. “By most accounts, compliance begins with education: effective communication so that agents within the firm understand the firm’s commitment to compliance and enough about the law to spot issues that arise within their own scope of authority and know how they are expected to respond,” according to Donald C. Langevoort in his formidable law review article, Monitoring: The Behavioral Economics of Corporate Compliance with Law.
Dry technical language found in statutes and company policies must be transformed to resonate with employees. Sure, companies need to avoid writing in legalese, but communicating ethical principles goes way beyond that. EVERFI Lead Instructional Writer Carmen Poole explains her research:
Using case studies to facilitate learning has long been celebrated as one of the best ways to encourage critical and experiential thinking skills. Case-based learning in ethical training contexts is advantageous because case studies can be tailored endlessly, giving rote content the potential to get up and walk around, while giving the learner an opportunity to experiment, to explore, to evaluate.
When done right, and adapted to fit a company’s values, the result on employees could be transformational. Training is not the end-all, but it is a critical part in communicating, informing, and building an ethical culture.
Learn More About Corporate Compliance Training
EVERFI delivers online ethics and compliance training to help your business meet compliance requirements both dynamically and scalably. In addition to our award-winning online courses, EVERFI delivers a robust, cloud-based learning management system to help you easily deploy and track our growing library of ethics, anti-harassment, data security and employee conduct courses.