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Business Ethics

4 Essential Elements of a Successful Compliance Program


By Josh Young Nov 17, 2016

4 essential elements of a successful compliance program2

In September 2015, the Volkswagen Group was deemed the "most sustainable automaker in the world" according to the Dow Jones Sustainability Index. As part of the assessment, the business was given full marks for its "codes of conduct, compliance and anti-corruption."

Ten days later, the CEO of the company apologized for the company's failing in all of these categories and resigned shortly thereafter.

In that brief period, it was discovered that Volkswagen had embedded emissions-cheating software in roughly 11 million vehicles worldwide. The software, running within the vehicle's on-board computer, would detect if an emissions test were occurring and reduce output to pass these tests. In some cases, vehicles that "passed" these emissions tests were in reality releasing pollution that exceeded 40 times the legal limit.  

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As would be expected, the company's code of conduct prohibited these activities, stating that the corporation stood for "responsible, honest actions" and that it was "obligated to the truth with respect to political institutions."

The most well-meaning and well-written code of conduct is worthless if it is not followed consistently and enthusiastically throughout the organization. And rather than trusting in the honestly and reliability of your employees, you need to employ a comprehensive corporate compliance program.

What Should You Expect From an Effective Compliance Program?

1. Thorough documentation

Employees leave. So your compliance manager will someday leave as well. Don't rely on human memory to manage or record corporate policy. Instead draft a comprehensive code of conduct for your business that outlines employee expectations and company policy on a broad range of subjects.

Frequently reevaluate these guidelines. Legal expectations will change over time, and new policies or services may create new ethical challenges for your business. By proactively reviewing your guidelines, your company can be better prepared to avoid future pitfalls.

2. Constant training

Having guidelines is not enough. You need to equip your staff to behave responsibly by providing them with frequent training on your organization’s code of conduct. Clearly outline appropriate behavior, providing real-world examples of potential pitfalls.

If changes occur to the code or company policy between training efforts, make sure that these updates are communicated clearly to all employees.

According to guidelines provided by the United States Sentencing Commission, companies with active programs designed to make employees aware of their legal and ethical obligations are likely to receive more lenient treatment in an investigation.

3. Data analysis

Research conducted by the Association of Certified Fraud Examiners (ACFE) found that when incidents of fraud were discovered through active surveillance rather than passive methods (e.g., notification by police), the median loss and average length of the fraud were significantly lower -- often cutting the company's loss in half.

If possible, automate document and workflow processes, and employ data monitoring software to look for abnormalities that might indicate violations of company policy.  Establish reporting hotlines or email accounts that enable employees to report potential conflicts of interest or fraud anonymously.

4. Executive support

According to guidance offered by the Organization for Economic Co-operation and Development (OCED), the participation of senior-level management is critical for preventing corruption and unethical behavior within a business. When executives make it clear that ethical practices are a priority, that message is passed throughout the company.

Conclusion

A corporate code of conduct offers very little protection if it isn't followed. To protect your business, you need to proactively manage and monitor compliance efforts.

To learn more about our code of conduct training courses, you can fill out the form on the right to request a demo.

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