The Board’s Role In Curbing Ethical Issues

Pat Harned, CEO of Ethics and Compliance Initiative (ECI)
Pat Harned, CEO of Ethics and Compliance Initiative (ECI)

Pat Harned, CEO of the Ethics and Compliance Initiative (ECI), joins Corporate Board Member for part two of our conversation with her about ethics. She talks about the role the board plays in curbing ethics issues and why these issues have become so top of mind for corporations.  Here is part one.

What is the role of the board of directors to curb ethics issues?

It’s not realistic to expect the board to know everything there is to know about the ethics and compliance program, but I do think it’s the role of the board to do a couple of things. First, to make sure that the organization is implementing an ethics and compliance program. Not just a basic, check the boxes program, but they’re concerned for the quality of that program. And that’s a report that we just released that says that the higher the quality of the program, the less risky the organization is going to face for non-compliance issues.

So, one role of the board is, is to just be sure that management is taking that seriously. I think the other responsibility that they have is to be regularly asking for information about the culture of the organization. To be monitoring what’s happening and then holding management accountable for taking ownership and leading the effort to address culture in the organization. Again, it’s not the role of the board to actually know everything there is to know about the culture and what’s happening in it but they should be asking for information on a regular basis and making sure that management is aware of what’s going on.

Now, what about the CEO? Obviously, different role, probably a little bit more hands on. What’s the CEO’s role in curbing some of these issues?

Well, one of the phrases that gets said in our industry, and I’m sure in a lot of industries is “tone at the top matters.” In fact, one of the things that our research has shown is that there are two drivers of culture in an organization. The first comes from the CEO and the C-Suite. The tone that they set, there are expectations that this will be a company with a high standard of integrity. The second major driver is immediate supervisors, managers who on a day to day basis, carry out that expectation.

“I think the other responsibility that they have is to be regularly asking for information about the culture of the organization.”

So I think the first thing that CEOs need to know is that they have an a very large influence on whether or not the standards of the organization are going to be taken seriously. So if they’re not regularly committing to talking about the importance of ethics, if they’re not taking steps to model the kind of conduct that they expect others to adopt, they need to start.

The second thing, I think, is for them to make sure that they have given the resources that are necessary for the organization to create a high-quality ethics and compliance program. And there are a lot of indicators of what that looks like. In fact, we can give you a report that is our framework of what some of those objectives are, and the principles that are behind it. But it’s really the CEO that has to be the champion of that making sure that leaders understand they have a role in it, they should be making sure that their chief ethics and compliance officer reports to them directly and also to the board. But then, they also need to make sure that they are holding people accountable for their responsibility in assessing and mitigating risk and driving a strong culture.