Creating a corporate culture in which employees naturally embrace ethical conduct over non-compliant action is a top priority for compliance programs these days. Dynamic, innovative companies are both advantaged and disadvantaged in this arena, said compliance officers from Google and Paypal at the 2011 Compliance Week Annual Conference in Washington last week.

On the one hand, an open culture of ideas facilitates open conversations about compliance, where employees aren't afraid to step forward with questions or with problems they've spotted, agreed the panelists at the popular “Culture and Compliance” session. On the other hand, sometimes innovators don't see ‘no' as ‘no,' but rather as a point of departure for a conversation on compliance—which can get tricky for compliance officers.

The speakers, who were both formerly at General Electric, contrasted their current corporate cultures with that of their previous employer. “Maybe it's a spectrum in terms of: where do you draw the line of business people having operational responsibility or accountability for compliance?” said Google's Andy Hinton, where he is global ethics and compliance officer and associate general counsel. “Google feels very different to me than GE does around business people's depth of ownership around compliance.”

Hinton said that GE had a much more robust infrastructure and populated compliance program. “The fear-factor, if you will, was much more significant,” he said. “Google has had only one ‘significant' FCPA issue; GE has had lots of brushes with the fire. That means that the firm clearly understands the downside. Numerous executives have been fired for compliance breaches. When compliance says ‘no' at GE, it's no.” Businesses will bend over backwards at GE to convince compliance that they can move forward. No one wants to move forward if compliance says ‘no,' because at that point, said Hinton, “You're risking your career.”

At Google, while compliance still has “far more stickiness to its ‘no'” than the general legal group, and the workforce generally doesn't want to be engaged in conduct that could be viewed as unethical by the company, employees still do feel that compliance is a conversation, according to Hinton. “At GE, you would never get someone saying, ‘Andy, you said I can't do this, but I actually took a look at the FCPA and I think…'—You don't have that conversation at GE, and at Google, you have it all the time," he said. "Sometimes it's good; lots of times it's a pain.”Leonard Shen, vice president and chief compliance officer at PayPal described special challenges at his firm, which he characterized as “a fast-moving, fast decision-making company in the context of a rapidly-changing environment.” “There isn't the process/ bureaucracy and that's a good thing and a bad thing,” said Shen. “There are real risks associated with that, since there is a high degree of expectation for regulated institutions in terms of not having operational lapses.” If firms don't have detailed, operational rigor, as well as monitoring, testing, and systematic end-to-end thinking, then they will have those lapses, he said.

Shen explained the dilemma: “One of the biggest challenges that I face and that the company as a whole faces is: how do we mature rapidly enough to ensure that we've got the tightening-up of those processes, while at the same time preserving the speed, innovation, and youth-spirit of the company?”

'Engage and Educate'

Shen gave an example of one strategy he used to “engage and educate” employees in a way that is meaningful to them. He described the launch of a program at PayPal in 2004 that put every employee in a focus group and discuss compliance. First, there was “targeted training” that refreshed participants in compliance issues that were specifically tailored to their business unit or location. Second, the compliance facilitators encouraged employees to raise concerns—anything from a practice they were uncomfortable with to an HR-related issue to business pain points, e.g. “When I try to do this with a compliance point of view, it angers my customers.” Next, Shen's team gathered those concerns, as well as the 6,000 employee-generated solutions, into a “massive matrix” and “separated the wheat from the chaff” in order to identify the most important issues to follow up on. Finally, they communicated those points back to the employees.

Though PayPal's management was initially skeptical that the focus groups would be a huge waste of time and resources, Shen said that at the end of the process, employees felt that they had a voice, engagement, and validation, and business leaders felt that this was a great source of rich information about what was really going on in the business. “We had a lot of fans in this ‘bottoms-up' process, and it was then instituted year after year,” Shen said.