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Shop Talk: Cultivating Compliance and Ethics Leadership

Jaclyn Jaeger | August 13, 2013

Cultivating a workforce that values ethics and compliance takes work and dedication. Lots of companies talk about it, but few take the necessary steps to make it a reality.

ROUNDTABLE PANELISTS - 06/18/2013
Click on attendees below for full biographies.
 
Tyson Avery

  SVP, Global Compliance,

  CBRE Inc.
 
Dianne Binkoski

  Director, Internal Controls &
  Compliance,

  DIRECTV
 
Wanda Denson-Low

  SVP, Office of Internal Governance

  The Boeing Co.
 
Lee Erlichman

  Chief Compliance and Ethics Officer,

  LifeWatch Services Inc.
 
Elliot Fisch

  Director, Internal Audit & Chief
  Compliance Officer,

  Easton-Bell Sports
 
Tom Garcia

  Associate General Counsel
  and Compliance Officer,

  Deckers Outdoor Corp.
 
Kathryn Greaney

  VP, Global Trade Controls

  The Boeing Co.
 
Gus Hubert

  VP, Corporate Compliance,

  Jacobs Engineering Group Inc.
 
Laura LaCorte

  Associate SVP, Compliance,

  University of Southern California
 
Brian Michael

  Deputy General Counsel, CFO,
  Fox Networks Group,

  21 Century Fox
 
Tom Rudenko

  VP of Internal Audit,

  99 Cent Only Stores
 
Tania Saison

  Senior Compliance Counsel,

  Agilent Technologies

Not only do companies need to motivate and train employees to make ethics and compliance a priority, they also have to mold compliance leaders of tomorrow. As elusive as those tasks can be, however, driving effective compliance leadership in a hyper-connected business world is an imperative.

Last month we gathered a group of a dozen compliance, ethics, and internal audit executives in Los Angeles along with compliance executives from the Boeing Co. to talk about what it takes to instill an organization with a strong sense of ethics and build a culture that respects the importance of compliance.

Most of the executives at the forum said it starts with identifying strong compliance leaders and empowering them to turn words into action. “You need somebody who is an advocate for the company's goals,” said Elliot Fisch, director of internal audit and chief compliance officer for Easton-Bell Sports. The ideal compliance leaders should not only be able to articulate the importance of those goals, he said, but also be easily approachable by all employees in the company. “That's a trait you need to find in the person you're hiring for compliance.”

Another step, participants agreed, is to be proactive and build a strong compliance function before problems are identified or regulators start knocking on the door. It's easy to get the business to rally around the importance of compliance in the event of a big investigation, said Laura LaCorte, associate senior vice president of compliance at the University of Southern California. The real challenge, she said, is getting out in front of the compliance concerns that fly below the radar and making sure you consider all the things that could go wrong before they actually do. “It involves persistence,” LaCorte said, “and having confidence in your message.”

Jack of All Trades

Building a robust compliance program doesn't happen in a vacuum; compliance has to plug into all the business groups, win the support of executive leadership, and cross functions, such as IT, audit, and human resources, said attendees. That means compliance executives need to become expert communicators and advocates.

Compliance leaders today essentially have to be a jack of all trades, they agreed. “It's a little bit of project management. It's a little bit of communication skills. It's a little bit of crisis management,” said Tyson Avery, senior vice president, global compliance for commercial real estate services provider CBRE. “It's all those aspects.”

They must also know the business. Wanda Denson-Low, senior vice president of the Office of Internal Governance for Boeing, said that compliance leaders today must have business expertise on the operations side, a working knowledge of regulatory matters on the legal side, as well as a clear understanding around the value proposition of doing compliance. “All of those skill-sets are needed,” she said.
“I don't think we are successful as compliance officers if we don't roll up our sleeves and understand what each of our constituents do,” agreed LaCorte. If you don't embed the importance of compliance into all the business operations, “you're not going to be successful,” she said, “and you won't be able to successfully embed it if you don't know the operations.”

The required skills of compliance leaders are also growing more varied as companies expand into new markets and must take their messaging, communications, and training to employees that speak different languages and have different ethnic cultures.
Boeing, for example, has more than 170,000 employees in 70 countries, and more than 25,000 suppliers all over the world. Consider, too, that Boeing had total new-hire volume of about 13,000 employees in 2012 with projections to hire 8,000 to 10,000 people by the end of 2013. “We have a huge group of folks we have to educate, and not all necessarily come from the aerospace industry,” said Denson-Low.


Tyson Avery, SVP of global compliance for CBRE, expanded on a CCO's qualities. “It's a little bit of project management. It's a little bit of communication skills. It's a little bit of crisis management,” he said.



Boeing's top officials continually emphasize the importance that Boeing places on ethics and compliance. Denson-Low said Boeing's chairman and chief executive officer, James McNerney, constantly reinforces the message that, “we are a federation of countries and individuals from all over the world—but it's one culture.” “So that permeates throughout everything we do,” she said.

To drive home Boeing's one-company culture, McNerney does a live feed speaking to the importance of ethics and compliance that is broadcast to several thousand employees, Denson-Low added. On an annual basis, all employees are trained across the globe. Employees who are unable to attend the live broadcast participate in team meetings led by managers using the same training, which includes communications from the CEOs of the major businesses and McNerney.

And Boeing isn't satisfied with training the employees it already has; it also wants to give future employees a leg up. To that end, Boeing is partnering with 14 of the country's leading engineering schools to help build a curriculum around the specific skill sets and ethical values they seek in future employees. The CEO and other senior executives of the company go out to the participating schools, “and we recruit them at the college level,” said Denson-Low.

Compliance executives aren't only working to train employees overseas and instill a strong sense of ethics and compliance in them, but they must also take that message to third parties that they do business with. “Not only must employees follow the rules, but they must also help to ensure that distributors and other third parties are following the rules,” said Tania Saison, senior compliance counsel with Agilent Technologies. “That can be a hard message for them to deliver.”

Measuring Up

Forum participants also talked about the elusive challenge of how to measure and score positive conduct so that it can be incentivized through compensation or other measures.


Sharing a laugh at the forum (left to right): Dianne Binkoski of DIRECTV; Fox Networks Group GCCO Brian Michael; and Laura LaCorte, associate SVP of compliance for the University of Southern California.



On measuring and scoring employees, Lee Ehrlichman, chief compliance and ethics officer for LifeWatch Sciences, said the danger is in giving an employee a perfect score and then seeing that employee mess up. “You look like an idiot,” he said.



Boeing, for example, has a “leadership performance management system” in which employees are graded on their leadership attributes. The annual incentive program for executives and managers includes a score for leadership behaviors such as "living the Boeing values," Denson-Low said.

Forum participants said companies should be careful to distinguish actions from personality traits. “If you're try to rate their personality, you're then becoming kind of like a psychologist,” said Lee Erlichman, senior vice president, chief compliance and ethics officer for cardiac monitoring service provider LifeWatch Services. The danger in that is if you give an employee a perfect score who then screws up, “you look like an idiot,” he said. “It's not a quantifiable type of behavior.”

The group also cautioned against trying to prevent every single instance of bad behavior. “You cannot control all your employees,” said one participant. In the event that a rogue employee does go “off the reservation,” he said, the company should at least be able to demonstrate to enforcement officials that it did everything possible to prevent that incident from happening.

To that point, roundtable participants discussed the importance of continuous monitoring as part of an effective ethics and compliance program. No matter how you monitor compliance, the end goal should be to identify and correct any weaknesses in the organization's compliance program, said Saison. “It's not a ‘gotcha' exercise,” she said.

An effective ethics and compliance program is both a “proactive and reactive function,” one of the roundtable attendees cautioned. On the proactive side exists auditing and monitoring policies and procedures, whereas the reactive side entails making continuous improvements to the compliance program in the event that something does go wrong. “It's a cyclical loop.”

Cultivating compliance leadership will only grow more important with time as the regulatory landscape grows more complex. As the compliance landscape broadens, certain industries could experience a shortage in compliance experts, said Denson-Low. “It's going to get real interesting over the next couple of years.”