What is a corporate compliance program?

Corporate compliance programs are formal programs that specify a company’s policies and procedures—and the consequences for violating them. Compliance programs are meant to ensure that employees don’t behave dangerously, break the law or breach federal or state regulations.

A compliance program isn’t the same as a corporate code of conduct. A company code of conduct is a brief ethics guide—a list of things you should or shouldn’t do; employees sign at the bottom and that’s it. A corporate compliance program, on the other hand, is an in-depth procedural dossier. It identifies a set of company-specific risks and outlines appropriate risk-management tactics.

Thoughtful corporate compliance programs have operational benefits, too. When people, processes and technologies work together to manage risk, vendors and customers feel more satisfied. In short, businesses thrive with the right compliance programs in place.

Why do companies adopt compliance programs?

Corporate misconduct is no small issue. In recent years, state, federal and overseas prosecutors have upped the ante, scrutinizing company assets and diving into business deals in an effort to find fraud. When companies are caught red handed—in the Volkswagen emissions scandal, for example—they face heavy financial penalties. Occasionally, executives go to prison.

If you can prove that you have a corporate compliance policy in place, your company may be protected if one of your executives commits a crime. Courts at every level prosecute individuals, rather than the organizations they work for, if those businesses can prove that law-breaking employees previously read and agreed to a robust compliance scheme.

Your company isn’t a Fortune 500 behemoth, so do you really need a compliance policy? Absolutely. Why? Because compliance programs:

• Protect your reputation: Compliance programs imply accountability and an understanding of ethics, so they cast your company in a positive light.
• Keep you out of trouble: When you identify problem areas and create policies to address them, you prevent violations from occurring in the first place.
• Prevent court cases: With a solid compliance program in place, you could avoid legal trouble if or when employees and subcontractors make bad decisions.
• Reduce damages: Enforcement officials and courts usually show lenience if companies can prove that they’ve tried to mitigate problems with a compliance program.
• Give your business an advantage: Big-name companies, governments and offshore ventures create alliances with well-run corporations.

Compliance programs have the potential to increase company value, too: shareholders love robust compliance programs because they help to minimize fraud.

What are the elements of a compliance program?

Compliance programs vary from company to company, but they usually incorporate similar elements. Core principles include:

• A written policy and procedure document, available electronically or in a printed format
• A designated compliance manager and a dedicated compliance committee
• An effective communication policy
• A comprehensive training scheme
• An internal monitoring and auditing procedure
• Clearly written and widely known disciplinary guidelines
• Prompt action when violations occur

These seven elements help to foster a widespread culture of compliance within your organization.

Why do some compliance programs fail?

Some compliance programs just don’t hit the mark. Here are four reasons compliance programs fail.

Incomplete data

Guidelines issued by the Supreme Court (USSC) and the Department of Justice (DOJ) expect corporate compliance programs to hold employees liable—and to be able to prove that they do so. If your compliance program doesn’t gather sufficient data, this can be hard to do.

Some compliance programs retain information about disciplined employees but don’t hold data about those who weren’t disciplined for similar offences during any given year. If ten people commit an offence and all of them are disciplined, that’s one thing; if only ten out of 50 people who commit an offence get into trouble, that’s quite another.

Invalid metrics

Employees who complete training courses aren’t always able to recall policies effectively. If your company tracks the number of hours staff spend in the classroom but doesn’t monitor the number of employees who demonstrate a real-world understanding of procedure, you won’t be able to gauge the effectiveness of your compliance program. You can use a survey to find out how many people within your organization understand and follow your compliance program.

Lack of employee oversight

Program compliance depends on employee participation—but some companies don’t monitor how many of their employees actually read compliance program documents. Many people sign statements without reviewing what they pertain to. While they can give you grounds to fire workers who disobey rules, signed statements don’t prove that members of staff grasp your compliance program.

Biased self-reporting

We mentioned surveys earlier—and they can be useful tools, as long as you ask the right questions. Think about what you need to know and give employees an opportunity to provide real information. Stay away from ambiguous questions and don’t encourage participants to answer “favorably.” Make your survey anonymous: unidentified survey participants tend to be more truthful.

How to create an effective compliance program

Well-written compliance programs ensure that companies follow the law and fulfil contractual agreements. Compliance is more than just a regulatory necessity—it also protects your company from harm. Ready to create your own compliance initiative? The following ten tips can help you write a comprehensive and compelling compliance program.

Identify needs

Before you begin, make a comprehensive list of all your regulatory and internal compliance needs. The scope of your compliance program might change from time to time, so revisit this step periodically.

Gather information

Get as much input as you can from as many people as possible within your organization. Ask board members, staff members and managers at every level for compliance program ideas. Then, look at what other companies in your sector have done with their compliance programs.

Conduct a risk assessment

Identify the most serious potential risks and think about how likely they might be. Consider various compliance scenarios and how they might play out in house, in the wider world and, if applicable, in court.

Define objectives

Think about what you want to accomplish with your compliance program. Consider how a successful compliance program might benefit your business; then, implement measures that help you reach your objective.

Check policies and procedures

Examine your other policies and procedures to ensure your compliance program slots neatly into place. You might need to modify specific human resources documents, including disciplinary strategies, to achieve seamless integration.

Speak in plain terms

Many people don’t bother reading documents written in legalese. You can increase the chances of employees actually reviewing your compliance procedure if you avoid overly technical, dense or complex language.

Gauge support

Without proper internal support, compliance programs amount to nothing more than words written on paper. Try to gauge support for your strategy before D-Day. For best results, everyone at your organization—from headquarters to the shop floor—must be on board.

Educate and communicate

Periodic company-wide training and targeted coaching can help you raise awareness of your new compliance program. If applicable state guidelines or federal laws change, distribute that information immediately. Encourage employees and team leaders at every level to share thoughts about the program with their line managers.

Check ongoing compliance

Monitor adherence to—and awareness of—your compliance program on an ongoing basis. Internal audits and special reviews can help you streamline your strategy and gauge its effectiveness.

Measure and report results

Create a reporting dashboard to keep executives and other stakeholders fully informed about internal compliance measures, changes in relevant law, industry compliance trends and other applicable subjects.

Keeping compliance on track

It’s a complicated world out there. Government regulations, corporate obligations, ethical guidelines and new laws make compliance a tricky business. There’s no such thing as a universal compliance program, but with a little ingenuity, regular testing and model design, you can engineer a custom compliance scheme to suit your company.