compliance culture is based on clear accountability for performing and
controlling business processes to improve performance, and finally, to achieve
strategic plans. The accountability for each employee is formalized by policies
and procedures in supporting the code of conduct. . A
transparent ethical culture also involve external stakeholders, such as the communication
with vendors, clients, regulators and investors
also support the compliance culture when the performance goals includes the
financial results, the risks assumed to achieve them and the capability of
controlling risks. The managerial oversight of fraud, corruption and legal risks
enables to safeguard assets from misconduct, and also to protect the company reputation.
This oversight is supported by the whistleblowing reporting, the open-door
communication and investigation and sanction protocols.
compliance culture has a deep impact on the way that a company hire, promote,
retain and terminate employees. Internal and external factors of the compliance
culture are studied by diverse academic disciplines to change them for the
better. Perceptions of the governance structures such as remuneration
incentives and performance measurement are critical to adjust risk
behaviors. The compliance program should
specify these desired expectations to align practices in all part of the
company with the ethical values and the capability to take business risks.
and authorities have pronounced about a “poor culture” in enforcement cases to
extend liabilities to governance areas. With the Memorandum 1/2016 in Spain,
the State Prosecutor indicated that compliance programs should build the true
compliance culture of a company rather than being an instrument to avoid
criminal liability. Inadequate culture led by performance complacency,
tolerance of improper behaviors or the justification of compliance breaches
diverts resources from strategic objectives. A permissive corporate culture
will create pressure to compromise standards and fear of reprisal. When the
compliance function fails at instilling and ensuring an ethical culture, the
consequences affects both the profitability and the corporate reputation.
Consequences of poor compliance cultures are usually associated to higher fraud
and corruption, heavy fines and possible criminal charges, safety-record
blemish, mismanagement and poor business decisions, inefficiencies and
inadequate communications with stakeholders.
promotion of a sustainable compliance culture across the enterprise is a
responsibility of the board of directors and the executive management,
particularly, the chief compliance officer. The board members are liable for
ensuring that the company complies with the regulations, the laws, the internal
policies and ethical principles. Their
tone at the top filters down the elements of a “good culture” through the
layers of management and decision-makers. The code of conduct and the shared
values foster the alignment of business decisions and plans towards a mature
compliance culture. Where culture is favorable, behaviors are more desirable in
terms of policy compliance, risk prevention, whistleblowing and accountability.
Building a compliance culture is a process to prioritize risks and educate managers
and employees to perform controls to manage those risks. Promoting the
adherence to the objectives of the ethics and compliance program involves many
activities, such as assigning accountability, strengthening monitoring controls
and ensuring accessibility to legal advice.
Compliance Director IE Law School
Huwyler, MBA CPA
Importance of a sustainable