The 2023 ECCP mandated a Board of Directors ensure “the sufficiency of the personnel and resources within the compliance function, in particular, whether those responsible for compliance have: (1) sufficient seniority within the organization; (2) sufficient resources, namely, staff to effectively undertake the requisite auditing, documentation, and analysis; and (3) sufficient autonomy from management, such as direct access to the board of directors or the board’s audit committee.”
It went on to pose the following questions about the “sufficiency of the personnel” in the following manner. Under the topic, Seniority, and
Stature, are the following questions:
How does the compliance function compare with other strategic functions in the company in terms of stature, compensation levels, rank/title, reporting line, resources, and access to key decision-makers? and What role has compliance played in the company’s strategic and operational decisions?
Under the topic Experience and Qualifications are the following questions:
Do compliance and control personnel have the appropriate experience and qualifications for their roles and responsibilities? Has the level of experience and qualifications in these roles changed over time? How does the company invest in further training and development of the compliance and other control personnel? Who reviews the performance of the compliance function and what is the review process?
All of this leads to the inescapable conclusion that the Board of Directors needs to be involved in not only the hiring process for a CCO but also the succession planning. Yet many Boards fall short on that score. In a Chapman and Cutler LLP quarterly update, entitled, Advancing Board Refreshment Through the Director Succession Planning Process, William Libit and Todd Freier laid out a framework for Boards to use which I have adapted for CCO succession. There are some key traits you should consider in succession planning for any senior management position, including a CCO.
- Examine the key corporate documents.
- Use an assessment framework.
- Conduct due diligence.
- Maintain a pipeline.
- Assess Board policies.
- Disclose your succession strategy.
- Benchmark your succession strategy.
Three key takeaways:
1. Refreshment is a hot topic in corporate governance.
2. Review your Board policies to understand what your company will need going forward.
3. Transparency in succession planning.
