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Innovation in Compliance

Compliance Professionals Adapting to Change: Industries, Regulations, and Beyond: Part 3 – Jessica Czeczuga on the Role of a Board of Directors in Training and Communications

Welcome to a special series sponsored by Diligent, where we look down the road at key issues in 2024 and beyond. In this series, I will visit with Nicholas Latham, Renee Murphy, Jessica Czeczuga, Yee Chow, and Alexander Cotoia. Over this series, we will consider compliant communications in regulated industries, managing conflicts of interest at the Board level, the Board’s role in compliance training and communications, navigating the current ESG landscape, and professional growth and mentorship in compliance. In Part 3, we review the role of a Board of Directors in compliance training and communications with Jessica Czeczuga.

Jessica Czeczuga is a seasoned corporate training and compliance professional, currently serving as the Principal Instructional Designer at Diligent. Jessica’s perspective on the importance of Board oversight in corporate training and compliance is shaped by her extensive experience and deep understanding of compliance programs. She emphasizes the crucial role of the Board in setting the tone for the organization’s culture, advocating for active communication from the Board about the importance of training to all employees. Jessica also suggests that the Board should be more significant in discussions about your organization’s compliance efforts, ensuring it meets its stated commitments. She views the Board as another group within the organization that requires tailored training and active involvement in promoting a culture of compliance. Join Tom Fox and Jessica Czeczuga as they delve deeper into this topic.

Key Highlights:

  • Driving Compliance and Training Messaging
  • Fostering Alignment Through Board Involvement
  • Assessing the Impact of Multinational Training

Ready for Purpose-Driven Compliance? Diligent equips leaders with the tools to build, monitor, and maintain an open, transparent ethics and compliance culture. For more information and to book a demo, visit Diligent.com

Join us tomorrow as we consider navigating the current ESG landscape.

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Blog

Jessica Czeczuga on the Crucial Role of Board Oversight in Compliance Training and Communications

I recently had the opportunity to visit with folks from Diligent. We look down the road at key issues in 2024 in a podcast series sponsored by Diligent entitled Compliance professionals adapting to change: Industries, Regulations, and Beyond. I was able to chat with Nicholas Latham, Renee Murphy, Jessica Czeczuga, Yee Chow, and Alexander Cotoia. Over this series, we discussed compliance communications in regulated industries, managing conflicts of interest at the board level, the board’s role in compliance training and communications, navigating the current ESG landscape, and professional growth and mentorship in compliance. In this post, we discuss the role of the Board of Directors in compliance training and communications with Jessica Czeczuga.

Jessica, the Principal Instructional Designer at Diligent, emphasized the need for the board to underscore the importance of compliance, communication, and training and to provide messaging to employees that reinforces the significance of completing training. One of the key takeaways from the episode was the idea that the board sets the tone at the top. The board’s priorities are seen as priorities by the rest of the organization. By prioritizing compliance, communication, and training, the board can foster a culture of compliance and ensure that employees understand the importance of these initiatives.

Jessica also suggested that boards should consider providing messaging directly to the general population of their organization, highlighting the importance of completing training. This can help drive the messaging deeper into the organization and ensure that employees understand the significance of their training obligations.

We also discussed the need for boards to assess the effectiveness of training programs, particularly in multinational corporations. Computer access and language barriers should be considered when evaluating training effectiveness. By understanding employees’ challenges in different regions, the board can make informed decisions about training programs and ensure that they are effective and accessible to all employees.

Regarding board oversight of training, there are tradeoffs and challenges to consider. On one hand, the board must clearly understand the compliance program and what is required to support it. This may involve requesting additional metrics and information from the individuals responsible for training. The board can provide better oversight and support by having a deeper understanding of the program.

On the other hand, the board needs to strike a balance between oversight and micromanagement. Boards should trust the individuals responsible for training and compliance to do their jobs effectively. Micromanaging can hinder the effectiveness of training programs and create unnecessary bureaucracy.

We highlighted the importance of board oversight in corporate training and compliance. The board is crucial in driving compliance and training messaging throughout the organization. By setting the tone at the top and emphasizing the importance of compliance, communication, and training, the board can foster a culture of compliance. Additionally, the board should assess the effectiveness of training programs, considering factors such as computer access and language barriers. Balancing oversight and trust is essential for effective board oversight of training and compliance.

Ready for Purpose-Driven Compliance? Diligent equips leaders with the tools to build, monitor, and maintain an open, transparent ethics and compliance culture. For more information and to book a demo, visit Diligent.com

Join us tomorrow as we consider navigating the current ESG landscape.

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Innovation in Compliance

Compliance Professionals Adapting to Change: Industries, Regulations, and Beyond: Part 2 – Renee Murphy on Managing Conflicts at the Board

Welcome to a special series sponsored by Diligent, where we look down the road at key issues in 2024 and beyond. In this series, I will visit with Nicholas Latham, Renee Murphy, Jessica Czeczuga, Yee Chow, and Alexander Cotoia. Over this series, we will consider compliant communications in regulated industries, managing conflicts of interest at the Board level, the Board’s role in compliance training and communications, navigating the current ESG landscape, and professional growth and mentorship in compliance. Part 2 considers how an organization can manage conflicts of interest with Renee Murphy on the Board of Directors.

Renee Murphy has a rich compliance, governance, and risk management background. Having served as both an internal and external auditor and currently the Chief Evangelist of Diligent, she brings a unique perspective to managing board-level conflicts of interest and implementing ESG practices. Renee believes that conflicts of interest at the board level can have serious implications and emphasizes the importance of identifying and addressing these conflicts to prevent financial misconduct. She also advocates that boards prioritize disclosing their ESG practices and carbon emissions, as stakeholders will increasingly demand this. Her expertise and insights are shaped by her diverse experiences, including her role as a lead analyst at Forrester Research and her work with Fortune 500 companies. Join Tom Fox and Renee Murphy as they delve deeper into these topics on the next episode of the Diligent Podcast.

Key Highlights:

  • Board Members Sitting on Multiple Boards
  • Conflicts of Interest at the Board Level
  • ESG Reporting for Long-Term Risk Management
  • The Role of Compliance in Board Governance

Ready for Purpose-Driven Compliance? Diligent equips leaders with the tools to build, monitor, and maintain an open, transparent ethics and compliance culture. For more information and to book a demo, visit Diligent.com

Join us tomorrow as we consider the role of the Board of Directors in compliance training, messaging, and communications.

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Blog

Renee Murphy on Risks and Consequences of Board Level Conflicts of Interest

I recently had the opportunity to visit with folks from Diligent. We look down the road at key issues in 2024 in a podcast series sponsored by Diligent entitled Compliance Professionals Adapting to Change: Industries, Regulations, and Beyond. I could chat with Nicholas Latham, Renee Murphy, Jessica Czeczuga, Yee Chow, and Alexander Cotoia. Over this series, we discussed compliance communications in regulated industries, managing conflicts of interest at the Board level, the Board’s role in compliance training and communications, navigating the current ESG landscape, and professional growth and mentorship in compliance. In this Post 2, we discuss the conflicts of interest at the Board of Directors and the Board’s role at the ESG level with Renee Murphy.

Conflicts of interest at the board level can have serious implications for companies, requiring careful management and proactive measures to ensure ethical functioning. Board-level conflicts of interest can arise when board members sit on multiple boards or engage in self-dealing. These conflicts can lead to questions of fairness and potential harm to the company. For example, a CEO whose time is divided among multiple companies may not be able to provide fair attention to each organization, creating a conflict of interest for shareholders. Additionally, self-dealing at the board level, such as funneling company funds to entities owned by board members, can harm the company’s financial health.

To mitigate these conflicts, board members should establish clear boundaries and implement board management software for transparency and accountability. This software enables effective communication and decision-making, allowing boards to address conflicts promptly and ensure ethical operations. Compliance and risk management officials play a vital role in board governance by providing the board with an understanding of legal and regulatory risks and preventing conflicts of interest. These officials enable efficient risk management and compliance processes by utilizing governance software.

The implementation of ESG practices is another crucial aspect of board governance. ESG considers environmental, social, and governance factors in business operations. Companies are advised to select a framework and start disclosing their ESG information. Failure to do so can hinder access to capital and affect long-term risk management. While ESG practices are not currently mandated by the SEC, they are increasingly demanded by banks, customers, and third parties. Therefore, companies have no choice but to disclose their ESG practices to meet stakeholder expectations.

Balancing board-level conflicts of interest and ESG practices involves tradeoffs and challenges. On one hand, addressing conflicts of interest requires strict oversight and accountability to ensure fair decision-making. On the other hand, implementing ESG practices requires companies to consider their environmental and social impact, which may involve additional costs and changes to existing operations. Finding the right balance between these factors is crucial for organizations to maintain ethical operations while meeting stakeholder expectations.

The importance of considering the impact on decision-making cannot be overstated. Conflicts of interest and the lack of ESG practices can lead to financial losses, reputational damage, and legal consequences. By proactively managing conflicts and implementing ESG practices, companies can enhance their long-term sustainability and mitigate risks. Compliance and risk management officials and board members play a pivotal role in ensuring that ethical considerations are prioritized in decision-making processes.

Managing board-level conflicts of interest and implementing ESG practices are critical aspects of board governance. Companies can enhance transparency, accountability, and ethical functioning by establishing clear boundaries, utilizing board management software, and disclosing ESG information. Balancing these factors involves tradeoffs and challenges, but the impact on decision-making and the long-term success of organizations cannot be ignored. With the guidance of compliance and risk management officials, boards can navigate these complexities and ensure ethical operations for the benefit of all stakeholders.

Ready for Purpose-Driven Compliance? Diligent equips leaders with the tools to build, monitor, and maintain an open, transparent ethics and compliance culture. For more information and to book a demo, visit Diligent.com

Join us tomorrow as we consider the role of the Board of Directors in compliance training and communications.

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All Things Investigations

All Things Investigations: Episode 38 – CCO Certification – A Better Approach with Kevin Abikoff

In this episode of All Things Investigation, Tom Fox and guest Kevin Abikoff discuss the Department of Justice’s introduction of a CCO certification in the wake of FCPA violations. Kevin offers his unique perspective on this issue; their conversation also explores broader issues of corporate governance and the role of the Board of Directors.

Kevin Abikoff is a Partner and Deputy Chair at Hughes Hubbard & Reed. He is a recognized authority in corporate governance and compliance. 

You’ll hear Tom and Kevin discuss:

  • Kevin questions the necessity of the CCO certification, suggesting it addresses a problem that doesn’t exist, given the absence of complaints from the Department of Justice about dishonesty during monitorships.
  • A more practical approach, Kevin posits, is a certification 12 to 24 months after a monitorship ends to empower CCOs during periods of vulnerability truly.
  • Measuring compliance effectiveness is subjective and may be void of vagueness in a legal context.
  • In the broader realm of corporate governance, the board has a pivotal role in overseeing compliance. Parallels to the Caremark duty and Delaware law are drawn.
  • Kevin raises concerns about the burden on CCOs to assess program effectiveness retrospectively, especially considering the dynamic nature of compliance programs over time.
  • Boards should take responsibility for compliance certifications and should sign off on these certifications, mirroring similar practices in financial reporting.
  • Innovation within compliance may be stymied if CCOs fear that enhancing a program might be used against them in the future, Kevin points out.

KEY QUOTES:

“I’ve just never heard, especially from the context of Chief Compliance Officer, that the DOJ feels like they’re being lied to. If that’s not the problem they’re trying to solve, I think the solution they have paved is, again, a solution in search of a problem that doesn’t exist…” – Kevin Abikoff

“If you’re going to have a certification and you want to empower the chief compliance officer, have the certification twelve months, 24 months after the conclusion of the monitorship and have the CCO certify that they continue to believe that the policies, procedures, things that have been put in place, continue to be in place.” – Kevin Abikoff

“Now what you fail to investigate can kill you.” – Kevin Abikoff

Resources:

Hughes Hubbard & Reed website 

Kevin Abikoff on LinkedIn

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FCPA Compliance Report

FCPA Compliance Report – Dottie Schindlinger on Corporate Governance and the Diligent Institute

Welcome to the award-winning FCPA Compliance Report, the longest-running podcast in compliance. In this episode, Tom Fox welcomes Dottie Schindlinger, Executive Director of the Diligent Institute.

The Diligent Institute, the governance research arm of Diligent Corporation, is on a mission to promote governance excellence by providing valuable resources and support to board members and senior leaders. Through research, thought leadership, podcasts, web shows, and certification programs, the institute addresses topics such as climate leadership, ESG, cyber risk, strategy, and AI ethics. Programs like the Next Gen Board Leaders Program and Director Network software facilitate peer-to-peer networking and board opportunities.

The Diligent Academy offers e-learning certification programs for directors, while the Diligent Forum provides a platform for directors to discuss specific themes with guest speakers. The conversation emphasizes the importance of empowering board members with the right information and insights to make informed decisions. It also discusses the changing role of directors in today’s business landscape, with a focus on digital transformation, cybersecurity, and customer satisfaction. The Diligent Institute aims to be a trusted resource for directors, providing valuable knowledge and understanding of their needs.

Key Highlights

  • Diligent Institute: Empowering Board Leaders
  • Diligent Academy and Forum
  • ESG Momentum
  • ESG Views and Director Confidence
  • The Changing Role of Directors

 Resources

Dottie Schindlinger on LinkedIn

The Diligent Institute

Tom Fox

Instagram

Facebook

YouTube

Twitter

LinkedIn

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Corruption, Crime and Compliance

Board Oversight and Monitoring of AI Risks

As companies rapidly adopt artificial intelligence (AI), it becomes paramount to have robust governance frameworks in place. Not only can AI bring about vast business benefits, but it also carries significant risks—such as spreading disinformation, racial discrimination, and potential privacy invasions. In this episode of Corruption, Crime and Compliance, Michael Volkov dives deep into the urgent need for corporate boards to monitor, address, and incorporate AI into their compliance programs, and the many facets that this entails.

You’ll hear Michael talk about:

  • AI is spreading like wildfire across industries, and with it comes a whole new set of risks. Many boards don’t fully understand these risks. It’s important to make sure that boards are educated about the potential and pitfalls of AI, and that they actively oversee the risks. This includes understanding their obligations under Caremark, which requires them to exercise diligent oversight and monitoring.
  • AI is a tantalizing prospect for businesses: faster, more accurate processes that can revolutionize operations. But with great power comes great responsibility. AI also comes with risks, like disinformation, bias, privacy invasion, and even mass layoffs. It’s a delicate balancing act that businesses need to get right.
  • Companies can’t just use AI, they have to be ready for it. That means adjusting their compliance policies and procedures to their specific AI risk profile, actively identifying and assessing those risks, and staying up-to-date on potential regulatory changes related to AI. As AI grows, the need for strong risk mitigation strategies before implementation becomes even more important.
  • The Caremark framework requires corporate boards to ensure that their companies comply with AI regulations. Recent cases, such as the Boeing safety oversight, demonstrate the severity of the consequences when boards fail to fulfill their responsibilities. As a result, boards must be proactive: ensure that board members have the technical expertise necessary, brief them on AI deployments, designate senior executives to be responsible for AI compliance, and ensure that there are clear channels for individuals to report issues.

 

KEY QUOTES

“Board members usually ask the Chief Information Security Officer or whoever is responsible for technology [at board meetings], ‘Are we doing okay?’ They don’t want to hear or get into all of the details, and then they move on. That model has got to change.”

 

“In this uncertain environment, stakeholders are quickly discovering the real and significant risks generated by artificial intelligence, and companies have to develop risk mitigation strategies before implementing artificial intelligence tools and solutions.”

 

“Board members should be briefed on existing and planned artificial intelligence deployments to support the company’s business and or support functions. In other words, they’ve got to be notified, brought along that this is going to be a new tool that we’re using, ‘Here are the risks, here are the mitigation techniques.’”

 

Resources:

Michael Volkov on LinkedIn | Twitter

The Volkov Law Group

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31 Days to More Effective Compliance Programs Uncategorized

One Month to More Effective Reporting and Investigations – Board Investigations

In their article, “Successful Board Investigations”, David Bayless and Tammy Albarrán, offered seven considerations to facilitate a successful Board investigation.

  • Consider whether you need independent outside counsel.
  • Consider hiring an experienced investigator to lead the internal investigation.
  • Consider the need to retain outside experts.
  • Analyze potential conflicts of interest at the outset and during the investigation.
  • Carefully evaluate whistleblower allegations.
  • Request regular updates from outside counsel, without limiting the investigation.
  • Consider whether an oral report at the conclusion of the investigation is sufficient.

The authors conclude their piece by stating, “By keeping in mind the issues addressed above, the Board will be better prepared for the investigation and readily able to exercise good judgment throughout the review. A well-conducted investigation by the Board may spare the company further disruption and costs associated with follow-on investigations by the regulators, or at the very least minimize the company’s exposure.”

Three key takeaways:

  1. Retain the right counsel. Consider conflicts and appearance.
  2. Carefully evaluate all whistleblower allegations and reject retaliation.
  3. Consider receiving oral reports on an ongoing basis and one lengthy oral report at the end of the investigation.
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31 Days to More Effective Compliance Programs

One Month to More Effective Reporting and Investigations – Board Investigation Protocols

Many companies have an investigation protocol in place when a potential compliance violation or other legal issue arises. However, many Boards of Directors do not have the same rigor when it comes to an investigation, which should be conducted or led by the Board itself. The consequences of this lack of foresight can be problematic, because if a Board does handle an investigation right, the consequences to the company, its reputation and value can be quite severe. The SEC considers a variety of factors around corporate investigations including: Did management, the board or committees consisting solely of outside directors oversee the review? Did company employees or outside persons perform the review? If outside persons, have they done other work for the company?

Dan Chapman has said this is the time for a very frank conversation with your Board about what such an investigation will entail. Costs must be adequately discussed to set proper expectations. These include both direct costs and, what Chapman believes may be even more important, a discussion of indirect costs to the company. He noted, “the biggest cost to a company during an investigation is the diversion of management resources” and, as he further explained, “everything stops to focus on the investigation.” This indirect cost comes through largely the time commitment of senior management. He further explained, “if senior management has to commit 20% of their time to the investigation, that’s 20% that’s not going towards revenue generating, shareholder value protecting activities.”

Finally, Jonathan Marks has noted after notification of serious allegations, Boards should take the following steps:

• Consider creating a Special Committee to conduct the investigation;

• Establish a committee charter;

• Preserve the electronic and hardcopy documentation environment;

• Communicate with external auditors; and

• Plan potential communication with the SEC, DOJ, and the relevant stock exchange.

Marks also notes that while a special committee might be necessary in certain rare circumstances, the Board should try to avoid forming a special investigative committee to oversee the investigation if the Audit Committee is composed of independent and disinterested directors that are suited for the task. A special committee must be disbanded at some point (usually once the investigation is completed and before the restatement process begins), and the disbanding could become a complicated news item. Conversely, if the Audit Committee oversees the investigation, then, once the investigation is complete, they can pivot back to their normal role, which would include overseeing the actual restatement process. Investigations overseen by the Audit Committee also benefit from the positive relationship that the committee chair usually has with the audit partner of the company’s external auditor.

 Three key takeaways:

1. The Board should have a written protocol for investigations prepared in advance.

2. Any Board led investigation must be both credible and objective.

3. The investigation must be thorough but the Board can be cost effective.

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31 Days to More Effective Compliance Programs

One Month to a More Effective Board – Vin DiCianni on Board Inquiries into Compliance

Where does “tone at the top” start? With any public and most private U.S. companies, it is at the Board of Directors. But what is the role of a company’s Board in compliance? We start with several general statements about the role of a Board in U.S. companies. First, a Board should not engage in management but should engage in oversight of a CEO and senior management. The Board does this by asking hard questions, risk assessment, and identification.

A white paper by Deloitte & Touche LLP, entitled, Risk Intelligence Governance—A Practical Guide for Boards, laid out six general principles to help guide Boards in the area of risk governance. These six areas can be summarized as follows:

• Define the Board’s role. There must be a mutual understanding between the Board, CEO and senior management of the Board’s responsibilities.

• Foster a culture of risk management. All stakeholders should understand the risks involved and manage such risks accordingly.

• Incorporate risk management directly into a strategy. Oversee the design and implementation of risk evaluation and analysis.

• Help define the company’s appetite for risk. All stakeholders need to understand the company’s appetite or lack thereof for risk.

• How to execute the risk management process. Maintain an approach that is continually monitored and has continuing accountability.

• How to benchmark and evaluate the process. Systems need to be installed which allow for evaluation and modifying the risk management process as more information becomes available or facts or assumptions change.

All of these factors can be easily adapted to compliance and ethics risk management oversight. Initially it must be important that the Board receive direct access to such information on a company’s policies on this issue.

 Three key takeaways:

1. The Board’s role is to keep really bad things from happening to a company.

2. There are six general areas the point can inquire into and lead from.

3. A Board should have direct access to information on the company’s compliance program.