Tag: compliance

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31 Days to More Effective Compliance Programs

One Month to a More Effective Compliance Program with Boards – Incorporating Compliance into a Long-Term Corporate Strategy

How can a Board work incorporate the compliance function into a long-term business strategy of the organization?

The starting point for a Board of Directors is to develop a framework for incorporating compliance into your long-term strategy. To set up the framework for evaluating compliance into your Board’s long-term strategy is a three-step process, which you can use to determine how comprehensive the Board’s role in your compliance program is as a starting point.

1. Has the company identified the compliance issues relevant to the Board?

2. Has the company assessed and incorporated those compliance issues into its long-term strategy?

3. Has the company communicated its approach to compliance and the influence of those factors on its overall strategy?

From this initial inquiry, you can move into some specific questions that the Board can use to determine the overall state of your company’s compliance program. First, a Board can work to identify compliance issues material to your organization. This can be accomplished with compliance-related KPIs, which a Board should prioritize to elevate their impact on compliance. A Board should consider these through the life cycle of a business line or geographic sales area. Next, the Board should work to move compliance into the company’s long-term strategy and have the CCO detail the long-term strategy for the compliance function.

The Board should oversee incorporating KPIs into senior management performance evaluations and compensation. Once again building upon the 2020 Update, which asks how the company monitors its senior leadership’s behavior and how senior leadership models proper behavior to subordinates, the Board should make certain systems are in place to quantify or measure performance related to compliance issues, should establish performance goals against which they measure compliance achievement and disclose to shareholders the material compliance issues that drive compensation, the specific goals or performance targets that management must achieve and report on the actual performance against established goals to justify compensation payouts.

Finally, the Board should work to communicate the influence of compliance factors on overall corporate strategy by demonstrating how compliance was integrated into the business. Not only is this good from a business perspective and shareholder expectation, but it is also, as the 2020 Update makes clear, what the government expects is the operationalization of compliance going forward.

1. Having a long-term strategy is critical.

2. What is the Board’s framework for assessing compliance?

3. Create KPIs to measure senior management’s actions around compliance.

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Innovation in Compliance

Messaging Compliance in a Shifting Regulatory Landscape: Part 1 – The Future is Now: U.S. Regulatory Compliance

Is messaging compliance giving your compliance function headaches? Welcome to a special 5 part podcast post series, messaging compliance in a shifting regulatory landscape, sponsored by Global Relay. Over this series, I will visit with Chip Jones, Executive Vice President – Compliance at Global Relay;  Alex Viall, Chief Strategy Officer at Global Relay; Rob Mason, Director, Regulatory Intelligence at Global Relay; Jennifer Clarke, Head of Content at Global Relay; and Raewyn Danvers, Sales Manager, Unified Communications. Over this series, we will consider the US and UK regulatory framework for messaging apps, consider if business innovation is being stifled by regulatory action, preview the Global Relay Report: Compliant Communications in 2023, and look down the road on how to stay Ahead of regulation with the compliant communications in one app.

In this Part 1, I visit with Chip Jones, Executive VP of Compliance at Global Relay, on the current US regulatory landscape for messaging apps and discuss the challenges of maintaining communication compliance in various industries, focusing on off-channel communications, particularly in the financial services industry. Chip shares insights on the recent collective settlement issued by the SEC, which sends a clear message to firms about the importance of adhering to internal communication retention and supervision policies. Learn about how Global Relay is helping firms monitor their communications to detect fraudulent activities and avoid compliance issues. Take advantage of this informative podcast, which ends with a teaser for the next episode on the impact of regulatory action on business innovation.

Key Highlights:

  • The Challenges of Regulatory Compliance in the US
  • SEC enforcement actions on communication violations
  • Monitoring Electronic Communications in Financial Services
  • Off-channel Communications Consequences

For more information, go to Global Relay.

Join us in our next episode, where we ask: Is business innovation stifled by regulatory action?

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Blog

Messaging Compliance in a Shifting Regulatory Landscape: U.S. Regulatory Compliance

Are you ready to learn how to implement electronic communications capture and supervision in your firm for better compliance and prevention of regulatory violations? Is messaging compliance giving your compliance function headaches? Welcome to a special 5 part blog post series on messaging compliance in a shifting regulatory landscape, sponsored by Global Relay. In this Part 1, I visited with Chip Jones on the current US regulatory landscape for messaging apps.

The importance of capturing and supervising electronic communications cannot be overstated for financial services compliance professionals. By properly managing these communications, you are taking a proactive approach to preventing potential regulatory violations and protecting both your personal and professional reputation. Through implementing a robust communication compliance policy, training your employees, and establishing a monitoring process, you can ensure a secure and compliant environment in which your firm can thrive.

Here are the key steps:

  • Understand electronic communication regulations;
  • Choose a reliable communication capture tool;
  • Implement a clear communication compliance policy;
  • Train employees on communication best practices; and
  • Establish a monitoring and supervision process.

 1. Understand electronic communication regulations.

In the ever-evolving world of financial services, electronic communication regulations play a critical role in ensuring transparency, accountability, and compliance. Familiarizing yourself with these regulations is the first essential step in implementing effective Electronic Communications Capture and Supervision (ECCS) processes at your firm. By understanding the governing rules and industry standards, financial service professionals can avoid potential pitfalls and unwarranted regulatory scrutiny.

In light of the SEC’s enforcement actions against large investment banks, it becomes apparent how crucial it is to stay informed of these regulations and maintain proactive supervision. The use of electronic communication tools, enables firms to monitor their internal communications closely and prevent regulatory violations. One effective method is to actively flag specific phrases and keywords that indicate off-channel communications, which in turn draws attention to and helps monitor those potential risks.

2. Choose a reliable communication capture tool.

Implementing electronic communication capture and supervision within a financial firm is essential for ensuring compliance with regulatory requirements and maintaining a transparent and accountable work environment. When choosing a reliable communication capture tool, it is crucial to consider its effectiveness in monitoring and archiving all forms of electronic communication within the organization. This includes emails, instant messages, social media interactions, and any other relevant communication channels. A dependable tool should be able to capture and retain all electronic communications while additionally providing the option to search, analyze, and review the retained data for potential regulatory violations or areas of concern.

One way their solution helps is by tracking phrases and words that may suggest an attempt to shift discussions to off-channel platforms. This raises a red flag, which allows compliance professionals to identify potential violations and take appropriate action. The Securities and Exchange Commission (SEC) is increasingly focusing on individuals within firms who breach regulatory guidelines. As a result, the SEC may impose stronger consequences such as termination or monetary actions to deter similar violations from occurring.  The implementation of a reliable communication capture tool is essential for a firm’s overall compliance efforts, as it helps promote transparency and instills accountability within the organization.

Ensuring that electronic communications are monitored and retained reduces the likelihood of rogue representatives pushing unsuitable investments or engaging in other illegal activities. Furthermore, the use of reliable tools can provide financial firms with a solid foundation for communication compliance supervision, which regulators are increasingly emphasizing. As compliance professionals are likely to face more individual-level enforcement actions, firms must have the right tools and processes in place to maintain compliance and mitigate potential risks.

 3. Implement and train employees on a clear communication compliance policy.

Implementing a clear communication compliance policy is an essential step in ensuring your firm’s electronic communications are appropriately supervised and within regulatory requirements. By establishing a well-structured policy, compliance professionals can effectively monitor and mitigate potential risks, which may result in regulatory violations and penalties. A comprehensive compliance policy should address the monitoring of on- and off-channel communications, identify patterns of misconduct, and establish procedures to escalate and resolve potential issues.

A robust policy should educate employees on the importance of proper communication compliance and the dangers of using personal devices for business communications.  The regulators, including the SEC, are closely monitoring and enforcing communication compliance rules, increasing the potential for individual-level actions, such as termination or monetary penalties, against those violating such requirements.  Understanding and implementing a communication compliance policy is crucial for financial services compliance professionals to mitigate the risk of regulatory violations.

By proactively monitoring electronic communications and capturing data, firms can equip their compliance teams with invaluable information to identify and address potential issues early. Moreover, implementing a robust compliance policy can help encourage employees to maintain transparency in their communications and understand the importance of using appropriate channels for business purposes. In doing so, organizations can effectively minimize regulatory risks, protect their reputation, and ensure the highest standard of integrity in their business operations.

In today’s fast-paced financial services industry, ensuring compliance with electronic communication regulations is more vital than ever. By following the steps outlined in this blog post, compliance professionals like you can significantly reduce the risk of regulatory violations and protect your firm’s reputation. Remember, a well-thought-out communication compliance policy, coupled with employee training and a reliable communication capture tool, can provide the foundation for a robust compliance program. Don’t hesitate to take action – invest in the right tools and processes to safeguard your firm’s future.

Join us tomorrow when we ask the provocative question: Is Regulation stifling innovation?

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Corruption, Crime and Compliance

Crypto Conundrum: Coinbase vs. SEC – A Deep Dive with Matt Stankiewicz

The complex relationship between digital currencies and global financial regulations is highlighted yet again with the SEC’s recent crack down on major crypto exchanges Binance and Coinbase. Michael Volkov welcomes Matt Stankiewicz, also known as Crypto Max, to share his insight on these ongoing cases. He discusses the implications these enforcement actions might have on the industry, the securities law-related legal issues, and the internal mechanics of these exchanges.

Matt Stankiewicz is a Managing Counsel at The Volkov Law Group. His expertise includes financial regulation and compliance, with a focus on securities, anti-money laundering (AML), and cryptocurrency regulation. Given his professional background and interest in crypto regulations, he is a frequent speaker on legal matters concerning cryptocurrency exchanges and the SEC.

 

You’ll hear Michael and Matt discuss:

  • The SEC’s enforcement actions hinge on their assertion that Binance was serving US customers without the proper registration, thereby violating securities laws. They allege that Binance knowingly allowed and even encouraged US customers to utilize their offshore platform, enhancing their profits and trading volumes but breaching US regulations in the process.
  • Rather than directly challenging the status of specific tokens, the SEC is targeting exchanges like Binance and Coinbase. By regulating these exchanges, the SEC could effectively control the access points to the crypto industry, thus having a broader impact.
  • Binance is preparing for a legal fight with the SEC over these compliance issues, including allegations of wash trading to artificially inflate trading volume. The platform’s potential troubles are linked to similar issues faced by FTX and their trading arm, Alimator Research.
  • Given the recent pattern of the SEC bringing complaints without the DOJ pursuing criminal cases, it’s unlikely that the DOJ will bring a criminal case against Binance. 
  • Coinbase’s IPO was approved by the SEC despite allegations that the company had engaged in illegal activities related to the trading of unregistered securities. The SEC argues that the approval of an IPO doesn’t guarantee the legality of the company’s underlying operations, but this could be seen as contradictory to the SEC’s stated role of protecting investors.
  • Coinbase, in attempting to comply with securities regulations and being continuously rebuffed by the SEC, is the most compliant cryptocurrency exchange. However, should the SEC crack down on Coinbase and other major U.S. exchanges, it could push investors to offshore exchanges where the SEC has limited jurisdiction and where there is a higher risk of fraud. 

 

KEY QUOTES

“The SEC is taking obvious actions to show that they are very aggressive in their enforcement actions.” – Matt Stankiewicz

 

“This is a perfect reminder for everyone listening, whether you’re into crypto or not. If you are working internally with your email or you’re in [a] corporate chat, that can all be discoverable in future litigation. And you need to be careful what you say.” – Matt Staniewicz

 

“It is a very poor look in the court of public opinion for the SEC to stand on the ground of saying, ‘We are here to protect investors,’ but [avoid] stopping this before investors have a chance to throw all their money in that IPO.” – Matt Stankiewicz

 

Resources

Matt Stankiewicz on LinkedIn

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31 Days to More Effective Compliance Programs

One Month to a More Effective Compliance Program with Boards – The Board and Succession Planning

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.

  1. Examine the key corporate documents.
  2. Use an assessment framework.
  3. Conduct due diligence.
  4. Maintain a pipeline.
  5. Assess Board policies.
  6. Disclose your succession strategy.
  7. 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.

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Principled Podcast

Principled Podcast – S9 E 19 – The Value of Cross-Functional Collaboration for Compliance Program Effectiveness

What you’ll learn on this podcast episode

As the regulatory environment continues to evolve and organizations adapt, it is becoming increasingly important for ethics and compliance professionals to break down department silos.  But how do you do that effectively when so many stakeholders are involved? How do you develop a stronger network of assurance partners inside your organization? On this episode of LRN’s Principled Podcast, host Dave Hansen talks about the impact of cross-functional collaboration on program effectiveness with Tony Tocco, the chief ethics and compliance officer and assistant corporate secretary of DT Midstream.

Guest: Tony Tocco

Tony Tocco – Grayscale

Anthony M. Tocco (Tony) is the chief ethics and compliance officer and assistant corporate secretary at DT Midstream. He is responsible for overseeing the development and implementation of effective programs and processes to promote an ethical culture and compliance with applicable laws and regulations. He also provides board governance and support responsibilities as the assistant corporate secretary.  

Tony joined DT Midstream as part of the business unit spin from DTE, where he began as the manager of Audit Services in 2001 as a result of the merger with MCN Energy Group.  In 2002, he was promoted to assistant general auditor and subsequently performed as interim general auditor for a period. During this time, Tony directed the developing and implementing of the independent centralized testing center for Sarbanes-Oxley Act compliance and supporting corporate governance policies and procedures. 

Prior to joining DTE Energy, Tony held leadership positions in the MCN Energy Internal Audit department and Michigan Consolidated Gas Company’s Corporate Security & Investigations department. Tony has approximately 30 years of compliance-related experience in the utility and energy industry. Tony also has four additional years of compliance experience working for the Department of Defense in reviewing and auditing defense contracts and also established the internal audit department for a major Michigan public university. 

Tony earned a Bachelor of Science degree in accounting from Detroit College of Business, an MBA from Wayne State University, and a Master of Science degree in security administration from the University of Detroit-Mercy. Tony is a Certified Compliance and Ethics Professional (CCEP), a Certified Internal Auditor (CIA), and a Certified Fraud Examiner (CFE).   

Tony is a member of the Ethics and Compliance Institute (ECI), the Society for Corporate Compliance and Ethics (SCCE), the Institute of Internal Auditors (IIA), the Association of Certified Fraud Examiners (ACFE), and the Society for Corporate Governance.   

Tony also has lectured for the Institute of Internal Auditors, the Society for Corporate Compliance and Ethics, the Compliance and Ethics Officer Association, Compliance Week, and the University of Detroit-Mercy. Tony is a former chairperson for the Ethics and Compliance Officer Association Utility Industry Group, which is comprised of approximately 70 utility companies. Tony serves on the CCEP Exam Writing Committee and is on the Board of Big Brothers Big Sisters of Metropolitan Detroit as development committee chair. 

Host: Dave Hansen

Principled_Podcast_Dave-Hansen_Host

Dave Hansen is the global advocacy marketing director at LRN, an organization focused on ethics and compliance solutions that help people around the world do the right thing. His team drives LRN’s customer obsession by building community, deepening customer engagement, and finding meaningful opportunities for collaboration. Dave is passionate about learning, having spent most of his career in higher education or training. He loves sharing customer stories and best practices in the name of continuous improvement. Dave is a proud dad, coffee enthusiast, drummer, and scuba diver. In his spare time, he enjoys cooking and reading!

   

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FCPA Compliance Report

FCPA Compliance Report – Measuring Ethical Culture & Compliance Training Impact

Welcome to the award-winning FCPA Compliance Report, the longest-running podcast in compliance. In the latest episode of FCPA Compliance Report, Tom Fox speaks with Parijat Jauhari and Susan Divers, both with LRN, about their new tool, Catalyst Reveal, which helps compliance professionals deal with the new DOJ requirements around culture assessment, risk management, monitoring, and improvement. They explain how Catalyst Reveal goes beyond traditional methods of measuring the effectiveness of compliance training and that the platform includes completion data, culture data, and learner sentiment analysis to determine training effectiveness.

They also discuss the importance of benchmarking, which allows for easy comparison of clients within the same industry and revenue band. Plus, find out about their upcoming additions to their product and how they can provide solutions to challenges posed by the Department of Justice. Tune in now to discover how Catalyst Reveal can help compliance professionals fulfill their obligations under the 2023 Evaluation of Corporate Compliance Programs. 

Key Highlights

·      Measuring Ethical Culture

·      Enhancing Compliance Training Effectiveness

·      Challenges in measuring training impact

·      Data Analytics in Compliance Training

·      Benchmarking and Data-driven compliance training

Notable Quotes

“This is the most exciting development in this space in all the time that I’ve been working in ethics and compliance because it allows companies and chief ethics and compliance officers and their teams to move beyond what I would call dead data.”

“The culture pulse survey that we’ve included in this which is the ethical culture pulse survey. That’s its full title. It asks questions in real time about levels of engagement from the employee base and levels of respect levels of transparency, levels of organizational justice. And that that is a breakthrough.”

“What this tells you is it goes beyond we had a  warm seat. for this training to say, we had people take it, and a lot of people in this group really struggled with facilitation payments or with what is an actual conflict of interest. And this is an area that compliance officers really struggle with.”

“We are really using some new technology, machine learning to mine the data because it’s you’re accumulating it every day that employees are actually.”

Resources

Parijat Jauhari on LinkedIn

Susan Divers on LinkedIn

LRN

Tom Fox

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Facebook

YouTube

Twitter

LinkedIn

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Blog

Building a Stronger Culture of Compliance Through Targeted and Effective Training: Part 5 – The Role of the Board of Directors

Welcome to a special 5 part blog post series on building a stronger culture of compliance through targeted and effective training, sponsored by Diligent. Over this series, Tom Fox visits with Kunal Agrawal, Director of Customer Success at Diligent; Kevin McCoy, Customer Success Manager at Diligent; Jessica Czeczuga, Director, Compliance and Ethics at Diligent; Andrew Rincón, Client Director at Diligent; and David Greenberg, former CEO and Special Advisor at LRN and Director at International Seaways. Over this series, we will consider the importance of ongoing communications, the value of targeted training, training third parties, and the role of the Board of Directors. In this Part 5, we discuss the role of the Board of Directors in a compliance program.

Navigating the complex corporate governance and compliance world is challenging but essential for board members. Ensuring the company operates within legal, ethical, and social confines is vital to effective board governance. Boards that fail to achieve high compliance standards can suffer reputational damage, financial penalties, and even legal consequences. It is, therefore, critical for board members to engage with the importance of their oversight role and invest in the necessary education and best practices to ensure they effectively fulfill this responsibility. Here are the key steps:

1. Understand the Board’s oversight responsibilities.

2. Establish strong communication with management.

3. Ensure compliance programs are integrated into the company’s DNA.

Understand the Board’s oversight responsibilities. Board members ensure a company’s ethical standards, compliance, and performance.  Understanding a Board’s oversight responsibilities is paramount to effectively governing and managing the organization. Every Board has a fiduciary duty to protect the stakeholders’ interests and ensure the company’s compliance with laws, regulations, and policies. To meet this legal requirement, Board members should know current best practices, emerging trends, and the legislative and regulatory landscape and be prepared to ask tough questions, follow up, and support management in executing the company’s plans.

Greenberg discussed the importance of a healthy relationship between the Board and the Chief Compliance Officer (CCO). Greenberg emphasized that the role of the Board is one of oversight rather than execution. This entails the need for ongoing dialogue and frequent reporting by the CCO to ensure the Board is informed of the company’s activities, risks, and potential blind spots. Greenberg also recommends that oversight committees take a hands-on deep-dive approach to identify and address potential issues, ensuring the compliance program is ingrained within the company culture and business strategy. Companies must find the appropriate committee with the right people and relevant interests to oversee compliance and advocate for common membership across committees to ensure strategic integration and prevent fragmentation. For Board members, understanding their oversight responsibilities is essential to foster robust corporate governance, risk management, and compliance.

Establish strong communication with management. Establishing strong communication with management is critical for an effective board oversight process. This key step involves board members working closely with senior management and the CCO to ensure that all compliance-related matters are addressed promptly and accurately. By fostering a healthy rapport with management, Board members can actively engage in oversight and be more proactive in remedying compliance-related issues. This collaborative relationship between the Board and management is essential for companies to maintain compliance with laws and policies, ultimately safeguarding the organization’s reputation and performance. Greenberg emphasizes the importance of strong communication between the compliance officers and the Board.

CCOs should develop close relationships with board members, much like senior managers. Greenberg noted this could involve CCOs meeting with board members outside of scheduled meetings to discuss concerns or potential issues. By doing so, a CCO can build trust and foster open communication, allowing board members to comprehensively understand the company’s compliance efforts. Greenberg also emphasized the value of having the right committee and membership, which includes individuals with the background, interests, and time necessary to effectively carry out their oversight duties. This key step is vital for board members because open and direct communication with management enables the Board to strategically address compliance matters, resulting in improved oversight and risk mitigation. Moreover, when board members have a strong rapport with management, they can proactively identify and address any issues before escalating.

Ensure compliance programs are integrated into the company’s DNA. In successfully executing their compliance oversight duties, Boards must ensure that their compliance programs are integrated into the company’s DNA, or as the DOJ says, it’s all about culture. Such integration fosters a strong culture of compliance, which is crucial in minimizing misconduct, reducing legal risks, and protecting the organization’s reputation. By incorporating compliance as a core element within the company’s strategic planning, daily operations, and employee training, boards can better manage risks and ensure adherence to relevant laws, regulations, and policies. Further, a fully integrated compliance program will enhance overall corporate performance, customer trust, and employee engagement.

For a Board to effectively exercise its oversight duties, compliance programs should be tailored to the organization’s business strategy, culture, and resources. The relationship between the Board, senior management, and the CCO can facilitate effective communication and better coordination in addressing critical ethics and compliance matters. The Board must ask tough questions and dive deep into possible issues to ensure transparency and accountability. By embedding compliance within the organization’s structural and cultural fabric, boards can create a robust environment that discourages misconduct while promoting transparency, accountability, and ethical behavior. This safeguards the company’s reputation, financial performance, and regulatory compliance. Ensuring seamless integration of compliance programs is a vital obligation for the boards, enabling them to effectively fulfill their oversight responsibilities and protect the organization’s long-term interests.

For Board members, the importance of robust oversight and compliance cannot be overstated, especially in a world where regulatory scrutiny grows more intense by the day. By following these steps, you can hone your understanding of the Board’s oversight responsibilities, establish solid communication channels with management, and embed a culture of compliance across your organization. Equipping yourself with these essential practices empowers you to tackle complex compliance challenges head-on and steer your organization toward success. As you continue sharpening your oversight skills, you will foster a resilient compliance framework that safeguards your organization and its stakeholders.

For more information, go to Diligent.com.

Categories
Innovation in Compliance

Building a Stronger Culture of Compliance Through Targeted and Effective Training: Part 5 – The Role of the Board

Welcome to a special 5 part podcast series on building a stronger culture of compliance through targeted and effective training, sponsored by Diligent. Over this series, I will visit with Kunal Agrawal, Director of Customer Success at Diligent; Kevin McCoy, Customer Success Manager at Diligent; Jessica Czeczuga, Director, Compliance and Ethics at Diligent; Andrew Rincón, Client Director at Diligent; and David Greenberg, former CEO and Special Advisor at LRN and Director at International Seaways. Over this series, we will consider the importance of ongoing communications, the value of targeted training, training third parties, and the role of the Board of Directors. In this concluding Part 5, we consider the role of the Board of Directors in a compliance program with David Greenberg.

In this episode, Greenberg discusses the board’s legal obligations, emphasizing their duty to exercise reasonable oversight over potential misconduct and failures of compliance with law and policy. The podcast also delves into the importance of integrating compliance programs into a company’s overall strategy and developing strong relationships with senior management, such as the chief legal officer or chief compliance officer. Listeners will learn the importance of finding the right committee to oversee compliance obligations and utilizing outside experts for insight and guidance. This conversation is essential for board members and executives who want to ensure accountability, initiate change, and drive organizational success. Don’t miss out on this informative and engaging episode of “The Role of the Board” episode.

Key Highlights:

  • Legal obligations and oversight for corporate boards
  • Importance of integrating compliance into the company culture
  • Board Oversight and Relationship Building with CCO
  • The Significance of Outside Perspectives for Boards

Notable Quotes:

“There is a strong obligation on boards to exercise reasonable oversight over all potential misconduct and failures of compliance law and policy should a reasonable board has known and taken steps…should that body have known and should it have done more than it did.”

“Boards principally should be asking tough questions and following up on those questions.”

“Anything that is not integrated into the real levers and machinery of the business will not be successful.”

“That chief compliance officer who knows the head of the audit committee or compliance committee or governance committee is much more able and comfortable picking up the phone and saying to the chair, Houston, we’ve got a problem.”

For more information go to Diligent.com

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31 Days to More Effective Compliance Programs

One Month to a More Effective Compliance Program with Boards – The Board Role in Hiring

What is the role of a Board of Directors in hiring senior executives, CCOs, and even other board members? I explored this issue with Candice Tal, who began by noting, that bad senior executive hires can cost a company much more than simply dollars. She related, the “financial costs in day-to-day operations easily can quadruple that of a regular employee, but it can also impact the company’s corporate governance and board of directors if that executive hire was found to be involved with unethical and illegal activities. Not even a signed contract can protect a company if an executive hire’s unethical actions come to the attention of the national media. Fiduciary risk and exposure for the board of directors cannot be overlooked.”

She pointed to the example of Yahoo! and its hire of Scott Thompson. It turned out that Thompson had incorrect information in his online biography regarding his academic credentials. The “implications went beyond the activist shareholder accusations to reflect on the Board of Directors for not vetting his background more carefully. The company may have been exposed to claims of providing false information to the SEC and potential stockholder lawsuits. Thompson’s 120-day tenure at Yahoo! cost the company over $7 million and seriously tarnished the company’s reputation in the business community.”

The key is that a company engages in an executive due diligence investigation rather than simply a routine or even executive-level background investigation. Tal explained that an executive background search is “typically limited to a five-component review of criminal records, employment verification, degree or education verification, social security validation, address verification and sometimes credit history.” Such searches are “very limited searches.”

Conversely, executive due diligence, “looks in-depth at all available public records sources: criminal history, civil litigation issues, financial and legal issues, relationships with other companies and board advisory positions, reputation, misrepresented education and overstated work history, behavioral history (for example litigiousness), and, in particular, undisclosed or adverse issues.” While it is generally “more costly than executive background checks and takes more time, the information gathered is extremely valuable and can save a company substantially more. A high-quality due diligence review can find important information which would not be returned in a routine executive background check.”

Infortal has found that up to 20% of executive search candidates fail a deep-level due diligence investigation. Now consider how many senior executive slots your company has and add to that Board of Directors seats and you can quickly see the risk of failure to consider an executive due diligence search when promoting or hiring. Moreover, you need executive-level due diligence in other business situations as well, including the senior management of new business acquisitions brought into your organization through a merger or other acquisition, selecting new Board members, screening the corporate Board of Directors, and of course, for third party business partners and other agents in the sales and supply chain channels. 

Three key takeaways:

  1. The costs of a bad executive hire can far exceed the dollar loss.
  2. Do not forget the differences between an executive background check and executive level due diligence.
  3. 20% of all senior executives fail an executive level due diligence check.

For more information, check out The Compliance Handbook, 4th edition, available here.