Tag: compliance

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Rethinking the Employee Experience from the Compliance Perspective

In today’s competitive labor market, retaining top talent is more than just a human resources challenge but a compliance priority. This is one insight from the Harvard Business Review article, What Companies Get Wrong About the Employee Experience. In this piece, the authors outline actionable lessons and steps that compliance professionals can integrate to enhance ethical culture, reduce turnover risks, and strengthen compliance outcomes. Here’s how reimagining the employee experience aligns with robust compliance strategies.

The Intersection of Employee Experience and Compliance

The article emphasizes that many organizations must offer gratifying work experiences, leading to attrition and disengagement. For compliance professionals, these failures are alarming. Disengaged employees are less likely to follow compliance protocols, report concerns, or participate in ethical initiatives. High turnover amplifies this risk by disrupting organizational knowledge and weakening cultural consistency.

Every compliance professional understands that a well-designed employee experience fosters trust, transparency, and ethical alignment, all of which are critical for a strong compliance program. The Department of Justice (DOJ) also recognizes this. In the Monaco Memo, the DOJ pointed to corporate culture as a key indicator of an effective, operationalized compliance regime. In the 2024 Evaluation of Corporate Compliance Programs (ECCP), the DOJ further clarified its expectations in this area of compliance.

The Push and Pull of Employee Retention

While it should be discussed more, every corporate compliance function should thoroughly consider this issue of employee retention. The 2024 reiterated the DOJ position that the compliance function is the keeper of both Institutional Fairness and Institutional Justice and from these precepts, it is a clear entry point into compliance. The article identifies two forces driving employee departures and retention.

  • Push Factors are negative experiences, such as lack of trust, feeling undervalued, or toxic management. Push Factors can lead to ethical breaches, as disengaged employees may cut corners or fail to report misconduct.
  • Pull Factors. These provide employees with opportunities for alignment, flexibility, and personal growth. Pull Factors emphasize the need for a compliance-driven culture that aligns personal values with organizational integrity.

For the compliance professional, you must mitigate push factors by fostering a supportive, ethical environment and amplify pull factors by offering meaningful growth opportunities tied to compliance goals. It all starts with a true culture of speaking up and listening up. If employees feel they can safely speak up with no fear of retaliation and that their concerns will be heard, it can lead to more employee opportunities.

Proactive Compliance Strategies for Employee Engagement

What are some additional strategies for employee engagement? The authors recommend three transformative approaches to improve employee experiences, which also strengthen compliance initiatives:

  • Interview Employees Early and Often

Waiting until an exit interview is a missed opportunity. You should interview employees throughout the employment life cycle, from employment interviews and onboarding through the entire employment life. Compliance leaders should adopt proactive listening to understand and address employee concerns about ethical culture and workplace practices. Middle managers should be trained on not only how to accept information through a Speak Up culture but, equally importantly, how to Listen Up.

Another strategy could be to conduct regular “ethical climate surveys” to gauge employee sentiment about compliance. One example is the Culture AuditÔ developed by Sam Silverstein and his Accountability Institute. Whatever tool you might utilize, you should use the insights you obtain to refine training programs and policy enforcement.

  • Develop “Shadow” Job Descriptions

Traditional job descriptions often overlook the ethical dimensions of roles. I mentioned above how compliance can work to improve employee engagement as early as the interview process. You can also work to create “shadow” descriptions that highlight compliance responsibilities, ensuring employees understand the ethical expectations tied to their positions. The compliance function can collaborate with HR to embed compliance duties, such as reporting obligations and ethical decision-making, into all job descriptions. You can begin communicating these expectations during the hiring process, then the onboarding process and regular evaluations.

  • Collaborate with HR to Align Roles with Progress

Flexibility in role design helps employees see a clear path for ethical growth within the organization, reducing the risk of disengagement. The DOJ has made both financial and non-financial incentives an essential part of every compliance program. This means compliance should partner with HR to create rotational programs that expose employees to compliance-related functions. The clear message at your organization should be that there are ethical leadership opportunities in your company that operate as a pathway to career advancement.

Leveraging Technology to Enhance Compliance and Employee Experience

While most compliance professionals only think about data, advanced analytics, and AI-driven tools in the context of transaction analysis, these tools are transforming how organizations approach employee engagement. For compliance teams, these technologies offer dual benefits. You can use real-time monitoring to track compliance, training participation, and ethical climate indicators. Moreover, analytics, such as sentiment analysis, identify areas of concern or disengagement that may correlate with compliance risks. You should deploy data analytics and AI-based or enhanced tools that flag anomalies in training completion rates or whistleblower program usage, enabling timely interventions.

 Building an Ethical Culture Employees Rehire Daily

The bottom line is that you are asking employees to choose to do business ethically and in compliance. Your ultimate goal is to create a workplace where employees actively select daily. Your organization is where compliance is a shared value rather than a mandate. Achieving this requires multiple and continuous steps. One is continuous dialogue to keep communication channels open to reinforce ethical values. When information shows anomalies forming or detected, you should create a targeted action plan to act on feedback to demonstrate commitment to improvement swiftly. Finally, data, key performance indicators, and other transparent metrics should be used to share progress on employee experience and compliance outcomes.

The Compliance-Employee Experience Connection

The employee experience is not just a human resources initiative but a cornerstone of effective compliance. Compliance professionals can build a resilient, ethical workplace by addressing the factors that drive employee satisfaction and retention. This isn’t just about preventing turnover; it is about creating a culture of trust and integrity that empowers employees to champion compliance. By integrating these principles into your compliance strategy, you retain top talent and fortify the ethical foundation that supports sustainable success.

Call to Action

How is your compliance program enhancing the employee experience? It is time to reimagine the intersection of ethics, culture, and engagement to create lasting value for your organization.

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Compliance Tip of the Day

Compliance Tip of the Day – Boards and Operationalizing Compliance

Welcome to “Compliance Tip of the Day,” the podcast where we bring you daily insights and practical advice on navigating the ever-evolving landscape of compliance and regulatory requirements. Whether you’re a seasoned compliance professional or just starting your journey, we aim to provide bite-sized, actionable tips to help you stay on top of your compliance game. Join us as we explore the latest industry trends, share best practices, and demystify complex compliance issues to keep your organization on the right side of the law. Tune in daily for your dose of compliance wisdom, and let’s make compliance a little less daunting, one tip at a time.

Your Board must work to operationalize compliance at all levels of your organization entirely.

For more information on the Ethico Toolkit for Middle Managers, available at no charge, click here.

Check out the full 3-book series, The Compliance Kids, on Amazon.com.

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Innovation in Compliance

Innovation in Compliance – Navigating Compliance and Innovation with Colin Darke

Innovation comes in many forms, and compliance professionals need to be ready for it and embrace it. Join Tom Fox, the Voice of Compliance, as he visits with top innovative minds, thinkers, and creators in the award-winning Innovation in Compliance podcast. In this episode, host Tom Fox visits with Colin Darke, an attorney and compliance professional with a diverse career spanning over twenty years.

Colin shares his journey from banking and finance law to in-house compliance roles, eventually co-founding CompliSun, an AI-enhanced compliance management system. Colin discusses his experience handling regulatory challenges, building compliance programs from scratch, and innovating within fintech. He also delves into his book ‘Unleashing Innovation: Compliance Strategies for FinTech Disruptors,’ which offers practical guidance for compliance professionals. Additionally, Colin explores his dual passion for art, explaining how being an artist has contributed to his mental well-being and professional success. Listeners will gain valuable insights into integrating AI in compliance, effective training techniques, and the importance of creating a strong compliance narrative for regulators.

Key highlights:

  • Colin Darke’s Professional Journey
  • Authorship and Book Insights
  • CompliSun: AI-Enhanced Compliance
  • Regulated vs. Non-Regulated Industries
  • AI Revolution in Compliance
  • Art and Compliance: A Unique Intersection

Resources:

Colin Darke on LinkedIn

CompliSun

Unleashing Innovation-Compliance Strategies for Fintech Disruptors

Tom Fox

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Compliance Tip of the Day

Compliance Tip of the Day – Compliance Obligation for Boards

Welcome to “Compliance Tip of the Day,” the podcast where we bring you daily insights and practical advice on navigating the ever-evolving landscape of compliance and regulatory requirements. Whether you’re a seasoned compliance professional or just starting your journey, we aim to provide bite-sized, actionable tips to help you stay on top of your compliance game. Join us as we explore the latest industry trends, share best practices, and demystify complex compliance issues to keep your organization on the right side of the law. Tune in daily for your dose of compliance wisdom, and let’s make compliance a little less daunting, one tip at a time.

Today, we begin considering Board obligations around compliance.

For more information on the Ethico Toolkit for Middle Managers, available at no charge, click here.

Check out the full 3-book series, The Compliance Kids, on Amazon.com.

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Blog

The Role of Compliance in Employee Retention

The fight to attract and retain top talent has long been a concern for corporate leaders, but the stakes are even higher for compliance professionals. The insights from the Harvard Business Review (HBR) article Why Employees Quit the authors offer actionable lessons that compliance professionals can integrate into their strategic efforts. Let’s explore how fostering a meaningful employee experience can mitigate compliance risks and strengthen organizational integrity.

The Compliance Costs of Employee Attrition

Employee turnover is more than a budgetary concern; it is also a compliance risk. When experienced employees leave, they take with them institutional knowledge, including an understanding of the organization’s policies, culture, and compliance framework. The cost of replacing employees ranges from 6 to 9 months of their salary—and for executive roles, it can double their annual pay. More insidiously, high attrition rates may signal deeper issues, such as cultural dysfunction or ethical lapses, which could attract regulatory scrutiny.

For the compliance professional, employee retention is not simply about the cost of replacement and retraining but about sustaining a culture of ethics and compliance. Addressing the root causes of turnover is an investment in long-term corporate resilience.

Understanding Employee Quests for Progress

The authors identify four primary motivations driving employees to switch jobs:

  1. Getting Out- escaping from toxic environments or dead-end roles.
  2. Regaining Control- seeking autonomy and work-life balance.
  3. Regaining Alignment – a desire for respect and utilization of skills.
  4. Taking the Next Step- pursuing growth opportunities.

Each of these quests resonates with compliance principles. For example, consistent policy enforcement may frustrate employees seeking alignment, while those striving for growth may feel supported by a lack of training or mentorship.

Compliance Takeaway: A compliance program should ensure adherence to laws and regulations and foster an environment where employees feel valued and empowered.

Proactive Measures: Compliance as a Partner in Employee Retention

The authors recommend three strategies for aligning employee experiences with organizational goals. Here’s how compliance can lead the charge:

  • Interview Employees Early and Often

Exit interviews should be conducted more often, but they should be too late. Instead, compliance professionals can implement regular “pulse checks” to assess the ethical climate and identify areas where employees feel unsupported. Consider aligning these efforts with the DOJ’s emphasis on continuous monitoring in compliance programs. As a practical step, include ethical climate questions in employee surveys and encourage anonymous reporting to surface hidden concerns.

  • Develop Shadow Job Descriptions

Official job descriptions often need to capture the dynamic realities of roles, leading to mismatched expectations. Compliance can play a pivotal role in ensuring these descriptions reflect the ethical responsibilities associated with the job. Your corporate compliance function should work closely with HR to include clear expectations for ethical behavior, reporting obligations, and compliance training in every role.

  • Collaborate with HR to Align Roles with Employee Progress

Flexible role design can create opportunities for employees to grow while adhering to compliance standards. This approach satisfies employees’ quests for progress and reduces the likelihood of ethical lapses driven by disengagement or frustration. This ties directly into what the DOJ wants to see around non-financial incentives for employees doing business ethically and in compliance. The 2024 ECCP speaks directly to this issue, and once again, compliance should partner with HR to design roles that balance individual aspirations with organizational needs, ensuring compliance remains a core element and fully incentivizes employees in and around compliance.

The Compliance Implications of “Pushes” and “Pulls”

The authors identify joint “push” factors, such as lack of trust, poor management, and generally poor culture, as well as “pull” factors, including alignment with values, flexibility, and a more positive corporate culture in job switches. Push Factors include a lack of trust in leadership, which often correlates with higher compliance risks. Employees disengaged from management will typically disengage from compliance initiatives. Conversely, Pull Factors enhance values-driven employees. Such employees are more likely to thrive in organizations that prioritize ethical behavior. Compliance professionals should pay close attention to these dynamics in their organizations. Moreover, for corporate compliance professionals, as the holders of Institutional Justice and Institutional Fairness in an organization, addressing push factors and amplifying pull factors can help create a culture where compliance is not merely a requirement but a shared value.

Technology’s Role in Enhancing the Employee Experience

Advanced compliance monitoring tools like AI-driven analytics can support compliance objectives and employee retention efforts. These tools can provide real-time insights into employee sentiment, flagging potential compliance risks while highlighting areas for improvement in the employee experience. Compliance professionals can utilize analytics to monitor ethical climate indicators, including response rates to compliance training and engagement in whistleblower programs.

Building a Workplace Employees Want to “Rehire” Every Day

Compliance professionals have a critical role in shaping an ethical, engaging workplace. By embedding employee-focused strategies into compliance initiatives, organizations can reduce turnover, strengthen their ethical culture, and build a more resilient compliance program.

The employee experience is no longer a “soft” issue; it is now imperative for compliance. By proactively addressing why employees leave, compliance leaders can ensure their organizations retain talent and integrity. For the CCO, you should ask: Are you engaging your employees in ways that align with compliance priorities? If not, it’s time to reimagine compliance as a partner in the employee experience. This intersection of compliance and employee experience is an opportunity to drive meaningful change. Compliance professionals need to seize it and move your entire culture forward.

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Greetings and Felicitations

Compliance Lessons from Venice – Episode 3, How the Lion’s Mouth Informs Hotlines

Welcome to a short podcast series on doing compliance with a Venetian twist. This week, we will examine three areas where Venice’s time-honored methods inform modern compliance practices. Over the next 3 episodes, we will consider going back to basics in your compliance regime, the use of incentives and consequences to drive a culture of compliance, and how the Lion’s Mouth informs your modern-day whistleblower program. In this concluding Episode 3, we look at how the historical governance of Venice informs modern compliance programs by looking at Venice’s prototype whistleblower program, the Lion’s Mouth.

In this episode, Tom highlights Venice’s early whistleblower systems, symbolized by the lion of St. Mark, and their implications for creating effective and trustworthy hotline programs. This series also offers best practices for setting up and maintaining robust hotline systems to ensure confidentiality, avoid retaliation, and comply with legal standards. You will draw valuable lessons from Venice’s rich history to enhance your organization’s compliance framework.

Key highlights:

  • Historical Context of Venice’s Whistleblower System
  • Best Practices for Hotline Reporting Systems
  • Additional Tips for Effective Hotline Implementation

For more information on the Ethico Toolkit for Middle Managers, available at no charge, click here.

Check out the full 3-book series, The Compliance Kids, on Amazon.com.

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Blog

Compliance Lessons from Venice – Part 3: Straight from the Lion’s Mouth and Whistleblower Programs

In the final part of the Compliance Lessons from Venice series, we focus on one of Venice’s earliest tools for addressing misconduct: a reporting system predating modern whistleblower programs. Known as the Lion’s Mouth, this system encouraged citizens to report wrongdoing by placing written complaints in the mouths of lion-head statues stationed around the city. The symbolism is potent: Venice’s emblematic lion acted as a protector, allowing citizens to expose corruption and misconduct while contributing to the Republic’s stability. Check out the companion podcast series on the Compliance Podcast Network.

Today, a robust whistleblower program is one of the most essential components of a best-practices compliance program. The DOJ and SEC have clarified that effective compliance programs must include reliable, confidential, and trusted internal reporting mechanisms. Venice’s Lion’s Mouth reminds the modern-day compliance professional that encouraging transparency and protecting those who speak up has been crucial for centuries. In this blog post, we will explore some best practices for modern whistleblower hotlines and reporting mechanisms, along with insights from Venice’s historical approach.

Venice’s Lion’s Mouth: An Early Whistleblower System

The Lion’s Mouth of Venice functioned as an anonymous drop box where citizens could submit grievances and report misconduct. Initially designed to offer anonymity, this system later required that the complainant’s name be included, balancing confidentiality with accountability. Citizens could report fraud, bribery, and other forms of misconduct, trusting that their submissions would be considered seriously.

The modern equivalent of this system is the whistleblower hotline, an invaluable tool for compliance departments to detect and address issues early. Companies can foster a culture of openness and accountability by enabling employees and stakeholders to report suspicious or unethical behavior without fear of retaliation. This practice is essential for organizations subject to laws like the Foreign Corrupt Practices Act (FCPA), where transparency can mean the difference between compliance and liability.

Key Elements of an Effective Whistleblower Hotline

Building an effective whistleblower system means going beyond merely setting up a hotline. It is about creating a trusted channel that employees feel safe using, knowing their concerns will be handled with discretion and integrity. Here are seven best practices to establish or enhance your whistleblower program, inspired by the Lion’s Mouth and aligned with the DOJ’s most recent guidance from the 2020 FCPA Resource Guide, 2nd edition, and the recently released 2024 Evaluation of Corporate Compliance Programs(2024 ECCP). The 2024 ECCP states, “Another hallmark of a well-designed compliance program is the existence of an efficient and trusted mechanism by which employees can anonymously or confidentially report allegations of a breach of the company’s code of conduct, company policies, or suspected or actual misconduct.”

  • External Management of the Hotline

Many organizations find that outsourcing their hotline to a third party adds a layer of impartiality and anonymity. Employees are often more comfortable reporting through an externally managed system than an internal one. An external provider typically brings specialized expertise in handling confidential reports, ensuring compliance with local laws and regulations. This neutrality encourages employees to come forward with concerns, knowing the system is transparent and managed independently.

  • Detailed Information Collection

A hotline should support collecting detailed information from the first report to the resolution stage. By maintaining a consolidated record of each complaint, compliance teams can analyze data trends across departments, locations, and types of issues reported. This visibility helps the organization proactively identify and address potential risk areas, ensuring the compliance team has a complete, chronological view of each complaint to support thorough investigations and better decision-making.

  • Compliance with Data Retention Policies

With data privacy regulations such as GDPR, it is essential to ensure that all whistleblower reports adhere to the company’s data retention and privacy policies. Hotlines should offer secure, report-only access to data, ensuring that information is stored correctly and compliant with regulatory requirements. This reduces the risk of sensitive data breaches and ensures compliance teams can retrieve reports for future audits or legal inquiries.

  • Inspiring Employee Confidence in the Hotline

A hotline will be ineffective if employees lack confidence in it. Retaliation, or the perception of it, can quickly destroy trust in a whistleblower program. Employees should feel assured that they can report concerns without fear of retaliation and that their complaints will be handled fairly and objectively. The hotline should offer privacy, allowing employees to file reports from locations outside of their immediate workplace or chain of command. These features create an environment where employees feel safe and protected when reporting misconduct.

  • Support from Subject Matter Experts

A hotline is only as effective as the follow-up on each report. Once a complaint is entered, it’s crucial to ensure that subject matter experts or designated compliance officers address it promptly. Ignoring or delaying response times can damage trust in the hotline. Additionally, under the Dodd-Frank whistleblower provisions, there’s a short timeframe for internal resolution before an employee can seek benefits under the program, making prompt attention to complaints a legal and ethical priority.

  • Litigation Support and Document Retention Tools

A well-configured hotline should offer tools to meet the legal requirements for document retention and protect whistleblower submissions as attorney work product or under attorney-client privilege, if applicable. Implementing these legal protections within the hotline system mitigates potential legal risks and strengthens the organization’s ability to defend its actions should litigation arise. Outsourcing these functionalities to a third-party provider can save costs and ensure compliance with all necessary legal protections.

  • Direct and Transparent Communication with Whistleblowers

Employees need to feel their voices are heard at the highest levels of the company. A hotline that allows for direct, private, and anonymous communication with compliance officers gives employees confidence that their concerns are receiving appropriate attention. This visibility signals that the organization values transparency and accountability, even when uncomfortable. Providing employees with status updates on their reports can also reinforce trust in the system.

Additional Tips for Maintaining an Effective Whistleblower Program

Building a whistleblower program that employees trust requires ongoing effort. Here are a few additional considerations for making the program effective and trusted across your organization:

  • Publicize the Hotline. Ensure all employees know the hotline’s existence, how to use it, and the protections in place. This can be achieved through regular training, informational posters, and reminders from senior management.
  • Encourage Reporting Without Fear of Retaliation. It’s crucial to communicate a zero-tolerance retaliation policy and enforce it when necessary. When employees see that the company protects and respects whistleblowers, they’re more likely to trust the system.
  • Analyze and Act on Data Trends. The absence of certain reports may indicate areas where employees feel unsafe or unwilling to report. Use hotline data to understand the company’s culture and identify areas where additional support or training may be needed.

Lessons from Venice’s Lion’s Mouth for Today’s Compliance Programs

The Lion’s Mouth system exemplifies the importance of giving citizens, whether in Venice or within a modern corporation, a way to report misconduct. Venice’s willingness to create a system where concerns could be voiced without fear of reprisal, while imperfect, reflects an early understanding of the importance of accountability and transparency. Today, we see this principle in the FCPA’s guidance and the DOJ’s endorsement of anonymous reporting mechanisms as part of effective compliance programs.

In designing an effective whistleblower program, compliance professionals should remember that it’s not just about setting up a hotline but building trust. An effective system enables employees to raise concerns in a protected, confidential, and responsive environment, contributing to a culture where transparency and integrity are valued and protected.

Honoring Venice’s Legacy in Modern Whistleblower Programs

As we close out our series on compliance lessons from Venice, it is fascinating to reflect on how this unique city-state has influenced governance, law, and compliance even today. The Lion’s Mouth may have been a primitive mechanism by today’s standards, but its spirit lives on in the whistleblower hotlines that empower employees to report wrongdoing and hold their organizations accountable.

By providing a trusted platform for employees to raise concerns, compliance professionals can create a culture where doing the right thing is supported and valued. The message is clear: just as Venice’s Lion symbolized protection and justice, a well-constructed whistleblower system should stand as a testament to an organization’s commitment to ethics, transparency, and accountability.

Thank you for joining me in this special series on compliance lessons from Venice. These insights remind us that the best compliance practices are sometimes rooted in history and that we can learn from past innovations to create a safer, more ethical future.

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Greetings and Felicitations

Compliance Lessons from Venice – Episode 2, The Arsenale and Creating a Culture of Compliance

Welcome to a short podcast series on doing compliance with a Venetian twist. This week, we will examine three areas where Venice’s time-honored methods inform modern compliance practices. Over the next 3 episodes, we will consider going back to basics in your compliance regime, the use of incentives and consequences to drive a culture of compliance, and how the Lion’s Mouth informs your modern-day whistleblower program. In episode 2, we see how Venice used financial and non-financial incentives and consequence management to create a culture of compliance in Venice’s largest business operation, Arsenale.

The Arsenale district in Venice was known for its shipbuilding prowess from the 1200s to the 1400s. By examining how Venice managed its critical shipbuilding workforce through both incentives and discipline, Tom draws valuable parallels to modern corporate compliance programs. He highlights that Venice implemented job security and compensatory incentives to promote loyalty while enforcing strict non-compete clauses and severe punishments for leaking state secrets. Tom emphasizes the importance of balancing positive incentives with clear disciplinary actions, aligning this historical example with contemporary guidance from the DOJ and SEC. These principles support recognizing compliance efforts through promotions, bonuses, and acknowledgments, which can foster ethical behavior and improve overall organizational integrity.

Key highlights:

  • Arsenale and Incentivizing Compliance
  • Historical Context and Compliance Insights
  • Punishments and Incentives in Venice
  • Modern Compliance Practices

For more information on the Ethico Toolkit for Middle Managers, available at no charge, click here.

Check out the full 3-book series, The Compliance Kids, on Amazon.com.

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Blog

Compliance Lessons from Venice – Episode 2: The Arsenale and Incentivizing Compliance

In part 2 of the Compliance Lessons from Venice series, we journey to the Arsenale, the historic heart of Venice’s shipbuilding industry. During Venice’s golden age, the Arsenale was a hub of ingenuity, productivity, and loyalty to the state. The Venetian fathers recognized the strategic importance of Arsenale’s workers and implemented a unique mix of incentives and discipline to protect their secrets, maintain a loyal workforce, and create a prototype culture of compliance. This blog post series is the written companion to the podcast series running on the Compliance Podcast Network.

Today, we can draw from Venice’s business expertise to inform our approach to incentivizing compliance. We focus on a blend of rewards and consequences to encourage ethical behavior, adherence to company values, and enhancement of culture. We will examine how Venice’s example aligns with the DOJ’s compliance guidance and offers valuable lessons for modern corporate compliance programs in the areas of incentives and consequences, together with the development of a culture of compliance.

The Arsenale: Venice’s Production Powerhouse

At its peak, the Venetian Arsenale employed around 12,000 workers, nearly 10% of the city’s population. Venice, one of the most powerful economic and military forces of its time, relied on the Arsenale to build, repair, and maintain its fleet. Here, Venice perfected the assembly line method, with workers laboring by hand to create state-of-the-art ships efficiently and at scale. This commitment to quality and security extended beyond production techniques; the shipbuilding secrets developed in the Arsenale were considered so valuable that they were treated as state secrets, with measures in place to protect the knowledge and the workforce’s loyalty.

The Venetian fathers understood that safeguarding this valuable knowledge required both a carrot and a stick approach. They developed a system that incentivized workers to stay loyal while imposing severe penalties for disloyalty or breaches of confidentiality.

Venice’s Approach to Incentives and Disincentives

Venice’s system was designed to support long-term loyalty, stability, and excellence among Arsenale workers, serving as a model for effective workforce management and protection of critical information. Key elements included:

  1. Job Security and Benefits. Workers at the Arsenale enjoyed job security and were compensated if they lost their ability to work due to injury or illness. Upon a worker’s death, the Arsenale provided funeral expenses and continued to support the family through stipends or alternative job placements for family members. This created a robust and personal investment in the success of the Arsenale, Venice’s population, and the entire city.
  2. Strict Confidentiality and Non-Compete Policies. Venice enacted strict measures to protect its intellectual property. Skilled workers were forbidden from leaving Venice to work for rival cities, effectively instituting one of the earliest forms of a non-compete clause. The penalties for violating this policy were harsh, including torture and execution. Although we have come a long way from such extreme punitive measures, the principle remains relevant in compliance today: a company’s success is closely tied to maintaining the confidentiality of its processes, intellectual property, and proprietary information.

The DOJ’s Guidance on Incentives and Discipline

The DOJ emphasized the importance of both incentives and disincentives to drive ethical behavior in the 2024 Evaluation of Corporate Compliance Programs (2024 ECCP). Venice’s approach aligns closely with this approach, and compliance professionals can look to Arsenale for lessons in incentivizing compliance.

Incentives for Ethical Conduct

The DOJ has recognized that positive incentives can drive compliant behavior. Incentives can be financial—bonuses, salary increases, or promotions—or non-financial, such as recognition and personal acknowledgment. This was reinforced in the 2024 ECCP, which stated, “Has the company considered the impact of its financial rewards and other incentives on compliance?” Some companies have implemented programs incorporating ethics and compliance metrics into performance evaluations. Other companies have awarded annual cash bonuses for outstanding ethical behavior, demonstrating the company’s commitment to integrity.

Making compliance part of the company’s core DNA starts with integrating ethical behavior into everyday performance metrics. This means including compliance adherence in bonus structures or linking promotions to ethical performance rather than pure profitability. By embedding compliance into performance reviews, companies send a clear message: ethical behavior is not just expected but rewarded.

Publicizing Disciplinary Actions

Conversely, the DOJ’s guidance recommends that companies communicate the consequences of unethical actions and compliance violations. When employees understand that unethical behavior has swift and predictable repercussions, it reinforces a culture of accountability. Many companies choose to publicize examples of disciplinary actions to underscore the consequences of misconduct. This transparency demonstrates that the organization takes compliance seriously and applies consequences uniformly. Indeed, the 2024 ECCP states, “Prosecutors may consider whether a company has publicized disciplinary actions internally, where appropriate and possible, which can have valuable deterrent effects.”

In Venice, the knowledge of harsh punishments deterred Arsenale workers from betraying the city’s secrets. Today, compliance departments do not need such severe measures, but transparent communication around discipline can serve a similar function, reminding employees of the importance of maintaining integrity.

Building a Compliance Culture Based on Loyalty and Trust

In Venice, loyalty to the Arsenale wasn’t driven by fear alone; workers knew the city valued and protected them. The DOJ emphasizes a similar approach for corporate compliance programs, suggesting that incentives go beyond mere policy compliance. Instead, they should aim to cultivate a culture where ethical conduct is intrinsically linked to loyalty to the company and professional satisfaction.

Consider implementing the following methods to build loyalty and trust in your compliance program:

  1. Job Security and Career Support. Like the Venetian fathers who assured workers of job security and family support, compliance programs can provide employees with stability and purpose. Offering career advancement opportunities, professional development in compliance-related areas, and clear paths to promotion for ethical conduct reinforces a culture where compliance is valued and integral to career success.
  2. Recognition Programs. Recognizing employees who demonstrate ethical behavior is powerful. Recognizing compliance champions through formal awards or public acknowledgment sends a message that ethics and integrity are valued. A simple “thank you” for a job well done can also be incredibly impactful in reinforcing positive behavior.
  3. Integrating Compliance into Performance Metrics. Building on the DOJ’s guidance, integrating compliance into performance reviews ensures employees understand that ethical behavior directly impacts their career progression. By making ethics a part of promotion criteria, companies reinforce the idea that doing business correctly is critical to professional success.
  4. Ethics Training and Resources. Providing ongoing training beyond “checking the box” helps employees understand the why behind compliance. When people know the purpose behind policies and feel they have the resources and support to comply, they’re more likely to internalize ethical behavior in their day-to-day operations.

Lessons from Venice for Modern Compliance Programs

The Venetian Arsenale is a testament to the power of incentivizing loyalty and ethical behavior while establishing a clear system of consequences. Today’s compliance professionals can adapt these principles to build a balanced program that motivates employees to act with integrity, rewards ethical conduct, and enforces accountability.

Venice teaches us that incentivizing compliance is not just about financial bonuses; it’s about creating a work environment that values and rewards ethical behavior at every level. Employees need to feel part of something bigger than themselves—an organization that values their contributions and supports their ethical choices. When employees see that compliance is recognized and rewarded, they’re more likely to engage with the program and make ethical decisions.

The Timelessness of the Arsenale’s Approach

Venice may have faded as a global power, but the lessons from its golden age remain relevant. In the same way that Arsenale’s workers were loyal to their city because of the incentives and protections provided, today’s employees will be more committed to a compliance program that genuinely values and supports them.

As compliance professionals, we can create a culture where employees are encouraged, recognized, and rewarded for doing the right thing. The DOJ’s guidance underscores the importance of balancing incentives with disciplinary measures, and Venice shows us how this balance can be achieved to build a compliant, loyal workforce.

Join us tomorrow as we conclude our series with a look at Venice’s “Into the Lion’s Mouth“ whistleblower program, a true precursor to the modern whistleblower protections that support transparency and accountability in compliance programs.

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Daily Compliance News

Daily Compliance News: November 25, 2024 – The All WSJ Edition

Welcome to the Daily Compliance News. Each day, Tom Fox, the Voice of Compliance, brings you compliance-related stories to start your day. Sit back, enjoy a cup of morning coffee, and listen in to the Daily Compliance News—all from the Compliance Podcast Network. Each day, we consider four stories from the business world: compliance, ethics, risk management, leadership, or general interest for the compliance professional.

  • A reordering of world trade is coming; is compliance ready? (WSJ)
  • SEC racks up $8bn in penalties under Gensler. (WSJ)
  • 30 Chinese companies have been added to the blacklist.  (WSJ)
  • US sanctions GazpromBank and other Russian entities. (WSJ)

For more information on the Ethico Toolkit for Middle Managers, available at no charge, click here.

Check out the full 3-book series, The Compliance Kids, on Amazon.com.