One very accurate indicator of a compliance program is the relationship between the CEO and the Chief Compliance Officer. If a CCO is repeatedly making excuses for a CEO who does not devote enough time to compliance, you can rest assured that the compliance program is nowhere near effective.
Let’s start with the basics. Almost 60 percent of CCOs now report directly to the CEO. That is a terrific statistic, especially because it has been increasing each year. Given this important relationship, the real question boils down to what kind of relationship does the CCO have with the CEO. If the CEO and CCO meet monthly to catch up and update each other, that is not a quality relationship.
An effective CEO-CCO relationship is a professional and honest relationship where the CCO reports to the CEO and enlists the CEO when needed to accomplish various tasks. Some of the tasks may require the CEO to step out and speak, promote and represent the company’s compliance program. Others may require the CEO to direct senior executives to participate in and promote compliance program objectives. In the end, the CCO has to make sure that the compliance program represents the CEO’s commitment and direction to thee design and implementation of the company’s compliance program.
I would never go so far as to say that the CCO and CEO are partners in the compliance program, but a CEO who understands the importance of a compliance program, will know when CEO action is required and where it can help. For example, at senior staff meetings, instead of having the CCO speak about the compliance program, a CEO can send a strong message by speaking first in some detail about the compliance program, near-term objectives and expectations so that senior management can be held accountable.
At company-wide meetings, the CEO has to serve as the spokesperson for the compliance program, at least initially to lend his or her support to the program, underscore the importance of the program, and promote the program. A CCO who then follows the CEO as a spokesperson, can build on this support and has greater credibility when promoting the program.
A real danger in this area are CCOs who make excuses for their CEOs and fail to admit the need for greater CEO support and participation in the program. It is rare to find a program where the CEO “gets” compliance and actively supports and promotes the program on a regular basis. All to often, I have seen CEOs who mouth the words, say what everyone wants to hear but then fails to deliver on important actions and specific steps to promote the compliance program.
Words are cheap, as they say, and actions require commitment, understanding and effort. CEOs who only offer words of support are in reality providing little to no support. A CCO who will not admit that to him or herself nor speak to the Audit Committee about such issues is failing to do his or her job. I am not advocating reporting the CEO to the Audit Committee but when the opportunity arises, many CCOs choke on their words and fail to give their honest appraisal of the CEO’s commitment. In my mind, there is no excuse for failing to speak honestly. There always is a way to communicate on an issue, and there are legitimate ways to bring up certain issues and communicate ideas in a calm and professional manner.
A CCO who fears his or her CEO is either avoiding a difficult problem or is not in the right job. The CCO has to engage the CEO professionally and communicate honestly about expectations and requirements for an effective ethics and compliance program.