When we read the phrase “compliance and ethics program,” we sometimes overlook the interesting connection between the words “compliance” and “ethics” and how each contributes to the formation of an organization’s compliance and ethics program (CEP). Sometimes one can spark a lively discussion just by inviting other compliance professionals to describe the differences between compliance and ethics, and how these differences may compliment or potentially be in conflict with one another, as they both impact the overall effectiveness of a CEP. In addition, the fundamental differences between compliance and ethics may present a philosophical challenge for employees in their role of supporting or acting in accordance with the CEP. It is important that a compliance professional understand some of the root causes of these philosophical differences, so as to be in a better position to address or help manage them when they occur.
To establish a frame of reference between compliance and ethics, I introduce two common ideas that are commonly applied to these terms. Compliance is often thought of as referring to the relationship of a CEP and the rules and regulations that apply to the organization. These rules and regulations typically take the form of local, state, and federal laws. Because these rules and regulations apply to other organizations within the same industry, they tend to provide an opportunity for compliance professionals to discuss how their respective organizations are working to satisfy the requirements that these rules and regulations demand.
In contrast is the commonly held thought that ethics relates to the value system that exists within an organization. This value system can be seen as consisting of two subsets. One subset is what many organizations within the same and different industries tend to adopt and promote to their employees and customers. These values often take the form of social responsibility as it relates to how the organization works to be a responsible corporate citizen in the community in which it operates, or how the organization works to protect the environment above and beyond what it must do to meet regulatory requirements.
The second subset of the value system that represents the ethics of an organization is the value system that is generated from within the organization, often attributed to the culture that exists within an organization. This close relationship between an organization’s culture and its value system is what makes this second subset of the values that impact the CEP so unique to each organization.
Therefore we can understand how compliance professionals from two organizations within the same industry may have so much in common on one hand, such as when dealing with the compliance aspects of their respective CEPs, and at the same time are operating in such diverse environments with respect to the ethical aspects of their CEPs.
The rules and regulations that apply and impact the compliance aspects of a CEP provide an inherent element of stability to the organization. The laws that provide the basis for the underlying requirements for what an organization must do to operate legally within its industry are often well codified and easily accessible. In addition, because these are based on laws, a compliance professional can monitor legislative activity to identify if new laws are being considered or if changes to current laws are proposed. Just as finalized laws are relatively easy to find, many law-making bodies provide public notices on their activities, which can serve as early signals of potential, impending changes.
Now, although rules and regulations may be readily available and accessible to compliance professionals, this doesn’t necessary mean that all compliance professionals may agree on the meaning of these rules and regulations, and they may also differ on how they will implement mechanisms within their respective organizations to satisfy these rules. However, this variability of how different compliance professionals may respond to these rules and regulations is often a matter of choice or preference that may be driven by factors that are specific to the organization.
Let’s use an example of a regulation that requires that an organization’s workforce must be trained on certain policies and procedures within a reasonable time after joining the organization. As compliance professionals read this and decide what represents “within a reasonable time,” it is likely different conclusions will be drawn as to what represents a reasonable time. For some organizations, it may be within a certain number of days following when an individual has started working there. For other organizations, the decision may be that this training must occur on the first day that the new member of the workforce presents for work.
So, although the rules and regulations, which provide the basis for the compliance aspects of a CEP, may be “black and white” in terms of how they are available or may be made known to everyone, how they are applied may easily introduce shades of gray.
In the end, compliance professionals can serve as powerful agents of the organization by helping people understand how both compliance and ethics do indeed work together to help an organization meet its legal obligations, while also promoting the organization’s value system. It is through the effective management of these two elements, compliance and ethics, and how they work in combination that results in an organization developing and maintaining an effective compliance and ethics program.
Excerpts from an article written by Frank Ruelas.