Empowered Ethics and Compliance Officers
 Necessary for Culture of Integrity

Washington, D.C., August 13, 2007 – An executive position of Chief Ethics and Compliance Officer (CECO) with broad authority, access to the Chief Executive and the board, and sufficient financial and other resources is a crucial element in the successful development and nurturing of an ethical culture in organizations, according to a report developed by representatives of five leading non-profit ethics organizations. 

The analysis by a working group from the Ethics Resource Center Fellows Program and four other nonprofit organizations grew out of evidence that many CECOs face major impediments in their efforts to assure that their organizations meet the highest ethical standards.

According to Leading Corporate Integrity: Defining the Role of the Chief Ethics and Compliance Officer, the CECO position’s value depends on a balance between tailoring the job to an organization’s unique characteristics and providing the CECO with the basic environment and tools that should be universal for all holding such positions.

Along with ERC, the working group included representatives of the Business Roundtable Institute for Corporate Ethics, the Ethics and Compliance Officer Association (ECOA), the Open Compliance and Ethics Group (OCEG), and the Society of Corporate Compliance & Ethics (SCCE).  The report represents the first cooperative effort by these groups to fully define the CECO role.

“Damage inflicted on organizations and their stakeholders in the absence of integrity is significant,” said Scott A. Roney, Co-Chair of the CECO Definition Working Group. “Institutionalizing integrity demands a strong ethics program, and a strong ethics program requires empowered, dedicated leadership with sufficient independence and skill to cultivate an environment where ethics is valued.  Just as quality excellence and accurate financial statements demand focused and intentional effort, the same is true for a culture of integrity,” said Roney, Interim Chair of the ERC and Vice President, Compliance and Ethics at Archer Daniels Midland Company.

The ERC Fellows say that, at a minimum, a CECO should be afforded: 

Ø  Accountability to the governing authority to carry out the Board’s delegated fiduciary responsibilities;

Ø  Independence to raise matters of concern without fear of reprisal or a conflict of interest;

Ø  Connection to company operations, in order to build an ethical culture that advances the overall objectives of the business; and

Ø  Authority to have decisions and recommendations taken seriously at all levels of the organization.

“The stakes are high for any organization that fails to make ethics a priority and then finds itself embroiled in scandal,” said Dr. Patricia Harned, ERC’s President and also a working group co-chair. “Reputation and brand value can suffer, and that can damage the trust that investors must have to support growth.  Regulators and lawmakers may move swiftly to punish and/or further regulate those who step outside accepted ethical boundaries.

“Realizing this, many organizations have consolidated the critical responsibility for ethics initiatives under a CECO.  But it is absolutely essential to get the specifics of that position right – to make sure the CECO has adequate authority and is well-integrated with the rest of corporate management.  In putting together this report, our Fellows found that many CECOs today feel set up for failure due to insufficient authority or inadequate resources.”

Roney and Harned said the paper is intended as a starting point for a dialogue within corporate management circles – particularly among CEOs, Boards of Directors and the CECOs themselves, where they already operate – about the proper placement, qualifications and responsibilities for a leader of the corporate ethics and compliance function. 

Harned said the Fellows were prompted to launch their study and develop the report, in part, by a 2006 Forbes.com story with the questioning headline, “Chief Ethics Officers: Who Needs Them?”  About the same time, a BusinessWeek story noted that, that during the first three quarters of 2006, a CEO was fired every 13 days as the result of scandal.  “Chief ethics and compliance officers have become trendy in recent years,” the Forbes.com article asserted, “but some experts fear they act mainly as window dressing.” 

“CECOs simply can’t be window dressing, if companies are to be truly committed to operating on a high ethical plane,” Roney said.  “Our research shows that, where appropriately designed and situated in an organization, ethics programs—and the officers who lead them—can and do make a difference.  When the CECO’s role is structured the right way, a proper tone is set from the top and an ethical culture grows and misconduct is reduced.  Where that is not true, you can do more harm than good.”

A full copy of Leading Corporate Integrity: Defining the Role of the Chief Ethics and Compliance Officer and an executive summary are available on the ERC Web site at www.ethics.org/CECO/.

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The Ethics Resource Center (ERC) is a private, non-profit organization devoted to independent research and the advancement of high ethical standards and practices in public and private institutions.  ERC’s Fellows Program consists of a select group of corporate, non-profit and educational senior-level leaders gathered to identify, examine and further understand the critical ethics questions challenging organizations today.

The Business Roundtable Institute for Corporate Ethics is an independent center established in partnership with Business Roundtable, brings together leaders from business and academia for executive education programs, practitioner-focused research and outreach. For more information visit www.corporate-ethics.org.

The Ethics and Compliance Officer Association (ECOA) is the mission-driven leader and global voice for the ethics and compliance community. ECOA is a member organization exclusively for the ethics and compliance community.

Open Compliance and Ethics Group (OCEG) is the only nonprofit offering comprehensive guidance, standards, benchmarks and tools for integrating governance, risk and compliance (GRC) processes.

The Society of Corporate Compliance and Ethics (SCCE) is a member-based organization dedicated to championing ethical practice and compliance standards in all organizations and providing the necessary resources for compliance professionals and others.

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Ethics Resource Center Media Contact:

Brent Gilroy  
T: +1 (202)-872-4788 
newsdesk@ethics.org  

Business Roundtable Institute for Corporate Ethics Media Contact:

Brian Moriarty
T: +1 (434) 982-2323
MoriartyB@darden.virginia.edu 
 

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