By Joe Murphy, JD, CCEP, CCEP-I
A recent SCCE survey has reported that only 23% of compliance professionals have a role reviewing their companies’ incentive programs prior to the plans’ approval.
This is despite the obvious risk that incentives pose to compliance & ethics. Have we learned anything from the Well Fargo case? As the survey correctly notes, such a review should be undertaken at least to develop controls to ensure that the incentive goals are hit legitimately.
Yet even today, when you read about compliance programs there is still enormous attention to training, codes, tone at the top, etc. These are treated as if they were the key elements to drive conduct. Incentives? Not so much. Yet when management in a company really wants something done, it does not simply rely on paper, emails, classes or the corporate mood. It looks at the incentive system. So, too, if management really wants the compliance & ethics program to be effective, it needs to do the same thing.
Consider also the breathless reports by writers, academics and journalists about compliance programs not working, even “Cadillac” ones. Typically, the people making these claims have very thin understandings of what a compliance program is. Fairly consistently they have no sense at all about the role an effective compliance program should have in dealing with incentives.
In my experience and from studying the field, I would conclude that if a company had a brilliant code, fascinating and engaging training, and a CEO who every morning swore a mighty oath to the company code, it would still flunk the test of even a minimally effective program. If it did not address incentives it is just not being real.
Of course, companies and cultures do vary. So, too, the nature of incentives may vary. While in some companies and cultures cash may be king, in others different incentives matter. For example, in almost all organizations, promotions and recognition matter. If compliance and ethics does not figure into those determinations, then you know compliance and ethics is not that important. Employees are not stupid – they know how to tell what is important to management, and what is just window dressing.
There are many ways effective compliance & ethics programs interact with incentives. This was explored in the white paper, Murphy, “Using Incentives in Your Compliance and Ethics Program” (SCCE; 2012)
Do you want a compliance & ethics program that really works? Then do what managers do when they want something done, and focus on your company’s incentives.
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