Ethics and compliance

Boards and General Management

Audit Committee Leadership Network, December 2013

On October 24 and 25, 2013, members of the North American Audit Committee Leadership Network (ACLN) met in New York for their 27th stand-alone meeting. One session was a members-only discussion of ethics and compliance. This document summarizes the key points that members raised in the discussion, along with background information and perspectives that members shared before the meeting.   

ACLN members touched on three main topics encompassing a range of issues associated with promoting a strong ethics and compliance culture at large global companies:

  • Ethics and compliance are a growing challenge
    Members acknowledged an increasing focus on ethics and compliance at their companies.  Regulators are ramping up enforcement in many areas, such as bribery and price fixing, even as employees may feel increasingly tempted to test ethical and legal boundaries in the face of greater pressures to perform.  With companies expanding their operations in emerging markets, different cultural understandings of appropriate behavior are adding to the challenge of defending company-wide standards of behavior.

  • Companies are taking a variety of measures to promote ethical behavior
    Members agreed on the critical importance of a commitment by senior management to enforcing ethics and compliance, though the compliance function itself might be either a separate organization or merged with internal audit.  Training, monitoring, and consistent enforcement are key elements of an ethics and compliance program, and the program should leverage emerging technologies of communication and data analysis.  Transparency inside the company regarding how violations are handled promotes an ethical culture, though audit chairs noted the importance of prudence in handling such disclosures.

  • Board oversight must be up close and personal
    Boards and audit committees are spending more time on ethics and compliance.  Members said that each board member receives the same training and take the same tests that employees take.  Audit committee members often participate in town hall meetings on ethics and compliance, and they also visit employees out in the business to listen to their views and demonstrate the vigilance of the board.  Outside consultants can provide expertise to help the board or audit committee gauge the effectiveness of the company’s compliance program.