COMPLIANCE & RISK / Where ethics and corporate compliance meet

Excerpt from session:

Ethics vs. Compliance – Do we really need to talk about both?

The terms ethics and compliance are often used synonymously. As a result, drawing a distinction between the two concepts may seem unimportant. In fact, the difference between the two can be very important for company structure, culture and overall presence.

Therefore – Ethics and Compliance, the same? We think not!

Ethics is not compliance and compliance is not ethics. Ethics and compliance are like intersecting circles. At some segments they sure overlap but you should never assume that employees will comprehend the difference.

Let’s take a look from the perspective of titles and functions. One company will have a Chief Ethics Officer, another company may have a Chief Compliance Officer and a third company may combine the job title into a Chief Ethics and Compliance Officer. So, how to distinguish…

Compliance focuses on the rules of the law. Therefore, the compliance profession is pretty straightforward to prevent a violation of that law. Often, compliance violations can result in serious consequences that can involve fines, jail time, liabilities and firing of involved employees. There is no way to skirt around compliance policies and still have legal operations. This is one of the tasks that your Chief Compliance Officer handles in your operations.

On the other side, ethics involves a moral judgment of doing what is right. When talking about ethics, company is focusing on what is best morally following a code of behavior in practicing what is right to the benefit of company itself, its employees, its customers, the environment and other factors. Chief Ethics Officer will normally monitor employees and their procedures to look for allegations, conflicts of interest, improprieties and complaints that can create corporate governance issues. Ethics can be extremely important to the company culture. It can benefit company not only in its operations but also as a branding tool. Company can build customer and employee trust to create an ethical corporate environment as well as business interactions.

A Chief Compliance Officer will oversee any compliance issues that may be found or created during the course of your business operations and minimize risks so your company can maintain compliance. A Chief Ethics Officer will look for allegations, conflicts of interest and improprieties that won’t violate compliance standards yet may violate company governance policies and internal programs.

During the session ‘Where ethics and corporate compliance meet’, Pierre Simon will tackle this question by going back to the root of why businesses actually exist. To earn profits or to serve a purpose? For shareholders or for society? The conventional view is exclusively to earn profits. This ofcourse is based on Milton Friedman’s theory that the social responsibility of businesses is to increase profit. So just head to the land of profit and you’ll get all of these other decisions right. But this theory assumes that you can caculate the effect that ethical behaviour has no profits. In practice you can’t reduce every decision into mathematical calculation.

Main Takeaways:

  • Ethics does not equate to compliance
  • Auditing both compliance and ethics policies
  • Staying on top of ethics and compliance in your business