Recent changes in Washington D.C. including the Department of Justice's (DOJ) appointment of Hui Chen as its first-ever compliance counsel and the release of the Yates Memo has led to chief compliance officers (CCOs) fearing that they may be held personally responsible for the misconduct of their employers.
DLA Piper's 2016 Compliance and Risk Report: CCOs Under Scrutiny queried 78 corporate in-house counsel and compliance professionals and found that 80 percent of respondents were at least somewhat concerned about the change in tone from Washington and 91 percent predicted greater scrutiny now that Chen has been appointed compliance council.
The study also found that 81 percent of respondents were at least somewhat concerned about their personal liability as a CCO or the personal liability of their company's chief executive officer (CEO).
“CCOs are hearing Washington loud and clear and they're scared,” DLA Piper Global Governance and Compliance Co-chair Brett Ingerman told SCMagazine.com.
Despite the added scrutiny, Ingerman said he thinks it's fair that companies will be required to ensure that their compliance programs are working as long as the government recognizes that compliance programs will differ in size and scope depending on the company and its risk profile.
Ingerman said the Yates Memo, which made it a point to hold individual's both civilly and criminally accountable for organizational misdeeds, left CCOs worried about their own liability in the event of compliance programs failing.
Later when SEC officials came out and said that they won't prosecute CCOs for doing their jobs it didn't do a good job to “calm the waters,” Ingerman said.
“I think it's a show me don't tell me mentality,” he said.
Ingerman said, while the DOJ can say those who are prosecuted were doing other malicious activities, most CCO's are just going to think “if there is a problem at my company because of a failed program, is the government going to look at me?”
CCOs may be feeling the heat due to a lack of resources.
According to the study, two-thirds of the respondents said the recent developments would affect their decision to remain or accept a position as a CCO and only 30 percent of respondents “to a great extent” believed they had sufficient resources, clout, and board access to support their ability to effectively perform their job.
In order to instill more confidence in compliance related positions, Ingerman said companies should increase the stature of the CCO position within the organization, provide higher pay, and ensure adequate protection for CCOs in the event of an incident by providing protections such as director and officer insurance.
Ingerman said companies should allow their CCOs to report to the CEO and have direct access to the board so that they “feel like they have the ear of the company to ensure their voice is heard.”
“I think then you will see resources shake free once it gets that attention of the boards,” he said.
Ingerman said we have to take the findings with a grain of salt because he suspects that companies will make significant changes in their compliance programs by next year because several of the compliance changes will take time to gain approval up the chain of command.
“I anticipate that there will be changes CCOs will implement to comply with new changes out of Washington,” Ingerman said.