Over the last 12 to 18 months, businesses in every sector have been challenged like never before. They have faced unprecedented economic, environmental, and health crises forcing everyone to adapt at a breakneck pace. Simultaneously, organizations are still expected to adhere to their publicly stated values, particularly when it pertains to workplace conduct.
It's a difficult new world to navigate, and company boards of directors have had tough questions to answer about their responsibilities. To follow up on the recent release of part two of our 2021 Ethics & Compliance Program Effectiveness Report, LRN held a webinar to discuss the role of board engagement when it comes to corporate culture, ethics and compliance programs, and business outcomes—especially during these times.Panelists on the webinar included:
Leading the Way: How Boards of Directors Can Engage in Ethics and Compliance provides insights on how to strengthen the essential relationship between boards and E&C functions, and why the two should be inextricably linked. The report finds that when it comes to E&C concerns, boards can have a powerful effect: when the board compels leadership to consistently act in an ethical manner, that permeates through the rest of the company.
The report measures three areas of board engagement:
According to our research, boards that championed ethics and compliance programs in 2020 found themselves having strong ethical foundations. This only makes it easier to meet challenges in the future while living up to a previous high standard.
Findings in the areas of championship and open communication are encouraging:
One area where improvement is needed—and is critical for ethical compliance—is organizational justice. Employees at every level want to perceive the company as being fair in the way they treat individuals within the organization, no matter where they live in the chain of command. But only 60% of respondents said their board took an "active role" in ensuring misconduct from senior execs or high-level performers was addressed. Among boards known for holding leadership accountable, 51% disciplined or fired execs or high performers who had engaged in misconduct, while only 18% of companies with disengaged boards took similar actions.
During the webinar—which can be viewed in full here—panelists highlighted various engagement strategies that organizations can use to leverage their board in establishing and supporting an effective ethics and compliance program.
Board engagement strategy 1: Set expectations with senior leaders early and often. It's crucial for senior leaders to know early on that they have a responsibility to uphold their company’s ethical standards—and will be held accountable for doing so. Boards can assist in providing leaders with those standards at their hiring and continuing to reinforce them in leader-specific training, focusing particularly on company culture as well as ethics and compliance. Emphasizing the need for senior leaders to set the tone and be examples for the rest of the company from the outset will help ensure that organizational values cascade down.
Board engagement strategy 2: See how ethics and compliance fit into the board's current priorities. Before you commit to ethics and compliance being one of the board's priorities, you'll want to first identify where it rates right now in terms of your organization's overall value set. When the board meets, E&C should be more than its own agenda item. It should be a constant presence when dealing with other agenda items and priorities, touching all aspects of what you do. Don't set up an ethics and compliance program and leave it at that. Integrate it into your existing programs and systems. It should be a part of your organization's foundation as opposed to something you tack on to check a box.
Board engagement strategy 3: Go beyond the numbers. When your ethics and compliance team is presenting to your board, they may have interesting data and statistics to report. That can be useful, but data shouldn't be the only component of what they communicate to the board. Cameron Hoffman recommended the following ways to get the board engaged and asking questions:
Board engagement strategy 4: Have ongoing conversations about E&C outcomes. Elevating the relationship between the E&C function and the board is crucial to an effective program. That requires an ongoing, open dialogue. Similarly to reinforcing expectations, ethics and compliance officers must frequently discuss with their boards whether the company is living up to what it wants to be in terms of its overall behavior and its outcomes.
Panelists agreed that the findings from this report suggest a powerful effect: when boards send clear signals that company leadership must behave ethically without question, those expectations cascade through the organization and translate into action. To learn more about the role of a company's board in driving effective ethics and compliance programs, listen to the full webinar discussion and download a copy of the report. Our complementary boardroom report, Activating Culture and Ethics from the Boardroom, is also available to download.