What Is Corporate Compliance and Its Impact on Businesses

Companies create corporate compliance programs to ensure they operate within legal and ethical boundaries. These programs can cover everything from how to use artificial intelligence (AI) responsibly to data security policies and overtime regulations.

However, many business leaders admit that their compliance initiatives need improvement. In a 2025 McKinsey survey, respondents only gave their compliance efforts an average rating of 2.9 out of 4.¹

Company compliance goes beyond the minimal legal and ethical obligations—it’s a strategic asset that helps businesses limit risk and strengthen their reputation. Still, building an effective compliance program comes with challenges that professionals must be prepared to navigate. Let’s explore these impacts.

What Is Corporate Compliance?

The Corporate Governance Institute defines corporate compliance as “adhering to every law, regulation, and ethical guideline that applies to your business.”²

While all American businesses must follow federal, state, and local laws, compliance requirements can vary dramatically between companies. Some organizations also comply (often voluntarily) with rules set by professional organizations. For example, manufacturers may choose to adhere to the International Organization for Standardization’s (ISO) standards and guidelines in order to attract customers and clients.

Here are a few reasons why corporate compliance is important:

• Builds trust with customers and employees 
• Demonstrates a commitment to ethical behavior and responsible corporate citizenship  
• Improves productivity 
• Reduces the risk of legal and reputational damage

Understanding the Scope of Corporate Compliance

You may wonder, “What is the scope of corporate compliance?” The truth is that this concept covers virtually every aspect of a business’s operations, including the following:²

• Data management 
• Employee safety 
• Environmental impact 
• Finances 
• Human resources 
• Legal activities 

Many aspects of compliance are universal, such as paying taxes and properly managing waste. But others are industry-specific. Every medical professional knows about the Health Insurance Portability and Accountability Act of 1996 (HIPAA), for instance. It forbids health care organizations from disclosing confidential patient data, such as diagnoses or even the name of their doctor.³ Meanwhile, the Environmental Protection Agency requires energy companies to report their emissions annually.⁴

Positive Impacts of Compliance Programs

Corporate compliance programs are essential for organizations of all sizes and in all industries. They go beyond simply meeting legal requirements—they create a foundation for ethical conduct, risk management, and long-term success.

Mitigating Legal Risks 

The primary objective of a corporate compliance program is to reduce the risk of legal violations. Companies that comply with legal and ethical standards have a reduced risk of legal action or regulatory penalties.⁵

The price of noncompliance can be steep. In December 2024, for instance, Italy fined OpenAI 15 million euros after the tech company violated the General Data Protection Regulation.⁶

Increased Transparency and Accountability 

Corporate compliance programs can increase transparency and accountability within a company. Patagonia is an excellent example. It created a Supplier Workplace Code of Conduct that spells out how all vendors should treat their employees and the environment.⁷

By implementing policies and procedures that ensure compliance with legal and ethical standards, companies can demonstrate their commitment to being transparent and accountable in their operations to both their internal stakeholders and employees, as well as their customers.⁸

Improved Corporate Governance

Corporate governance (how a company operates internally) and corporate compliance go hand-in-hand. While compliance is focused on ensuring proper conduct, governance is focused more on oversight and management. When the two are aligned, companies function more effectively.⁹

Take Target, for instance. The retailer developed corporate governance guidelines that outline the structure and responsibilities of its board. As part of its compliance program, Target also requires executives to follow the same Team Member Code of Ethics as everyone else.¹⁰ That means everyone, from the CEO to cashiers, meets the same ethical standards.

Protecting and Maintaining Reputation 

By effectively complying with laws and regulations, companies can improve their reputation and gain the trust of stakeholders and customers. A breach in conduct by a well-managed company is newsworthy, to say the least. One cautionary tale is Outcome Health, a tech startup. The business made headlines in 2024 when three former executives were convicted of scamming clients and investors out of $1 billion.¹¹

By having a strong compliance program, companies can maintain their reputation with the public and with other business partners.⁸

Increased Employee Morale 

Corporate compliance programs can also boost employee morale. When employees understand the company’s commitment to compliance and ethical standards and see this behavior being modeled by the leadership team, they will have a better sense of the company’s key values and can feel a sense of pride in working for an ethical company with a good reputation.⁸

Additionally, in a culture of compliance, employees are more likely to feel valued and respected, which in turn can lead to increased job satisfaction and loyalty.

Hilton’s corporate compliance program helped it earn the top spot on the Fortune 100 Best Companies To Work For® 2025 list. One reason for its success? An astonishing 95% of its employees agreed that “management is honest and ethical in its business practices.”¹²

Challenges in Maintaining Compliance

While corporate compliance programs are essential for ensuring lawful and ethical business operations, they can be difficult to implement effectively. Without proper oversight, even well-intentioned programs may fall short. To overcome these challenges and maximize their value, companies must establish a system of regular auditing and monitoring.⁵

Costs 

Developing a corporate compliance program can be expensive. Companies need to invest in developing policies and procedures, training employees, and monitoring compliance. And, because regulations evolve, staying up to date can incur further costs.¹³

Increased Complexity and Resistance

If corporate compliance programs are seen by employees as overly bureaucratic, not only can they increase the complexity of a company’s operations, but they can lead to resistance and ineffective implementation.¹⁴

To help overcome employee resistance, effective compliance training is essential. Effective compliance training includes not only educating employees but also communicating the business value of these compliance programs. A strong program is reinforced when both senior leaders and operational managers actively demonstrate their commitment.

Data Privacy 

Companies collect and store vast amounts of personal and sensitive data—about customers, employees, partners, and vendors. The more data a company holds, the more vulnerable it becomes to breaches, leaks, and misuse—which can lead to significant legal and financial consequences. Ensuring that data is properly protected, stored, and only accessible to authorized individuals requires sophisticated systems and constant monitoring. Many companies rely on third-party vendors (e.g., cloud providers, data processors) to store or manage data. If those vendors mishandle the data, the company is still legally responsible.

Compliance isn’t just about systems. Employees need to understand how to handle personal data properly, report breaches, and avoid phishing or social engineering attacks. Companies can protect whistleblowers' privacy by creating anonymous reporting channels. That way, an employee won’t have to worry that someone will (unintentionally or intentionally) disclose their name.

Compliance programs should also follow these cybersecurity best practices:¹⁵

• Dispose of unnecessary or outdated data 
• Keep track of all data sources and audit them regularly  
• Only give employees access to data on a need-to-know basis

A failure in data protection—whether due to outdated software, human error, or cyberattacks—can compromise compliance and violate privacy laws.

How To Pursue a Career in Corporate Compliance

Businesses in all industries need experts to help them comply with laws and ethical standards. Here are a few career paths in this field:

• Compliance officer: Develops and oversees compliance programs; often trains employees to follow company policies¹⁶
• Ethics officer: Implements ethical standards and handles violations within a company¹⁷   
• Data privacy officer: Helps organizations comply with data protection laws and creates data security policies¹⁸  

Entry-level compliance roles typically require a bachelor’s degree in relevant areas. For instance, you might major in health care administration and apply for compliance officer jobs at hospitals. For more advanced positions, you may need a master’s degree or a certificate in an area like asbestos removal for a construction compliance job.¹⁹

Build a Culture of Compliance With Pitt Law

The law influences almost every professional decision in corporate environments. University of Pittsburgh’s Online Master of Studies in Law (MSL) program can help those without a JD degree advance their career. This 30-credit graduate degree program combines the core courses that give you a foundation in a wide range of legal topics with a chosen specialization. This specialization allows you to hone in on an area that directly impacts your current career path, it can help you transition to a new career.

The Corporate Compliance specialization or the stand-alone Online Certificate in Corporate Compliance will set you apart as a leader in business with in-demand legal knowledge and skills. Small class sizes and individualized attention foster deeper learning, stronger connections with faculty and peers, and tailored support—setting you up for success both during your master’s program and throughout your career.

As you consider Pitt Law’s Online Master of Studies in Law program or one of our online graduate certificate programs, know that our admissions outreach advisors are available to answer your questions, clarify admissions requirements, and discuss what this degree can do for you. Schedule a call today.