Corporate compliance programs are adopted by companies to ensure that they are operating within both legal and ethical boundaries. In the U.S., these requirements are most often laid out by the U.S. Department of Justice, the Federal Reserve Board, the Securities and Exchange Commission (SEC), and the Financial Industry Regulatory Authority (FINRA).1 The enabling legislation for each of these bodies and the regulations and policy statements that each of them issue drives how companies design their compliance programs.
Implementing an effective corporate compliance program is essential for a company’s regulatory well-being, but can also pose challenges that compliance professionals will need to address. Let’s explore these impacts.
What is a Corporate Compliance Program?
A corporate compliance program is a set of policies, procedures, and practices that a company establishes internally to ensure that its employees and agents comply with applicable laws, regulations, and industry standards.1 These programs are designed to prevent illegal, unethical, or inappropriate behavior by employees, to detect or provide for reporting of failures, and to mitigate the risks associated with noncompliance.
A compliance program typically includes several key elements, including2:
- Written policies and procedures that clearly define a company’s expectations for ethical behavior and compliance with relevant laws and regulations.
- Employee training and education programs to ensure that all employees are aware of the policies and procedures and understand their responsibilities under them.
- Systems for monitoring and detecting potential compliance issues, such as regular audits and internal investigations.
- Procedures for reporting and addressing compliance concerns, including a mechanism for employees to report potential violations anonymously and without fear of retaliation, such as a hotline.
- A system for enforcing compliance, including disciplinary action for violations of the policies and procedures.
- Ongoing review and evaluation of the compliance program to ensure that it remains effective and up-to-date with changes in laws, regulations, and industry standards.
By establishing a strong corporate compliance program, companies can reduce the risk of legal and reputational damage, improve employee morale and productivity, and demonstrate a commitment to ethical behavior and responsible corporate citizenship.
Positive Impacts of Corporate Compliance Programs
The benefits of corporate compliance programs may seem obvious, but it’s worth listing the positive impacts in order to better communicate with non-compliance professionals why company policies and procedures truly matter.
Mitigating Legal Risks
The primary objective of a corporate compliance program is to minimize the risk of legal violations. Companies that comply with legal and ethical standards have a reduced risk of legal action or regulatory penalties.1
Increased Transparency and Accountability
Corporate compliance programs can increase transparency and accountability within a company. 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.3
Improved Corporate Governance
Corporate governance (the way in which a company operates internally) and corporate compliance are linked. While governance is focused more on management and compliance is focused on ensuring proper conduct, when the two are aligned, companies function more effectively.4 The U.S. Department of Justice wants companies to ensure that not only are their programs well-designed, but that they are appropriately resourced, and operate well in practice.5
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, and having a strong compliance program will help to maintain the company’s reputation with the public and with other business partners.3
Increased Employee Morale
Corporate compliance programs can also boost employee morale. When employees are aware of the company’s commitment to compliance and ethical standards and see professional 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.3 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.
Challenges Posed by Corporate Compliance Programs
While corporate compliance programs are essential for companies to effectively conduct business in the U.S. and abroad while staying on the right side of the law, that doesn’t mean these programs don’t come without challenges, which can lead to ineffective programs. In order to overcome these challenges and run an effective program that brings high value to a company, a system of regular auditing and monitoring is necessary.1
Implementing a corporate compliance program can be expensive. Companies need to invest in developing policies and procedures, training employees, and monitoring compliance. And, because regulations are often evolving, staying up to date can incur further costs.6
Corporate compliance programs can increase the complexity of a company’s operations and can be seen to be a burden on employees if the policies written into the program are overly bureaucratic, not risk-based, not effective or not well-implemented.7 And, just as ever-changing compliance requirements can impact costs, they can impact the complexity of certain roles and policies, especially where a company operates in multiple jurisdictions.
Resistance to Change
Implementing a corporate compliance program can also meet resistance from employees who may view compliance requirements as bureaucratic, burdensome or unnecessary, especially if there is a general impression that new policies are not leading to positive outcomes.6 This can lead to a lack of engagement and buy-in from employees. Training employees, including showing them the business case for compliance, and illustrating the company’s commitment to it by having both top leadership and operational management demonstrate their buy-in, is important.
Stay Ahead of the Compliance Curve With Pitt Law
The law influences almost every professional decision for employees working in corporate environments. Pitt Law’s Online Master of Studies in Law (MSL) program is here to help those without a JD degree learn what they need to get ahead. This 30-credit graduate degree program pairs 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, or will give you an advantage as a career changer.
The Corporate Compliance specialization or the stand-alone Online Certificate in Corporate Compliance helps you set yourself apart as a leader in business with in-demand legal knowledge and skills. Small class sizes and individualized attention will set you up for success during your master’s program and after graduation.
As you consider Pitt Law’s Online Master of Studies in Law (MSL) program or one of our graduate certificate programs (also offered online), know that our admissions advisors are always on standby to answer your questions, clarify admissions requirements, and discuss what this degree can do for you. Schedule a call today.
- Retrieved March 15, 2023, from investopedia.com/terms/c/compliance-program.asp
- Retrieved March 15 2023, from amgen.com/responsibility/a-healthy-amgen/business-ethics-and-compliance/elements-of-an-effective-compliance-program
- Retrieved March 15, 2023, from trainingindustry.com/articles/compliance/what-is-corporate-compliance-and-why-is-it-a-business-essential/
- Retrieved March 15, 2023, from diligent.com/insights/entity-governance/the-correlation-between-corporate-governance-and-compliance/
- Retrieved March 30, 2023 from justice.gov/criminal-fraud/page/file/937501/download
- Retrieved March 15, 2023, from smallbusiness.chron.com/advantages-disadvantages-ethical-compliance-organization-20548.html
- Retrieved March 15, 2023, from ganintegrity.com/blog/corporate-compliance-program/