What Is The Role of Chief Compliance/Chief Ethics Officer?

Friday, July 1, 2005 - 01:00

Editor: What do you feel are the ideal reporting relationships for
chief compliance officers and chief ethics officers?

Wilkinson: In my view the chief compliance officer/chief ethics
officer should play an ombudsman style role, reporting to senior executive
management and not passing important initiatives through HR. He/she must also
have the authority to act in an emergency situation to suspend any illegal or
unethical practice, at least until a matter can be further reviewed by executive
management and the board of directors. Ethics officers or chief compliance
officers must also have direct access to outside counsel to secure confidential
and privileged legal advice on critical issues.

Editor: Should chief compliance or chief ethics officers report to the

Wilkinson: They should run routine legal matters by general
counsel. Where there is a perception that the general counsel is involved or
implicated in questionable conduct, they should have the opportunity to direct
those issues in the first instance to outside counsel in order to have the
protection of privilege. In today's legal environment, issues addressed to the
in-house counsel who also wears a corporate officer's hat are often not going to
be deemed privileged.

Editor: Are there any further duties that chief compliance officers
should have?

Wilkinson: The obligation to instill an ethical culture within
a corporation starts from the top down. It is important for a chief compliance
office to ensure that corporate executives, including the board, have
appropriate ethics training on an annual basis. They should also ensure that
appropriate policies are in place, are updated and maintained. Appropriate
training is not a static situation in any line of business.

Editor: Would you suggest that these policies be enumerated in an
employee handbook?

Wilkinson: Absolutely. They should be in a handbook and
relevant portions should be disseminated to employees, senior executive
management and members of the board. Every organization member should commit to
follow that code of conduct.

Editor: How actively involved in compliance matters should the
independent directors be?

Wilkinson: It should be a regular function of the directors to
ensure that the company is engaging in best practices with respect to compliance
efforts. The board should assure that training of senior executives on down
takes place so that all understand, for example, current obligations under
Sarbanes-Oxley and the obligation to fairly and accurately report financial
results. It should be a regular agenda item of board and committee meetings.

Editor: How do the functions of internal audit, general counsel, the
chief compliance or chief ethics officer interrelate to avoid overlapping
activities that may lead to the ball being dropped?

Wilkinson: General counsel, audit staff and other corporate
executives have to understand that they are encouraged to take ethical concerns
to a chief compliance officer or chief ethics officer. Robust communication on
matters of overlapping concern is critical. There can be no repercussions or
reprisals for raising concerns with the compliance or ethics officer. Part of
that comfort level is enhanced by the accessibility of the chief compliance
officer. A perception must be held company-wide that communication with the
compliance officer will not result in discipline to the employee or officer who
makes that contact.

Editor: If a general counsel sees something could create a problem but
has not yet crystallized, should that be reported to the compliance officer?

Wilkinson: The chief compliance officer should be kept "in the
loop" in the initial stages of an investigation and have some reasonable
familiarity with legal requirements even if he/she is not a lawyer. There should
be an effort to keep those communications protected by privilege. Often times,
you can prevent these problems from recurring through notices to employees of
updates to the code of corporate conduct or through training. Having the
compliance officer develop a high profile within the company is important.
His/her visiting the various offices and facilities will ensure that he/she
becomes a familiar figure who will more readily become the "go to" person.

Editor: What backgrounds should these officers have?

Wilkinson: An ideal background includes a broad based
understanding of the regulations impacting the organization's industry, a
familiarity with the rules of professional conduct in the legal ethics area as
well as training in corporate ethics. There are now many courses available on
corporate compliance and ethics although it is a relatively new field. Good
people skills and an ability to assess a problem objectively are also essential
so that employees will not be reticent to raise issues that may or may not
represent corporate misconduct. Look for someone who is accessible and will not
simply run to the inquirer's supervisor to report that a whistle-blowing
situation has occurred. Another attribute would be good investigative and
interviewing skills, which many lawyers as well as non-lawyers have.

Editor: Is it important for a company to have both a code of conduct
and a code of ethics?

Wilkinson: Those two codes are often interchangeable. How best
practices and ethics codes become embedded in the corporate culture is what's
paramount. That can only be done through regular reminders and training to show
the company's commitment to complying with the law and doing the right thing
when presented with multiple options. It is a slippery slope and if everyone
understands that the company's intention is to comply with the law and go above
and beyond those requirements, then you will have relatively few instances of