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Abstract
Although substantive lawyers have expertise and knowledge to assess legal and ethical risks in their areas and to design specific mitigants, they may not have the process skills that great compliance leaders possess. (Compliance leaders may not even be lawyers but can, for example, be ex-military officers with outstanding organisational skills) . Working with the GC and CFO and with the substantive compliance experts, the CCO assists business leaders in embedding integrity processes deep into business operations. Make no mistake, I believe process management across the whole compliance system is a central and vital job.
As noted, it makes no sense for the CCO to be independent and hire the various substantive experts who must work on compliance but also on business problems for the GC and CFO. That doesn't amount to appropriate checks and balances, but is a source of bureaucratic waste, confusion and possible turffighting. Similarly, the GC should not be CCO in the sense that I have used it here because rigorous oversight of the compliance processes demands too much time, and a direct report to the GC (and CFO) needs an important title like CCO to command the respect this critical job requires.
In such a culture, the CCO attends all integrity reviews with top leadership and, like the head of the company audit staff, can report directly to the audit committee of the board periodically on the strengths and weaknesses of compliance processes. Indeed, I would go so far as to have the board and the chief executive commit to give the CCO access to them at any time when the CCO believes that the company is not handling a compliance issue properly, including misbehaviour by the GC or CFO.
In a bad company, with a poor culture, a distant board and an indifferent chief executive (or worse), independent voices - whether from a CCO or the GC/CFO - will be muffled and discouraged. Neither a general counsel nor an independent CCO can change a bad environment, which deeply affects how people feel, think and act. If the tone at the top is rotten, then little can be done without the chief executive or board being removed. Indeed, the misguided enforcement thrust for a CCO wholly independent of the GC and CFO has stemmed from major scandals caused by senior leadership's unlawful, unethical or negligent behaviour and by board indifference or negligence. If the GCs (or CFOs) were complicit or negligent, enforcers should press for their replacement, not for supplanting them.
