At the most recent Association of Corporate Counsel Annual Meeting, there was a panel discussion that focused on a four-part approach for boards of directors to understand their role in the compliance function.
The 2011 ACC meeting laid out the general areas of inquiry a board should take up with the company’s chief compliance officer.
Structure questions
This area consists of questions which will help determine the fundamental sense of a company’s overall compliance program. The questions should begin with the basics of the program through how it operates in practice. Such inquiries should allow each board member to communicate the main elements of a compliance program.
Culture questions
This area should focus on the culture of the organization regarding compliance. Board members should have an understanding of what message is being communicated not only by senior management but also by middle management. Equally important, the board needs to understand what message is being heard at the lowest levels of the company.
Areas of risk
Board members ‘need to know what process is being used to identify emerging risks’. Such risk analysis would be broader than simply a legal or compliance risk assessment; it should be tied to other matters, such as ‘business continuity planning and crisis response plans’.
Forecast
A truly effective and informed board knows where the company stands at the present moment, but it also has a strategic plan for how the compliance and ethics program can continue to excel. This could be encapsulated in a one-three-five year compliance game plan. However, the compliance program should be nimble enough to effectively respond to new information or actions, such as mergers or acquisitions, divestitures or other external events. If the dynamic changes, ‘you want to get your board’s attention on the changes which may need to happen with the [compliance] program’. This is best accomplished by obtaining buy-in from a board that understands the role of forecasting the compliance program going forward.
