Does Your Company Need an Ethics Officer?

Posted by Jeff Pelliccio on Aug 28, 2017 9:00:00 AM

In ICS insights

The role of “Chief Ethics Officer” is not new; some organizations across the country have had an Ethics Department chaired by a dedicated Ethics Officer since 1991. When the Federal Sentencing Guidelines for Corporations made it clear that companies with ethics programs could escape punishment, or receive lighter punishment, upon the event that those ethics programs failed, companies took advantage.

However, the role has morphed over the years from being one that was often seen as little more than window dressing to being a position that, in some organizations, fits in seamlessly with executive roles as a natural part of the company’s fabric.

If your organization is evaluating how to best implement an ethics and corporate governance program, you’ll need to determine the best structure for those functions in light of your greater organizational structure.

Why Consider Hiring an Ethics Officer

In light of the corporate scandals that dominated the headlines in the early 2000s, followed by the 2008 financial crisis, there is an increased emphasis on corporate ethics and transparency.

In addition to the potential benefits companies can realize in the way of reduced penalties, employing an ethics officer can help ensure that the organization, its leaders and employees, are playing by the rules, acting with accountability.

Implementing an ethics program – steered by a dedicated Ethics Officer – can help set the tone for what is considered acceptable behavior. In addition, it gives everyone in the company somewhere to turn when they encounter behavior, issues or questionable situations that could be putting the company, its personnel and ultimately its shareholders, at risk. 

Some organizations may resist the need for yet another company officer. However, there’s an argument that many corporate executives, for all of their talents and abilities running the company, may not have the skill set needed to influence employees’ moral behavior. While they may be effective at impacting the circle of employees closest to them, their ability to influence others in the organization lessens the further removed those employees are from the executive suite. Additionally, many executives simply don’t have the time to devote to fostering corporate governance. Naming someone with responsibility for ethics and governance can resolve these issues, freeing up other executives to continue steering the ship.

Incorporating Ethics Officer Role into Existing Legal and Compliance Functions

Companies in some industries, including many financial services firms like broker-dealers and investment advisers, are required by federal and/or state regulations to have Chief Compliance Officers and structured compliance programs. In these firms, there is often a tendency to simply give responsibility for the ethics program to the CCO, or to someone in the Legal Department.

Where regulatory compliance programs are generally geared toward ensuring compliance with laws and regulations, ethics programs deal with what is morally and ethically right – a more ambiguous standard. That’s not to say that ethics programs cannot be managed effectively from within the compliance or legal departments; they certainly can. However, it is important to recognize that the responsibilities are different. In firms where compliance personnel are also responsible for corporate governance and ethics, policies and framework should clearly address both regulatory requirements and ethical standards.

In other firms, CEOs feel it makes more sense to create a separate role with a line right to the board of directors; someone who is, themselves, removed from other potential conflicts of interest. There isn't a single "right" way to structure an Ethics Program, or the job description of the person at its helm. Each organization should consider its existing resources and structure, and evaluate its ability to handle conflicts, ethical issues and corporate governance matters.

ICS Can Help Meet Your Legal and Compliance Staffing Needs

At Infinity Consulting Solutions, we understand the importance of legal and compliance roles, including positions responsible for handling complaints, conflicts of interest and corporate governance matters. Whether or not your company chooses to carve out a separate role for an Ethics Officer, ICS can help by sourcing and screening candidates for you – helping to make sure your organization has the internal controls and skilled workforce it needs.

To learn more about how we help employers across the country from our office locations in New York, Washington, D.C., Fort Lauderdale, Chicago, Dallas, Houston, Minneapolis and Denver, contact us online today.

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