Chapter 2: Foundational Materials and Program Infrastructure

Essential Elements of an Effective Ethics and Compliance Program

Although a one-size-fits-all compliance and ethics program does not exist, the Chapter Eight of the Guidelines Manual[3] outlines seven basic compliance elements that can be tailored to assist organizations in developing an effective compliance and ethics program. It is critical that there is demonstrated commitment to these seven basic elements:

  1. Standards, policies, and procedures

  2. Compliance program administration

  3. Communication, education, and training

  4. Monitoring and auditing

  5. Internal reporting systems

  6. Discipline for noncompliance

  7. Investigation and remediation measures

Every organization strives for this effective program in the hopes of gaining some level of protection for having an effective compliance and ethics program. In addition, the elements have been massaged by the compliance and ethics industry, as they have been implemented in actual compliance and ethics program models. The industry has now defined the following as the components of an effective compliance and ethics program (not all inclusive):

  • Code of conduct and relevant compliance policies and procedures

  • Oversight and accountability by the board for the compliance program

  • Education, communication, and awareness

  • Delegation of authority

  • Enforcement, discipline, and incentives

  • Monitoring and auditing

  • Internal investigations, including a root cause analysis and corrective action plans

  • Consistent and fair discipline

  • Risk assessments

  • Effectiveness assessments of the compliance and ethics program

  • Ongoing program improvement

While the cost and the time involved may seem daunting, the cost of not having an effective compliance and ethics program could be much higher. Compliance is not cheap. Yet as a Department of Justice official notes, “[C]ompliance programs make good sense—both good common sense and good business sense. Compliance programs help prevent companies from committing crimes in the first place. Even if they fail to do so, partially successful compliance programs may help companies qualify for leniency. Either outcome easily warrants your companies’ efforts to adopt and strengthen compliance programs.”[4] An effective compliance and ethics program is a sound investment.

It is always important to note that each organization needs to tailor its compliance and ethics program to its specific mission and ethical values. Your organization may have stricter guidance that includes additional elements. This manual does not include every compliance and ethics element used by every organization globally. But it tries to address the standard used by most organizations—the elements listed above.

Additionally, note that while the seven elements provide a standard structure and framework for the compliance program, every compliance program can and should look different from another organization’s compliance program. A compliance program should be tailored to the size and complexity of the specific organization and should be operating according to that organization’s unique risk profile. And as your organization changes, the risk profile evolves, and the regulatory landscape shifts, the compliance program must keep pace and evolve to remain effective.

Many new compliance and ethics officers come into programs that have none of these elements. Some come into their new office with some or broken pieces of these elements. Keep in mind that effective compliance programs do not happen overnight.

This document is only available to subscribers. Please log in or purchase access.