Chapter 2: Foundational Materials and Program Infrastructure

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Essential Elements of an Effective Ethics and Compliance Program

Although a “one size fits all” compliance and ethics program does not exist, the Federal Sentencing Guidelines (FSG), Chapter Eight[2] , 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 Non-Compliance

  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

  • Effective assessments of the compliance and ethics program

  • Ongoing program improvements.

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, “Compliance 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.”[3] 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 utilized by every organization globally. But it tries to address the standard used by most organizations—the elements listed above.

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.

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