Business Benefits of Effective Compliance Programs
Companies of all sizes stand to benefit when they implement and maintain effective ethics and compliance programs. This may be more obvious to leaders of large multinational companies, major government contractors, and firms involved in banking and investment activities, but leaders of small and medium-sized companies will see benefits as well.
Effective ethics and compliance programs are important for smaller firms and worth the cost, according to Maria Armstrong, partner in Ohio law firm Bricker & Bricker. Here are five reasons identified by Armstrong in a 2015 issue of Compliance Connections. With effective programs, companies of all sizes can
- stay out of trouble,
- protect their reputations,
- stay out of court,
- mitigate damages, and
- create a business advantage.
As stated in the article, a good program does not need to be expensive and it should be tailored to the individual company. “Such a program will focus on the areas where you are exposed to the most risk, whether that is ethics, environmental, employment, government procurement, antitrust, or any area where local, state, or federal laws provide for corporate criminal or civil liability.”
The need for tailoring is recognized by regulators as well. For example, regulators for the Foreign Corrupt Practices Act (FCPA), which applies to more companies than you might expect, recognize that “when it comes to compliance, there is no one-size-fits-all program,” and that “small- and medium-size enterprises likely will have different compliance programs from large multi-national corporations, a fact DOJ and SEC take into account when evaluating companies’ compliance programs.” (See Ethical Advocate’s 2014 “FCPA Compliance for Small Business.”)
When it comes to reputations, Armstrong tells us “violations, or even suspected or rumored violations, can cause reputational damage to your company and create a costly advantage for your competitors. An effective program will sensitize employees to key issues and solidify your reputation as a diligent, ethical business.”
To the third and fourth points, having a robust ethics and compliance program can reduce adverse legal action and lessen financial penalties. If there is a problem, states the article, “enforcement officials and the courts generally look more favorably on companies that tried to prevent problems with solid corporate policies than those that did not.”
Finally, “having good compliance policies and a reputation as an ethical business will help attract top talent and will make your company more attractive to potential partnerships, contract opportunities, or merger or acquisition consideration.”
The effect of reputation on the ability of companies to attract and retain talented employees has been addressed before. Corporate Responsibility (CR) Magazine reported that companies with good reputations enjoy greater consideration among potential candidates, far lower costs to on-board those candidates, and potentially greater retention among employees. A good reputation “should be maximized when building the employer brand or against competitors whose reputations may be weaker.”
These are not the only benefits of effective ethics and compliance programs, but they are five very good reasons for every company of any size to implement an appropriately tailored program of its own.
Ethical Advocate is an independent, third-party ethics and hotline company that specializes in advocating ethical culture and behavior in the workplace.
Armstrong, Maria J. “Five Reasons to Adopt and Effective Corporate Ethics and Compliance Program.” Compliance Connections, Winter 2015. http://www.bricker.com/insights-resources/publications/five-reasons-to-adopt-an-effective-corporate-ethics-and-compliance-program
Corporate Responsibility (CR) Magazine. “The cost of a bad reputation: The Impacts of Corporate Reputation on Talent Acquisition,” survey findings, October 2015.