Compliance and Ethics Program Differences

Past issues of the Project Post-Gazette have introduced how to successfully implement a compliance and ethics program within your organization. We invite you to review these articles to aid your understanding of the importance these often associated program have to one another.

The basic definition of a corporate compliance program is the organization employees’ adherence to external regulatory requirements that are mandated by the government.  The main goal of this program is to provide a structure to proactively prevent and detect violations of applicable laws and regulations.    An organizational compliance program provides a structure for policies and procedures to be taught while encouraging accountability.

An organizational or corporate compliance program might focus on:

  • Complying with government regulations and laws
  • The bigger picture of organizational risks
  • Personal liability issues
  • Mapping compliance requirements to strategic company goals
  • Compliancy checklists, auditing, monitoring, and corrective action plans
  • Tying compliance solutions to business objectives

As a compliance program matures, it will focus on ways to enforce internal compliancy by implementing internal audits, corrective action plans to mitigate risks such as financial fraud, and foreign practices corruption, and the overall non-compliance with government regulations and laws.

It is the compliance program that brings all of an organization’s compliance efforts together and sets strategic, operational, and financial reporting objectives for the employees.   Figure 1 is an example of the many regulatory mandates to which organizations need to ensure compliance.

Figure 1.

An organization’s compliance program is about oversight of rules, policies, and regulations.  Compliance is the function within the organization that enforces effective governance.  Monitoring and maintaining compliance is an important avenue for an organization to maintain its ethical health, and support its long-term goals and objectives.

Ethics on the other hand is not about the enforcement of government regulations applicable to the organization.  The ethics program’s goal is to promote consistent ethical behavior by instilling an organizational culture of doing what is right by discussing ethical issues with employees.  Ethics involves communicating the organization’s core values to the employees and the people with whom the organization does business.

The Code of Conduct is an important component of a compliance program, but the ethics program is to get people think about and addresses ethical issues that arise on the job — not to enforce internal compliancy of mandated regulations.  Codes of conduct, employee hotlines, formal policies, practices are processes that organizations put into place within their ethics program to deal with their own ethical issues. Ethics involve how organizations desire their shareholders and customers perceive them and their actions.

A proactive compliance program promotes effective governance. Compliance programs with regulatory requirements and an organization’s ethics program that monitors and maintains compliance through an effective implementation of education and guidance is one of the most important ways for an organization to maintain its ethical health. These activities also support the organizational goals, and preserve and promote its values.

In closing, every function of the organization HR, IT, legal, have compliance regulations they must adhere to within the organization. They are the experts in their areas and these regulations are black and white mandates such as Sarbanes-Oxley, Dodd-Frank, and the Federal Sentencing Guidelines.  The Ethics Officer is not the one responsible to ensure each department adheres to these regulations; they provide the oversight.

Ethics is somewhat of a gray area. The ethics program supports the organization’s business objectives, helps identify the boundaries of ethical behavior, and establishes a system to alert management when the organization are getting close to a boundary that will prevent the achievement of   business objectives.   Ethics is the appearance your organization projects externally, and how they want to be perceived by key stakeholders.

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