Business ethics and compliance are naturally top concerns for companies as they maintain regulatory practices, but some industries are better at ethics and compliance than others. A recent report from research firm LRN details that financial services companies are hanging behind other industries in both categories — a fact that bodes ill for a market sector that is one of the most closely-scrutinized for those two categories of operation.
The 2014 Ethics & Compliance Program Effectiveness Report is based on LRN’s Program Effectiveness Index (PEI), and “is the first comprehensive analysis of ‘program effectiveness’ in terms of its impact on the behaviors and attitudes that make up organizational culture,” according to the firm.
The Washington Business Journal quotes Wayne Brody, a senior adviser at LRN, on the statistic that the aerospace and defense industries received the highest ranking for ethics and compliance. He notes that the aerospace and defense industries got a head start on both categories during reform in the 1980’s.
He said: "The employees in that world tell you to a man or woman they are there to protect the warfighter and defend the nation. Not so much in financial services. The sense of mission really isn’t present…Organizations and compliance can’t be going in different directions. The more successful organizations are where you get the notion that compliance isn’t just done by the compliance department, but has to be owned by the business unit and everyone in the organization.”
While compliance means different things for different categories of workers, financial services must be on their toes considering the tightening legislation surrounding their business activities. Since the 2008 financial crisis in the U.S., regulations have been set to ensure that such financial misconduct will never occur again, which has translated into heightened compliance needs, and thusly the growing importance of the chief compliance officer. Legislation such as Dodd-Frank have put standards in place that are slowly being integrated into the roles of financial institutions as the Securities and Exchange Commission fleshes them out.
Out of LRN’s report comes some recommended approaches for compliance, including using audits to determine ethics and compliance risks, incorporating online learning for at least some employees, targeting critical ethics and compliance information to the entire organization, providing anonymous channels for employees to raise concerns, and using company email to raise awareness.