News on CCO Titles, Reporting Structure

Ethisphere has released another analysis of its World’s Most Ethical companies, finding a move toward a more clearly defined chief ethics & compliance officer role and more direct reporting to senior leadership.

The study, released on Thursday, is the second in a series of reports Ethisphere is publishing about the 128 firms that made its WME list for 2018. The first report looked at trends in Codes of Conduct and written policies, among other issues. This one examines job titles, reporting relationships, and staffing.

First, news about job titles: at 76 percent of WME firms, the person with overall ownership of the ethics & compliance program has the title of chief ethics and compliance officer — although only 35 percent of firms have that person solely in charge of ethics and compliance, with no other title.

As you can see from the chart below, most CCOs do have some other title. Twenty-six percent also hold the title of general counsel — which really means that those people are general counsels, who moonlight as their firm’s chief compliance officer. And that “Other” category at 38 percent includes lots of “vice president of…” titles, but substantively, those people are devoted to ethics and compliance full-time.

Source: Ethisphere

Also important are CCOs’ reporting relationships. Among WME firms, 37 percent of CCOs report directly to the chief executive officer, and another 7 percent report either to the board of directors or the chair of the board — so that’s 44 percent who somehow report straight to the top. That’s good.

Source: Ethisphere


On the other hand, 28 percent still report to the general counsel; and within the 24 percent who report to “Other,” that includes some portion of CCOs who report to both the chief executive and the general counsel simultaneously. Which sounds even worse than reporting directly to the general counsel to me, but such is life.

Access and Resources

The compliance chiefs at WME firms also have considerable ability to give input on strategic issues at their businesses, rather than just running around to ensure regulatory compliance. For example, 95 percent have “significant input” into supplier and procurement processes, compared to only 67 percent in 2015.

Likewise, 89 percent have input into mergers & acquisitions or market expansions (up from 77 percent four years ago); and 66 percent have input into new products or services (up from 52 percent).

All of that is good news, since arguing for ethics and compliance awareness at the strategic level saves compliance officers boatloads of time at the tactical level later, when you’re implementing specific controls and processes.

My question is how much these answers about strategic input correlate to better, higher-level reporting relationships. That is, if a compliance officer manages to wriggle free of reporting to the general counsel, instead reporting to the board or the CEO — does he or she then gain more power to talk about the compliance implications of strategic issues?

One would assume so; I’d just like to see a longitudinal, data-driven analysis of that. (Hint, hint, Ethisphere.)

On staffing levels, a huge different exists (understandably) between highly regulated firms and everyone else. The median number of full-time employees at those highly regulated firms is 92; for everyone else, the median is only 14.8. Another split exists between WME firms that are publicly traded (median of 26 employees) compared to privately held or nonprofit firms (median of 15).

Average staffing levels are drifting upward overall, from 28 employees in 2017, to 30 in 2018, to 31 this year — but that’s the average for all WME firms together, so I’m not sure how useful that point of data is given the large disparities that exist among different types of firms.

What It All Means for CCOs

The biggest caveat for all this data is that we have only 128 firms in the sample size, and they landed in that population because Ethisphere selected them. I don’t dispute that these firms have a solid commitment to ethics and compliance — but they aren’t necessarily representative of all large firms as a whole, if you want to compare your own organization’s practices to what WME has identified here.

In other words, the WME firms offer a glimpse of what other firms might aspire to do. They aren’t a sample of “normal” firms that might portray what companies usually do.

CCOsThat said, the broad direction of these WME firms’ practices all make sense. In the first Ethisphere analysis published last month, that report explored how the firms were trying to be more transparent with employees (and even outsiders) about what the ethics & compliance function actually did; and how the firms were using technology to give employees a better, more interactive experience when reading the Code of Conduct and written policies.

Now we have this report, showing that more CCOs among this group have input into strategic issues. That reflects, I hope, an awareness among board directors and senior executives that ethical considerations are important to a company’s ability to generate value for its stakeholders.

Put simply, if management doesn’t heed ethics and compliance issues early in its business decisions, it will heed those issues later, usually at greater expense. If employees don’t heed ethics and compliance issues in their daily operations, that will bring the organization to the same uncomfortable place too.

So why not establish a role dedicated to bringing those issues to light, and then inculcating awareness across the whole enterprise? Sometimes doing good really is its own reward.

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