Podcast: CCOs Serving on Boards

The Radical Compliance Podcast
The Radical Compliance Podcast
Podcast: CCOs Serving on Boards

Regular readers of Radical Compliance know that I believe ethics and compliance officers serving on corporate boards is a superb idea. More and more of the governance challenges boards face, as they try to position their organizations for success, somehow touch upon ethics and compliance issues. Well, who understands those issues better than professional ethics and compliance officers? 

To explore all of this more fully, I recently caught up with David Greenberg, chief ethics and compliance officer for Altria Group in the 2000s. Since then Greenberg has served on the boards of two private companies, and these days he is chair of the governance committee and a member of the audit committee of International Seaways, an NYSE-traded oil and natural gas tanker business. 

You can hear the podcast of our conversation (20 minutes long) at the top of this post. Meanwhile, I have a few further thoughts of my own, below.

The Struggle Is Real

First, the need for ethics and compliance perspective in the boardroom is genuine. We see calls increasing from all sides for corporations to be better corporate citizens. As a practical matter, that means boards must play a larger, more thoughtful role in guiding corporate culture. Ethics and compliance officers can help with that.

For example, earlier this year Cognizant Technologies received generous treatment from the Justice Department when it resolved FCPA charges that included egregious misconduct by senior Cognizant executives. In no small part, that leniency stemmed from the board’s decision to self-report the misconduct immediately, with no assurance of a good outcome later. The audit committee of the board includes one chief ethics and compliance officer, and one general auditor — and their experience clearly shaped the decision to self-report. Who knows what might have happened with audit committee members who were all, say, operations executives? 

A more recent example comes from Carnival Cruise Lines, which just paid a $20 million fine for persistent environmental compliance trouble and agreed to place a compliance expert on its board. This might even be a better example than Cognizant, because that example was all about making the decision to self-report — difficult to swallow, but morally clear. Carnival’s problems are much more about a byzantine organizational structure, where considerations of good conduct get lost in an org chart that looks like a Jackson Pollock painting. 

Number 14: Gray, by Jackson Pollock; 1948

A big part of Carnival’s challenges in the next few years will be straightening out that organizational mess. The company just hired a chief compliance officer, and he’s going to need help from the board. So having a compliance professional on the board (Carnival hasn’t announced that person yet) will be crucial.

Moreover, as Greenberg mentioned in our podcast, society is simply placing more expectations on corporations anyway. Consumers and the public want businesses to play a role in issues like climate change, income inequality, gender and racial equity, immigration, and gun control. Corporations don’t have clear answers to those issues yet. But as businesses derive more of their value from corporate reputation, and more of corporate reputation is bundled up in “doing the right thing,” when we don’t even know exactly what that means — ethics and compliance perspective will be critical. 

Boards Are Constrained

All that said, there’s also the reality that boards always need strategic and operational expertise first and foremost. They also want (and in some jurisdictions, are now required to have) female and minority board members, to diversify the conversation. They are in dire need of cybersecurity expertise. 

So I have no illusions that despite all our great arguments above, finding room for ethics and compliance voices in the boardroom will be hard. Even Greenberg admits as much: “There’s a lot to think about — and I have to say, at this point, ethics and compliance doesn’t make it very high on the list.” 

Greenberg is right. More to the point, boards are right, that they have other, competing recruitment needs at the moment. If a board finds a female or minority director candidate who also has corporate compliance experience, that’s great. If no such candidate is available, nobody can begrudge boards for putting other criteria ahead of compliance expertise. As one chief audit executive told me: “It’s a great idea — it’s just also very aspirational. Right now my board needs a cybersecurity expert.”

So ethics and compliance voices will need to wage a long campaign to raise the profile of this cause. Or, as Greenberg also said: “It should be obvious from the scandals and the number of problems that companies have, that would have benefitted from having a strong ethics and compliance point of view on the board, but I don’t think we’ve fully made the sale yet.” 

Where on the Board?

I also wonder exactly where an ethics and compliance professional would add the most value to a board. We tend to assume “audit committee,” because the audit committee has so much responsibility — but the more I think about it, the less sure I am.

For example, Greenberg is chair of International Seaways’ corporate governance and risk assessment committee, and sits on the audit committee. Meanwhile, the chair of the company’s audit committee also sits on his governance committee. 

Arrangements like that can make a lot of sense. Not every audit committee issue needs ethics and compliance expertise, and not every corporate compliance issue needs an audit committee’s attention — but most of those issues will overlap somehow, so a committee structure that lets each committee see the other’s work could be the best way to skin the cat.

I could also see the wisdom in putting an ethics and compliance officer on the compensation committee, since we encounter so much misconduct that’s driven by a flawed approach in incentive compensation. A compliance officer could even add value on the board’s nominating committee, since that’s the group that leads the charge on hiring a new CEO and recommending other board members. 

Lots of food for thought. Greenberg and I just started the conversation, and we’d love to hear your opinions.

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