Welcome to a special five-part podcast series on building a stronger culture of compliance through targeted and effective training, sponsored by Diligent. In Part 5 of the series, we discuss the role of the Board of Directors in a compliance program with David Greenberg, former CEO and Special Advisor at LRN and Director at International Seaways.
An accomplished board member with a passion for effective governance, Greenberg offers a well-rounded perspective on the duties and responsibilities that board members must undertake to ensure proper oversight within their organizations. Adept at helping board members differentiate between the distinct roles of oversight and execution, Greenberg has been instrumental in guiding professionals to strengthen their abilities and improve overall organizational compliance. With vast experience spanning across multiple committees and industries, Greenberg provides timely and accessible advice on building strong relationships with executives, executing on committee responsibilities, and accessing the resources necessary for successful board oversight.
Navigating the complex world of corporate governance and compliance is a challenging but essential task for board members. Ensuring the company operates within the legal, ethical and social confines it exists within is a vital aspect of effective board governance. Boards that fail to achieve high standards of compliance can suffer reputational damage, financial penalties and even legal consequences. It is, therefore, critical for board members to engage with the importance of their oversight role and invest in the necessary education and best practices to ensure they effectively fulfill this responsibility. Here are the key steps:
1. Understand the board’s oversight responsibilities
Board members play a crucial role in ensuring the ethical standards, compliance and overall performance of a company. This means understanding a board’s oversight responsibilities is of paramount importance to effectively govern and manage the organization. Every board has a fiduciary duty to protect the interests of the stakeholders and ensure the company’s compliance with laws, regulations and policies. To meet this legal requirement, board members should be knowledgeable about current best practices, emerging trends, and the legislative and regulatory landscape, and be prepared to ask tough questions, follow up and support management in executing the company’s plans.
Greenberg emphasized that there should be a healthy relationship between the board and the Chief Compliance Officer (CCO). This entails the need for ongoing dialogue and frequent reporting by the CCO to ensure the board is kept informed of the company’s activities, risks and potential blind spots. He also recommended that oversight committees should take a hands-on deep-dive approach to identify and address potential issues, making certain that the compliance program is ingrained within the company culture and business strategy. This means companies must find the right committee with the right people and relevant interests to oversee compliance and advocate for common membership across committees to ensure strategic integration and prevent fragmentation. For board members, understanding their oversight responsibilities is essential to foster robust corporate governance, risk management and compliance.
2. Establish strong communication with management
Establishing strong communication with management is a critical factor for an effective board oversight process. This key step entails board members working closely with senior management and the CCO to ensure that all compliance-related matters are addressed promptly and accurately. By fostering a healthy rapport with management, board members can actively engage in the oversight process and be more proactive in remedying any compliance-related issues. This collaborative relationship between the board and management is essential for companies to maintain compliance with laws and policies, ultimately safeguarding the organization’s reputation and performance. Strong communication between the compliance officers and the board is essential. CCOs should develop close relationships with board members, much like other senior managers. This could involve CCOs meeting with board members outside of scheduled board meetings to discuss any concerns or potential issues. By doing so, a CCO can build trust and foster open communication, allowing board members to have a comprehensive understanding of the company’s compliance efforts. The value of having the right committee and membership, which includes individuals with the background, interests and time necessary to effectively carry out their oversight duties is paramount. This key step is vital for board members because open and direct communication with management enables the Board to strategically address compliance matters, resulting in improved oversight and risk mitigation. Moreover, when board members have a strong rapport with management, they can proactively identify any issues and address them before the situation escalates.
3. Ensure compliance programs are integrated into the company’s DNA
In successfully executing their compliance oversight duties, boards must ensure that their compliance programs are integrated into the company’s DNA, or as the Department of Justice (DOJ) says, it’s all about culture. Such integration fosters a strong culture of compliance, which is crucial in minimizing misconduct, reducing legal risks and protecting the organization’s reputation. By incorporating compliance as a core element within the company’s strategic planning, daily operations and employee training, boards can better manage risks and ensure adherence to relevant laws, regulations and policies. Further, a fully integrated compliance program will enhance overall corporate performance, customer trust and employee engagement.
For a board to effectively exercise their oversight duties, compliance programs should be tailored to the organization’s business strategy, culture and resources. The relationship between the board, senior management and the CCO can facilitate effective communication and better coordination in addressing critical ethics and compliance matters. It is crucial for the board to ask tough questions and to dive deep into possible issues to ensure transparency and accountability. By embedding compliance within the organization’s structural and cultural fabric, boards can create a robust environment that discourages misconduct while promoting transparency, accountability and ethical behavior. This ultimately safeguards the company’s reputation, financial performance and regulatory compliance. Ensuring seamless integration of compliance programs is a vital obligation for boards, as this will enable them to effectively fulfill their oversight responsibilities and protect the long-term interests of the organization.
For board members, robust oversight and compliance, especially in a world where regulatory scrutiny grows more intense by the day, is essential. Through following these steps, compliance professionals can hone their understanding of the board’s oversight responsibilities, establish solid communication channels with management and embed a culture of compliance across their organization. Equipping yourself with these essential practices empowers you to tackle complex compliance challenges head-on and steer your organization on the path to success. As you continue to sharpen your oversight skills, you will foster a resilient compliance framework that safeguards both your organization and its stakeholders.
Ready to incorporate compliance into your company’s DNA? Start with a powerful and customizable Compliance and Ethics Training program.
