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“What does a foundation mean?” & Three Questions with Nicole Tarasoff

The Code of Conduct is the Foundation

Why does the Department of Justice and the SEC call the Code of Conduct the foundation of an effective compliance and ethics program? This question is something that has come up often over the last few years and this terminology— the foundation has become a buzzword. Let’s take a step back and look at where the Code of Conduct became such a vitally important piece of the puzzle for a compliance program. If we look back at the original U.S. Sentencing Guidelines standards for organizations, which by the way are going to be celebrating their 25th anniversary in November 2016, we don’t find code of conduct. There just wasn’t a focus on code of conduct when these initial compliance and ethics program standards were being developed. It’s only been a sharper focus in the last 5 to 10 years. Today, standards could be mere individual policies, they could also be other written documents. They definitely could be code of conduct which could encompass things like your employee handbook. 

So this term foundation—what does it mean? There are some fundamental pieces of the compliance and ethics program puzzle that the code of conduct can often be a part of. So, when we talk about a foundation what do we expect from a foundation? We expect the foundation to be solid, we expect it to be well planned.  Just like a a foundation for a building, it should  should reflect everything that’s going to stand on top of it, it is the support system. We also know that foundations for buildings need to be maintained on a regular basis. The same goes for your compliance and ethics program. It needs to be revisited on a regular basis, that’s really important and sometimes overlooked. 

Practically speaking, you should also consider a mission statement when talking about what a foundation means.  What are the expectations of your organization? Code of conducts often have a statement from the CEO or chief executive in the front of the document, this can serve as a mission statement for compliance at the organization. It wasn’t always there 10 years ago but certainly that personal message stands for something, for ideals and principles, it establishes the tone of the conversation. The tone that you’re going to continue to have with your employees about these issues. It can be individual risk topics or discussions of things like reporting. It can be considered the hub of the wheel or base of operations for your compliance program.

Another key aspect of a foundation is that it’s basic, it’s simple, it’s structural. I think that really lends itself to talking about the broad values that underpin your compliance and ethics program. And the bottom line here is you want people to be familiar with these values, Familiar with the basic premises from the code of conduct.

I think as compliance professionals we are “glass half-empties” type of people. So when we think about the code of conduct and discussion of risk topics we’re trying to put together a resource to help people remediate problems. We need to think more like  “glass half-full” people. The code should be aspirational, it should be the values platform of the organization. I think we tend to forget that and concentrate more on the mitigation or the clean up afterwards rather than the aspirational piece and I think that’s important to consider when you’re talking about a foundation. It’s a values foundation, a values platform for the organization as a whole and in their compliance and ethics program.   

This notion of a foundation and using that kind of terminology is a very clear cue that the Department of Justice & SEC expect to see a code of conduct. A foundation that talks about values. A foundation that talks about big picture expectations. A foundation that supports a real bonafide program. So let’s take them at their word. Let’s make sure that the foundation is strong.

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The Upshot

The Code of Conduct is the foundation of your program. It’s got to be solid and well maintained, it must be purpose built for your unique organization, it must support your program and state the value of your organization. Lastly it must be maintained.

3 Questions with Nicole Tarasoff

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