Compliance: ethics, culture and values

Tracey Groves

“Compliance should be able to establish the circumstances and help to cultivate an environment in which people feel empowered, equipped and confident to take the appropriate decisions in a given context."

                                 Tracey Groves, Partner, Compliance & Business Ethics

Helping people to ‘do the right thing’ is often given as the raison d’etre of compliance. In fact, my view is that the ‘right’ thing is almost certainly a misnomer. That’s because it’s impossible to define precisely what the ‘right’ thing is at any one time. It will change according to context, circumstances, culture and other influences. What we’re really talking about is the ability to exercise judgement in order to make a decision or take the action that is the ‘righter thing to do’ in any given context. These are subjective assessments, based on judgement, rather than actions or decisions that meet a strict set of objective codified instructions.

And that distinction is crucial if we are to avoid setting ourselves up to fail as compliance functions, by trying to impose a counsel of perfection that in nearly all circumstances we’re likely to fall some way short of. Instead, compliance should be able to establish the circumstances and help to cultivate an environment in which people feel empowered, equipped and confident to take the appropriate decisions in a given context.And that largely describes the effective culture of the organisation.

So what is required to deliver that? Ultimately, it rests on the alignment of corporate purpose, vision and a set of values and desired behaviours that provides a framework to design organisational culture. By nature, these are very different from the enforced rules, policies and procedures with which the compliance function is often associated. Merely following the rules and acting in accordance with the law may not always lead to behaviour and outcomes that are acceptable to different stakeholders and their expectations. And this distinction has become increasingly evident, for example, in the way that some companies’ tax activities have been greeted as unacceptable in public arenas.

Underpinning organisational culture is trust. Trust provides a licence to operate and is the foundation of integrity. Rules and legislation alone cannot and will not create trust. Rather, it is the application of core values – and the consistent deployment of them – that creates integrity and underpins trustworthy behaviour. So it is critical the compliance function strives to ensure that values are identified and communicated effectively. 

Underpinning organisational culture is trust. Trust provides a licence to operate and is the foundation of integrity. Rules and legislation alone cannot and will not create trust.

Those values should serve as simple and clear guides that all employees ‘naturally’ internalise in their decision-making and actual behaviours – and which will, through the repeated actions they inform, clearly demonstrate to stakeholders what the business stands for and generate trust. This is in marked contrast to a rules-based approach that, with the growing volume of regulation, becomes complex, incongruent and increasingly difficult to navigate.

At a recent PwC event held to debate the role of compliance in the future, the distinction between rules-based and values-driven organisations was a recurring theme. Many of the delegates emphasized the importance of values and culture over complying with rules as critical to creating an effective organisation. However, precisely how that can be achieved is an issue that attracts far less consensus. There’s no question that moving from a rules and controls-based environment to one characterised by a more behaviourally-based decision making process is hard. Yet it’s a challenge that no organisation can shirk if they want to ensure that they are able to prosper in an increasingly global and multicultural business world in which the rate of change is constantly accelerating and decisions have to be made at a comparable speed.

Compliance can act as a critical enabler to support the deployment of corporate values and behaviours that delivers on the purpose of the organisation and its vision. By providing employees with the space to question and the opportunity to challenge instances where they believe actions or behaviour run contrary to them, compliance can help build an ethical corporate culture that goes way beyond the enforcement of rules.

But this is not a role that is – or can be, restricted to the compliance function. The creation of incentives and career development, for example, are other levers that need to be aligned to reinforce and reiterate the values. However, the compliance function has a key role to play in supporting and advising the wider organisation about the policies and approaches that can help to reinforce an ethical culture. It’s important, too, to remind ourselves that corporate culture is not a ‘nice to have’ accessory for a corporation who cares about its reputation. It’s a commercial imperative. Its importance increases as organisations operate in many different territories in which different norms and expectations guide behaviour. In those varying contexts, it’s essential to embrace difference while at the same time making sure that the core values guiding behaviour are consistent. And daunting as it may seem, it’s the objective that compliance functions will increasingly need to work towards in future.

Related content

The (current and future) role of the compliance function

Compliance: The role of the Board and leadership

 

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