News
04.01.2008
From the compliance system to the compliance culture
The underrated role of communications in the risk topic compliance. By Hartwin Möhrle, Dr. Knut Schulte
Bribery, corruption, embezzlement or even merely a “sloppy” attitude towards donations; in the meantime time one could be forgiven for thinking that German companies and institutions are being run in a manner akin to that which previously characterized the Neapolitan city administration. No surprise then that the subject of compliance – the system that guarantees the corporate monitoring of legislation and rules, internal and external obligations, therefore – is experiencing a real boom. And also as a high-profile risk topic for the standing and reputation of companies and institutions, as well as their senior management.
A few facts: Germany’s federal investigations bureau, the BKA, estimates the material damage from compliance violations in recent years has been some 200 billion euros. The statistics also reveal that nearly two thirds of compliance violations are committed by corporate personnel.
Seemingly the “respectable merchant”, the somewhat old-fashioned sounding synonym for ethically sound, value-oriented business dealings, is now obsolete in many areas as an internal role model. Nevertheless, we are seeing an increase in the number of brochures and training courses on mission statements and business ethics, corporate governance and codes of conduct. In the area of conflict that exists between compliance and competition many employees and managers regard the topic as a somewhat annoying compulsory exercise in corporate starry-eyed idealism. There is a strange divide: Between that which many companies and institutions formulate as an ethical and cultural self-image and the actual compliance systems in existence.
The overall situation has further compounded the problems: The more public the general debate on the tarnished trust between politics, business and society, the more damaging and momentous the impact of each bribery scandal, every act of tax evasion, and even “just” an inept baksheesh deal somewhere in Africa.
What can help then? Tougher legislation, bans, threats of punishment, and the appointment of compliance officers with prior prosecuting experience as controllers of and tutors for organized integrity? And what role does the communication play in all this? Does it play any at all? Let’s take a systematic look at things.
1. The dilemma
The compliance scandal at Siemens was possibly only allowed to take on such dimensions because the company had a compliance system that putatively functioned. It protected the very people lacking in the corresponding sense of wrongdoing.
Thus many a compliance problem is created not because the requisite system is not in place, but because the existing system is not lived out, as it is too far-removed from practice and merely has a more or less legitimatory function.
2. The damage
By-the-book corporate activity becomes the central criterion for public acceptance of business dealings. In this respect it is not simply a question of image, but of money.
Those who take the subject of compliance lightly are taking major economic risks. Compliance violations can quickly lead to substantial business disadvantages: Exclusion from bidding processes, the loss of customers and partners, major difficulties with state institutions and agencies during approval procedures. And, not least of all, the reputation of a company plays a significant role in the battle to acquire qualified specialists.
3. The rules
Compliance rules have to be brief, concise and unequivocal. Everybody has to know and understand what is allowed and what not – and be aware of the consequences that threaten in the event of a violation. They have to be concrete, comprehensible and directly relatable to professional practice for all involved. Otherwise they will not be taken seriously.
Extensive bodies of rules, which primarily revolve around consideration for the retention of the rainforest in Papua New Guinea, may well meet with general consent, but in practice they are counter-productive: They obfuscate the clear statement actually required, namely that infringements are not acceptable and will be quickly and resolutely sanctioned. Yet which does not mean that a commensurate approach cannot be taken towards the errors of individuals, possibilities for rehabilitation etc. There should be no possibility of a misunderstanding that there is unofficial tolerance of that which is officially forbidden.
4. The values
If the values culture in the company is not right, compliance regulations and compliance officers will not be able to protect the company against violations of rules and legislation – no matter how many of these there are. A management task therefore.
Compliance and corporate governance are directly tied to the values within a company and to the persons who credibly exemplify these values at the head of the company. In particular where people have gathered experience, some over several decades, in the grey areas of business, on both a national and international level, existing regulations often merely serve as a necessary token gesture. In many companies it is a question of nothing less than a sustainable change in mentality and attitudes, a change process in the minds of the managers and employees – alongside the improvement of or implementation of compliance systems that comply in full with legislation.
5. The attitude
If compliance training courses and training sessions are lent the character of unpleasant obligations and enforced repetition, then from our experience very little changes in cultural terms, neither in people’s attitudes nor within the company.
Many internal workshops and training courses focus on legal formalities, on perfecting reporting systems etc. Above all they are based on deterrence. This is necessary. However, these tend to lack legally unambiguous and comprehensible implementation, as well as the unequivocal and uncompromising imparting of the associated ethical and cultural guiding values. Attitudes are not changed through front-on instruction, but through a process which conveys the right values and which is firmly anchored in professional practice.
6. The task
It is not the compliance rules which create a positive corporate culture, but rather the corporate culture creates the basis for a regulatory framework that is accepted as beneficial and which has meaningful, useful and practicable rules of conduct.
The best protection against violations of rules and legislation, and not only in the business process by the way, is a team of managers and employees whose own values systems and conduct prevent the occurrence of questionable conduct from the very outset. Those wanting to take compliance and corporate governance seriously have to ensure that not only warning and punishment systems are established, but that people understand, internalize and actively represent the associated values and their positive significance for the organization. This is the central task.
7. The communication
Successful compliance means the implementation and imparting of corporate values and their self-image as a good corporate citizen, and sustainable identification on the part of management and personnel. The number of seminars and conferences is constantly on the increase, with lawyers, management consultants and HR, security and compliance specialists discussing the subject. Strangely enough, those with responsibility for communication in the company are totally absent. And this although the communicative competence of all the participants is the key to the successful implementation of corporate and societal guiding values in daily practice.
In part, the communication in companies and organizations faces a new challenge in this respect. It represents the competencies necessary for the successful imparting of the values for the internal audience. The more strongly the communications department is involved, the more confidently it can take action in the eyes of an external audience if the violation becomes public. In the past one could almost have gained the impression that some of those responsible for communications seemed to be totally surprised by what was happening within their organizations in terms of compliance. The world turned on its head therefore.
A conclusion
Effective compliance comprises two elements: A clear, simple, practice-oriented body of rules and an active values culture lived out by the management and employees. It has to be conveyed, lived out without any compromise, and when necessary asserted. “Business ethics” are indispensable brand components for a company or an institution.
The communication plays a key role. It can play a major part in the successful implementation of compliance systems in both the individual and the corporate consciousness. It is true that no system in the whole world can protect against the criminal energy of an individual. But it strengthens the immune system. In the worst-possible case it is ultimately a question of making sure that the misconduct of a small few does not sustainably damage the reputation of an entire organization. Ultimately, the worst-possible case has to be perceived by the internal and external audience as an exceptional case that was mastered by the organization and the protagonists in an expert manner. Once again the communication plays a significant role.
The authors
Hartwin Möhrle is a Managing Partner of A&B COMMUNICATIONS GROUP GmbH and Managing Director of A&B ONE Kommunikationsagentur GmbH.
He advises major companies, SMEs, institutions and individuals on corporate communications, compliance and issues management, and crisis situations. Current publication: “Krisen-PR - Krisen erkennen, meistern und vorbeugen - ein Handbuch von Profis für Profis” [“Crisis PR. Identifying, Overcoming, and Preventing Crises – A Handbook by Professionals for Professionals”], Frankfurter Allgemeine Buch, expanded and updates re-edition, Frankfurt am Main, 2007.
Dr. Knut Schulte is a lawyer and tax consultant, a partner at BEITEN BURKHARDT Rechtsanwaltsgesellschaft mbH; he also lectures at Heinrich Heine University Düsseldorf; he is concerned with legal aspects of crisis consulting.
 
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