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Carving Out the Ethics in Ethics and Compliance


Carving Out the Ethics in Ethics and Compliance

To influence behavior, it’s the principles that count

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When you want to get employees to think and act ethically, don’t talk to them about compliance, say some experts. For as important as compliance is, it’s about rules. Ethics is about so much more than that.

Yet, in the ethics and compliance profession, many companies use the terms “ethics” and “compliance” synonymously, leading to the impression that they don’t need to be seen as separate entities. These companies may be missing out on a great opportunity, because separating these functions has the potential to define a company’s ethics culture and the way its employees conduct business.

To test this theory, last year the BMO Financial Group made the move to separate the organization’s ethics and compliance functions, appointing a standalone Chief Ethics Officer, functionally distinct from compliance/the Chief Compliance Officer. It was an exploratory move for a financial services company that is already heavily regulated and reliant on huge compliance and risk management functions, which are rules-based, says BMO’s new Chief Ethics Officer, Ula Ubani. She sees the move from a rules-based to a culture-based focus as a positive step on the path to helping people behave more ethically.

Legal vs Ethical Conduct

Other leaders in the ethics and compliance space have voiced similar views. In a blog post entitled The Important Distinction between Ethics and Compliance, attorney Michael Volkov writes:

“The consideration of ethics as a fundamental value to a company elevates everyone’s performance. An ethical focus is more than just legal compliance – can we engage in the conduct without creating significant legal risks? Instead, an ethical focus turns to an important consideration: while the conduct may be legal, is it ethical?”

In a banking environment, conduct must be both, but by measuring behavior separately against the two yardsticks of ethics and compliance, an organization arguably has a better chance at making sure both requirements are met.

Compliant behavior no longer satisfies the ethics test by simply being compliant.

This is not to say that BMO has cut off ethics entirely from the other, rules-based, functions, such as legal and compliance. “We are responsible for the code of conduct and everything that falls with it, but the difference is that we also work closely with human resources and other parts of the organization that are focused on employee behavior and employee engagement,” says Ubani. “We also set the annual training and describe the content for the training, but corporate compliance will administer it. They’re the ones who make sure it gets done.”

Having a separate function gives the ethics team the ability to work with human resources, employee relations and other areas, on developing behaviors that will help support the code of conduct and help employees to get a better sense of what it all means, says Ubani.

Principles-Based Code

It all boils down to giving employees an understanding of what’s behind the rules, and this is much more effective when you have a principles-based code of conduct.

A principles-based code of conduct gives people freedom to make their own choices, says Ubani. “If people feel that they make their own choices within the framework that we are providing, they are more likely to buy in,” she says. “It makes sense to them and it’s more likely to stick.”

She stresses the importance of explaining the code of conduct in the context of behaviors and company values and reinforcing it with whatever else is happening in the organization. “They just keep hearing it over and over again and it makes people realize that it makes sense. This is what we actually stand for.”