European Audit Committee Leadership Network, August 2013
On 28 June 2013, members of the European Audit Committee Leadership Network (EACLN) met in Paris to discuss ethics and compliance, among other topics. This document summarizes the key points that members raised in the discussion, along with background information and perspectives that the members and subject matter experts shared before the meeting.
EACLN discussed the state of ethics and compliance at their companies, including the challenges companies currently face and how they are responding. Members touched on three key themes:
Nurturing ethical behavior is more important than ever
Governments around the world are enforcing existing laws more actively, and they are passing new laws and regulations. At the same time, the pressures imposed on managers and employees by difficult economic circumstances continue to tempt a minority to cross ethical lines, creating reputational issues for their companies. The will to resist is particularly hard to muster in cultures where prevailing norms conflict with the standards companies are trying to uphold.
Building an ethical culture is a journey
Members discussed several elements of a successful ethics and compliance program. Strong leadership in the form of commitment by top executives and adequate authority granted to the compliance function are both fundamental. Companies also need a code of conduct reinforced by an effective training program. Careful monitoring can identify problem areas as well as specific violations, and a zero tolerance policy underscores the company’s determination to enforce ethical behavior.
Boards are trying different approaches to overseeing ethics and compliance
Members noted that boards want to see improvements in ethics and compliance, but they are taking different approaches to oversight. Some boards delegate oversight of ethics and compliance to the audit committee, while others have created a new board committee. The full board may also take the lead if ethics and compliance has become a critical issue for the company. Reporting by management to the board also varies somewhat in terms of frequency and content, and whistleblower systems are being adapted to abide by local laws and customs.