How dangling carrots in front of executives can boost compliance programmes

March 25, 2015

Many considerations influence human behaviour. In an ideal world, adherence to compliance laws and policies for moral reasons would be enough to ensure that the rules are followed. In the world we live in, however, something more is often required, forcing companies and regulators to punish individuals and corporations for breaches. Increasingly, companies are starting to understand that compliance programmes are best served when there is a ‘stick and carrot’ in place to encourage a culture of compliance.

Even without that understanding, it is prudent to ensure that there are inducements for good behaviour as the idea is encapsulated in the Department of Justice (DOJ) and Securities and Exchange Commission’s (SEC’s) FCPA guidance: ‘The DOJ and SEC recognise that positive incentives can also drive compliant behaviour. These incentives can take many forms such as personnel evaluations and promotions, rewards for improving and developing a company’s compliance programme, and rewards for ethics and compliance leadership. Some organisations, for example, have made adherence to compliance a significant metric for management’s bonuses so that compliance becomes an integral part of management’s everyday concern.’

Financial incentives are most often used at executive level to motivate the most senior members of the business to take responsibility for compliance. This has the benefit of ensuring that tone from the top exists – one of the key tenets of a robust compliance programme. It is important for companies to consider implementing financial incentives into remuneration packages to turn compliance from a ‘tick-the-box’ exercise into a programme that is best in class.

Given that senior members of staff are often involved in bribery schemes – particularly systemic, long-running transactions of improper payments – it makes sense for companies to properly incentivise their executive staff in order to best protect the interests of the business.

In addition, staff at all levels should be given incentives to not only comply with laws and policies, but to take a more proactive approach to compliance, enhancing the quality of the programme for everyone. Compliance staff members only have a certain amount of visibility over the entire running of a business, and should not be the only ones responsible for compliance. As with health and safety, every individual should be responsible for compliance. Persuading staff to take a personal interest in compliance by rewarding them for ‘doing the right thing’ promotes a culture of compliance and adds to the efficacy of your communication campaign. This helps to truly embed the compliance message in the business.

Incorporating financial incentives into remuneration packages

There is no broad consensus on how an incentive programme should be incorporated into a business. The best approach, as with all things compliance, is to offer something that is proportionate to the circumstances of your company. What is reasonable for a Fortune 100 company with hundreds of thousands of staff is not going to be reasonable for a small start-up company. The board should be included in this process.

Once the decision has been made to include financial incentives as a feature of your compliance programme, the payment structure will have to be considered. Will there be a bonus or does it better suit your company to incorporate compliance factors into performance appraisals? Are there more creative or ‘outside-the-box’ avenues you could take?

Consulting with the compliance team, you should prioritise which factors are most important to your company, and these factors should be the focus for the incentive scheme. Some companies may decide that executive managers should have an obligation to have compliance on the agenda at 80 percent of internal meetings. Alternatively, a company struggling with perceptions of retaliation could base measurements related to their whistleblower programme on complaints about retaliation from management.

Non-monetary incentives

The beauty of offering non-monetary incentives is that you do not usually have to worry about budget constraints – finally something compliance practitioners can implement swiftly without having to scrape together funding!

Non-monetary rewards can be as simple as recognising and acknowledging those individuals who demonstrate ethical behaviour or come up with a creative solution to plug a compliance gap.

If you do have some budget available, moderate and reasonable purchases can be made to facilitate rewards.

You are limited only by your imagination, and can tailor your creative solutions to the unique circumstances of your company and incorporate topical and current events to maintain interest.

Case study

A compliance officer at a multinational telecommunications company decided to take advantage of the Chinese New Year festive period to promote the company’s gifts and entertainment policy. The officer wanted to reward staff for correctly applying the policy to a delivery of a Chinese New Year gift to the office. An email was sent out to the entire office posing two questions about what should be done on receipt of the gift and promising a prize for the first person to submit the correct answers. The prize was modest (a bottle of wine), but the flutter of conversation that ensued throughout the office proved that a little creative communication and reward was enough to get the office talking about compliance and accessing and reading the policy.

Other non-monetary incentives might include:

  • featuring an individual who has done the right thing in a company newsletter or other communication, outlining the situation and how the staff member acted appropriately in the circumstances
  • taking a moment to discuss the actions of someone who has acted ethically at a conference or in team or department meetings
  • awarding ‘compliance champions’ with personalised certificates or company merchandise that they can display
  • rewarding staff who act ethically with a lunch with the CEO or another well-respected member of the business
  • introducing reward vouchers for free lunch or coffee at the company’s cafeteria or a nearby coffee shop
  • rewarding a particularly compliant staff member with an afternoon off work.

 

Adding some incentives to your compliance programme can go a long way to making it more than a paper programme and will pique the interest of your colleagues. These initiatives will supplement your existing compliance communication plan and encourage tone from the top. In addition, creative thinking has the benefit of getting staff to view compliance in a different way. One of the biggest struggles for compliance officers is changing the perception that they are an obstacle to the business when instead they should be viewed as an enabler. Highlighting the positive aspects of compliance by incorporating these initiatives will help to achieve these goals and open the door for discussion between compliance staff and colleagues.

 

 

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