Amateur Hour In Compliance?

I am often asked whether corporate compliance is a profession. Since my organization has been certifying compliance professionals for almost 30 years, my bias is clear. But there are good arguments on both sides of this question. One thinks of the scene in “My Cousin Vinny” in which Joe “Vinny” Pesci describes himself to the judge as a “para-lawyer”! Along these lines, I have heard it said that compliance officers are simply a large group of people practicing law without a license. Is this really the bottom line?

To answer this question fairly, we need to ask what makes law, accounting and medicine professions, while sailing, cooking and painting are not professions, at least for most of us. Theologian William F. May is often considered the authority on profession. He argues that the root of the term “profession” is “to profess” so that a professional is someone who has a core, specialized knowledge base which she or he is expected to profess authoritatively. Thus, doctors are trained in medical science, lawyers in the law, and accountants in standards of financial reporting. Chefs, on the other hand, have skills and a body of practical knowledge but, one might argue, no body of special knowledge not accessible to anyone who tries to make the donuts.

This is a real bone of contention in a society in which everyone wants to be a professional something or other. There is no question that the word “profession” is being generously applied to activities as varied as being a politician and being a cab driver. To be called a craftsman, skilled amateur or, even worse, layperson to invite low pay and less respect. One is inclined to ask what is so bad about being an amateur, someone who engages in activity for the sheer love of it. Social bias aside, there is a difference between a craftsman, such as a carpenter or shoemaker, and a professional. And part of that difference is a body of knowledge as opposed to a set of skills.

But that is not all the difference.

In addition to having a specialized body of knowledge, a professional adheres to a set of standards dictated by the domain of his or her knowledge, without exception and beyond the pressures of practical advantage and job. A lawyer who works for a company is still an officer of the court and is obliged to observe basic standards, such as not advising his/her client on how to break the law (and get away with it). Similarly, accountants are allowed to tell you how to best report financials and fill out your tax form, but they can not assist you in falsifying your financials or avoiding taxes you actually owe. I am not saying that lawyers and accountants always observe these standards; I am saying that we expect them to if they are to be regarded as professionals.

Where does that leave corporate compliance?

When one thinks of a body of compliance knowledge, the Corporate Sentencing Guidelines for Organizational Crime are the initial reference. The Guidelines became effective in November of 1991, and, although slightly modified subsequently, remain essentially unchanged. The Guidelines outline the elements of an “effective compliance program” that organizations should have in place if they expect leniency when sentenced for a crime. It is fair to say that no compliance officer can be considered competent if he/she is not familiar with the Guidelines and the extensive body of knowledge that has grown up around them. The Guidelines are now recognized across industries and agencies as the baseline standard for compliance programs.

But there is more to the body of compliance knowledge than the Guidelines. The Guidelines themselves codified a body of knowledge that had developed concerning corporate compliance in the decade prior to issuance of the Guidelines. Corporate compliance programs, which are more often called corporate ethics or integrity programs outside of healthcare, had assumed a specific form over years of experience mainly earned by government contractors partnering with the federal government in fighting fraud. Just as the Treadway Commission (Committee of Sponsoring Organizations of the Treadway Commission) was more of a codification of financial reporting standards than a creation, the Sentencing Guidelines did little more than sanctify a stable body of knowledge, a body of knowledge that continues to develop at a rapid pace.

So the argument that there is a body of knowledge underlying compliance seems safe. Even though there are many specializations within this body of knowledge, such as research compliance, health plan compliance and even VHA compliance, the core requirements of compliance as part of a system of internal controls constitute a stable body of knowledge capable of on-going growth and refinement.

But is there a related set of behavioral standards? It is in this area that compliance truly distinguishes itself as a professional endeavor. Let’s start with a simple question: Since both the legal profession and compliance concern themselves with laws and regulations, how are these endeavors different? And is this relevant to the status of compliance as a profession?

The behavioral standards for a lawyer derive from the lawyer’s primary role as an advocate for the interests of the client in the legal system. The lawyer is to put these interests ahead even of the personal interests of the lawyer (e.g., in getting paid) but only up to the point of not leading to violations of the law beyond those already committed by the client. In a corporation or other organization, the lawyer’s client is the abstract entity which is the corporation itself. The lawyer is an advocate for the corporation in legal matters.

By analogy, the behavior of a physician or other medical professional is to be guided by what is in the best interests of their patient from a health viewpoint. The patient’s health interests are to take precedence over any other interests that the medical professional may have and should always be paramount in the medical professional’s mind.

The behavioral standards for a compliance officer derive from compliance officer’s commitment to being an advocate for the integrity of the organization’s conduct with respect to all of its constituents. Specifically, the compliance officer is expected to advocate that the organization keep its word, including its promise to observe laws and regulations, or accept responsibility for those cases in which it does not or can not keep its word. Since organizations are composed of people, there will always be an error rate even in basic integrity. While the lawyer advocates the client’s interests, the compliance professional advocates the interests of integrity, even if this interest is disadvantageous to the organization in the short run.

That is why our certification program for compliance professionals tests for more than a core body of knowledge. For example, we ask those who seek certification as VHA compliance professionals how they will handle a situation in which they raise a compliance issue with their management and do not believe there has been adequate follow through. While there are many correct answers to the question, the common denominator is that all involve advocating an honest outcome.

This is also why the US Department of Justice and US Department of Health and Human Services have been adamant in their belief that the compliance function should not report to the legal function. In the face of a violation of law by an organization, an attorney’s guidance system shifts to defense while a compliance officer’s inner compass says “own it” by disclosing and correcting. These are both valid professional instincts but they are in fundamental conflict in some cases.

One of the reasons that the professional status of compliance is questioned is that so many of its practitioners bring the passion of the amateur to their work. But this should be viewed as the commitment of those fighting for standards that are not yet universally recognized rather than as the enthusiasm of the untrained. There is no reasonable question as to the professional status of compliance professionals, no matter how much those who are members of professions advocating narrower interests may complain.

Mark Pastin, Ph.D.
President, Health Ethics Trust
Council of Ethical Organizations

copyrighted to Mark Pastin

Of Mice and Lawyers

One puzzle of current attempts to defang the compliance function is why it seems to some, particularly members of the Legal Department, a good idea to have the Chief Compliance Officer report to the Legal Department. The idea would be laughable except for the fact that it is carrying the day. This is one of the few things in compliance that can be made perfectly clear.

Go back to the beginning which is the Federal Sentencing Commission in the mid-1980s. The country had survived the scandals in the defense industry but was in the throws of economic collapse at the hands of a sick financial system run by scoundrels. Some folks refer to this as “the S&L Crisis” which was thought to be the financial crisis to end all financial crises. Maybe not.

In response to this perceived increase in corporate misconduct, the Federal Sentencing Commission decided to develop guidelines for sentencing companies convicted of criminal conduct. It was intended that such companies be assured of suitable and consistent punishment.

But the Commission conceded the obvious fact that even the best corporations may have individual members who do reprehensible things in the name of the corporation. Thus, the Sentencing Guidelines specified a model of what counts as a good citizen corporation even in cases in which an individual or individuals have committed crimes in the name of the corporation.

The idea is that good citizen corporations will have ethics or compliance programs designed to detect, prevent and correct misconduct by individuals prone to wrong doing even at the highest levels of the corporation. The Commission defined an effective ethics or compliance program as including seven elements which are now the recognized building blocks of all reputable ethics and compliance programs.

The Sentencing Commission was not under the delusion that savings and loans, banks, and brokerages had committed wrong doing because their legal departments were understaffed. In fact, they had armies of loophole seeking, regulation side stepping attorneys. It was obvious to all that legal departments had failed to detect, prevent and correct the wrong doing that resulted in the economic crimes of the late 1980s and early 1990s. An additional system of checks and balances was to be instituted to allow members of the organization to point out wrong doing at even the highest levels of the organization and without fear or retaliation from those high levels – even if those high levels include members of the legal department. The Commission was not trying to add staff to the legal function but instead was trying to add a separate element to a system of check and balances.

This is not to say that lawyers can not or do not make good compliance officers. Some do and some don’t. Former Naval Commanders, former CEOs, the theologically or philosophically trained, CPAs, internal auditors, social workers and many others sometimes make good compliance officers. But none can succeed if they are thwarted by an ill-conceived organizational structure that places them in the executive team’s harem.