Sunday, July 10, 2011

The Need for Corporate Compliance Committees

Guest Blogger: Michael Volkov  (MayerBrown)

It is hard to move businesses in different directions. I like to use the analogy of turning a ship around -- it takes time, dedication and a steady hand.

Corporate governance is shifting again. We had the revolution of Sarbanes-Oxley in the early 2000s and now we have a new movement afoot. It is no coincidence that aggressive changes in white collar enforcement coincide with significant changes in the corporate governance landscape.

The newest trend -- which I fully endorse -- is the creation of corporate compliance committees. For most businesses, a separate compliance committee is an effective means to focus on difficult compliance issues, demonstrate a management commitment to compliance, and facilitate communications on compliance issues within an organization. By establishing such a committee, a company sends a very clear message. But the committee has to be more than just window dressing -- it has to have the support, the resources, and dedicated members with real expertise in the compliance area.

I like to use another analogy -- a compliance committee is like your dashboard on your car, telling you how fast you are going, how much fuel you have, and allowing you to signal others on the road.

A compliance committee should help your company navigate your legal obligations by empowering your decision makers with the right information. It serves a proactive role, separate from the audit committee which has a number of critical obligations related to Sarbanes-Oxley enforcement.

The compliance committee is responsible for ensuring that the company is complying with key legal and regulatory obligations. It is your primary vehicle by which to manage risk.

The compliance committee must actively gather and disseminate information reporting on overall compliance efforts. It must also communicate compliance issues and business risks to the right people. The right people include responsible managers, who are directly responsible for significant day-to-day business decisions.

The compliance committee must include one or more independent members who understand the regulatory environment, as well as the principles of good governance. This has a number of advantages. The independent member can test reports and statements, and mine discussions for issues that may otherwise go uncovered; may be able to share broad industry information and trends; and is likely to be less susceptible to a company’s internal culture (which might be reluctant to discuss certain risks and violations).

A well-structured compliance committee is your ultimate protection against potential legal and regulatory violations. I encourage others to look at such committees as part of an overall compliance program.

(mv)

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Comments

What do you think would be the specific guidelines for establishing such a compliance committee? As the saying goes, the proof is in the pudding.

Your comment that such a committee has to be "more than just window dressing" is poignant.

There must be specific guidelines for the establishment of a committee. Is there a movement afoot to draft certain guidelines?

Posted by: Craig Rolle | Jul 31, 2011 12:35:36 PM

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