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Five key responsibilities of a compliance/ethics officer, and reporting lines

James Nortz, the director of compliance for Bausch and Lomb, worries in ACC Docket, April 2007 at 94, whether the nascent field of dedicated ethics and compliance professionals will “persist and grow over the long term” (See my posts of Jan. 17, 2006 on the Ethics Officer Association; and Oct. 25, 2006 on the rebranding of the association to become the Ethics and Compliance Officers Association (ECOA).). His concern arises from the fact that more than 19,000 corporations in the US have taxable income above $8 million yet only somewhat more than 600 have a member of ECOA. He fears that traditional corporate functions will continue to manage legal/ethical risks of companies.

Nortz lists five fundamental questions that compliance/ethics officers are typically asked to answer:

1. What are the most significant legal and ethical risks facing the enterprise?
2. How effectively are those risks being managed?
3. What opportunities for improving the effectiveness of legal and ethical risk management should be pursued?
4. What is the status of work undertaken to improve the effectiveness of legal and ethical risk management systems?
5. To what extent have investments made to enhance legal and ethical risk management systems improved performance?

The list can serve as a salutary guideline for what inside lawyers should address.

As to the reporting line of a company’s senior top compliance and ethics officer, Nortz does not believe it should be to the general counsel. “There is a consensus among compliance/ethics professionals that it is best if the chief compliance/ethics officer reports directly to the CEO and/or board of directors rather than to an existing department head.” He argues that direct line reporting to the top – as compared, say, to the general counsel – gives the compliance/ethics officer independence, an enterprise-wide perspective and expertise.

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