One Year After the Department of Justice Raised Bar for Corporate Ethics & Compliance Programs: Those Focusing on Values, not Just Rules, Meet DOJ Criteria, LRN Research Finds

NEW YORK, March 14, 2018 -- Just over a year ago, in February 2017, the U.S. Department of Justice (DOJ) changed the game for Ethics & Compliance (E&C) professionals. It refocused evaluation criteria for programs on whether, in practice, they prevent and fix misconduct in the workplace, instead of just looking at the programs’ structure and rule books.

The findings in LRN Corporation’s just-published 2018 Program Effectiveness Report (PEI) delineate the kinds of E&C programs that have the greatest impact on behavior in the workplace – and underscore that programs ranking high in that regard are also most likely to live up to the DOJ criteria that prosecutors use to evaluate programs.

Values Over Rules

“A year ago, the Department of Justice refocused ethics and compliance programs on outcomes, not procedures. And our new research demonstrates clearly that, when it comes to meeting the 2017 DOJ criteria, programs focused on values outperform those based primarily on checklists and rules,” said Susan Divers, a Senior Advisor at LRN, a company that helps leaders and organizations build ethical cultures.

“The new emphasis on results is especially timely as sexual harassment scandals continue to erupt in companies with programs that may well have codes of conduct and reporting procedures, but apparently lack traction in preventing and dealing with actual misconduct,” she added.

What Characterizes E&C Programs that Influence Behavior and Reduce Misconduct

LRN’s 2018 Program Effectiveness research, based on a survey nearly 400 ethics, compliance and legal professionals around the world, finds that the most effective E&C programs – and the ones that meet the 2017 DOJ criteria – do the following:

• “Operationalize” ethics and compliance using principles and values that inform all organizational decisions, not just those made in a legal or regulatory context.
   
• Ensure that the company analyzes the root cause of misconduct, rather than simply punishing misconduct.
   
• Embrace accountability and transparency – even if it means holding senior leaders or successful performers fully accountable for their actions.
   
• Make sure senior leaders, middle managers and boards of directors are engaged in preventing misconduct, and that the function isn’t left exclusively to lawyers or compliance staff.
   
• Are continuously reviewed and improved to ensure they remain value-focused and effective in terms of influencing workplace behavior in a positive way.

Quantifying E&C Programs that Influence Behavior and Conduct

The 2018 Program Effectiveness survey and analysis measured the effectiveness of participants’ E&C programs looking at factors such as whether the company tolerates high-performing people who violate the company’s code of conduct or values; managers act like they’re above the rules; employees hesitate to speak up; or employees are comfortable going a level above their direct boss to raise ethical concerns.

Many Companies Fall Short

The survey findings show that many companies still have a long way to go when it comes to operationalizing ethics and compliance – and, it follows, meeting the new DOJ criteria.

• Fewer than half of the E&C professionals who responded – 49% – said senior leaders in their company get actively involved in and take responsibility and action in instances of compliance failures.
   
• Only 38% said their organization’s leaders support appropriate sanctions or penalties on senior-level top performers involved in misconduct.
   
• Only 43% said leaders consider E&C factors in business and planning decisions such as new business ventures, mergers and operations reviews.

“Not only are the Department of Justice criteria that were formulated last year a good inspiration for companies to reassess their E&C functions, but there is also a solid business case to do so. A number of studies, including LRN’s HOW Report, demonstrate that substantial financial benefits accrue to companies that cultivate ethical cultures,” Divers said.

To access LRN Corporation’s 2018 Program Effectiveness Report, please visit: http://pages.lrn.com/2018-program-effectiveness-report.

To learn more, or to speak with Susan Divers, please contact Katarina Wenk-Bodenmiller of Sommerfield Communications at +1 (212) 255-8386 or [email protected].

ABOUT LRN

Since 1994, LRN has helped over 20 million people at more than 700 companies, worldwide, simultaneously navigate complex legal and regulatory environments and foster ethical cultures. LRN's combination of practical tools, education and strategic advice helps companies translate their values into concrete corporate practices and leadership behaviors that create sustainable competitive advantage. In partnership with LRN, companies need not choose between living principles and maximizing profits, or between enhancing reputation and growing revenue: all are a product of principled performance. As a global company, LRN works with organizations in more than 100 countries, and has offices in major cities around the world including New York, Los Angeles, London, Mumbai and Paris. www.lrn.com