More compliance on the executive chair!

Communication, exemplary homogeneous leadership and a good corporate culture are essential for bringing compliance to life in companies.

The issue of compliance is still frequently neglected despite the corruption scandals of the last decade. However, expectations vis-à-vis companies have changed sustainably as a result of the tightening of national and international legal frameworks. Corrupt and dishonest conduct is no longer tolerated by legislators and the public. Many companies are therefore responding by implementing compliance management systems (CMS) to provide their employees with guidelines for rule-compliant and ethically correct conduct.

A widespread problem, however, is that many CMS are not designed to be practical and employee-oriented. Predetermined rules, principles and values are not lived by. In critical situations, employees do not follow the requirements of the CMS. One reason: They don't want to stand out by deviating from familiar patterns of behavior. The CMS fails to serve its purpose and lives on as an ignored set of internal rules.

The question now is: What do the boss and his chair have to do with this? After all, every employee makes decisions themselves and the boss doesn't want to play the moral apostle as well. What is the role of management here? To clarify this, it helps to look at the duties of corporate management, the influence they have on “compliance decisions” and the ways in which they can improve them. There is still no direct legal obligation to set up a CMS. However, the diverse and far-reaching legal obligations for management may result in the need for a CMS.

Management duties

• Section 25a KWG, for example, obliges the banking sector to establish a proper business organization to comply with legal obligations.
• Section 33 I p. 1 WpHG even obliges to establish a permanent and effective, independent compliance function.
• General due diligence and fiduciary duties arise from Sections 93 I S. 1 AktG, 43 I GmbHG.
• Another necessity also results from administrative offenses law. In accordance with Section 130 OWiG, the owner of a company or company order acts contrary to regulations if he fails to take supervisory measures that are necessary to prevent infringements of criminal or administrative obligations in the company or company.
• Not to forget the self-binding German Corporate Governance Code (DCGK), which contains risk and control obligations as well as corporate obligations.

Even this excerpt of duties and the accompanying derivation of “best practice measures” in practice — for all company sizes and industries — should arouse the interest and sensitivity of every top management in establishing or improving their compliance organization.

More responsibility

The task and challenge of running a company is becoming ever more complex and complex. This applies in particular to dealing with and responsibility for compliance. There is also a paradigm shift away from conservative to modern management methods. Give up control — maintain leadership. Trust in employees as the basis of leadership competence is required. How is compliance compatible with this? Managers should trust their employees and give them more decision-making power. Let employees become entrepreneurs. Because by increasing responsibility, more conscientious decisions can be made. Compliance is improved. This approach can be a deterrent. Accordingly, it is the task of management, employees, to provide them with the right tools for this purpose.

Be a role model — show an attitude

“Compliance is a question of attitude. There is no alternative to this,” says Oliver Burkhard, CEO of Thyssen-Krupp, aptly.

It is important that a corporate culture is created in which compliance is part of the big picture — compliance awareness. Compliance thus becomes a strategic success factor. Who is responsible for this? The management. As a role model, it is the linchpin of effective compliance. Compliance as a mindset, firmly anchored in corporate culture, must be exemplified and the “tone from the top” internalized. This is the only way for all employees to recognize compliance as their personal task for sustainable corporate success and a sales brake becomes a revenue engine.

Compliance is the guide to legally secure conduct and thus becomes a competitive advantage. Managers must be aware of this particular role and responsibility. Or would you follow the sign to the left when your mountain guide walks to the right?

Use modern approaches

In order to elicit the right attitude and therefore the right decisions among employees, the science of behavioral economics can be included. Behavioral economics is based on the real and natural behavior of people. It is well known that people think rationally in a limited way. Because of their limited ability to absorb and process new information, they use so-called heuristics, i.e. simple and well-known problem-solving mechanisms. A pictorial example is the Gordian Knot. If it cannot be opened, the rope is simply cut through. A complex problem was solved simply, but with serious consequences. Accordingly, employees must be prepared and trained for explosive cases and typical situations.

From rule to implementation

Compliance awareness is increased through aggressive internal corporate communication and training on relevant subject areas. Seminars or new forms of learning such as e-learning or webinars are ideal for this purpose. Such training and training measures should be accompanied by the organization of a Compliance Awareness Day, mandatory for employees and managers, with exciting and interactive contributions from experts. The aim is to make employees more aware of critical situations. The seriousness, but also the reasons and benefits of a compliance policy should be understood.

The company's often dry compliance base, usually a code of conduct, can thus be usefully supplemented and brought to life. Understanding of issues such as corruption, conflicts of interest, money laundering, and fraud is being increased. It is also important to note the so-called “Forgetting Curve”. The human brain tends to forget. Once learned, it fades quickly. It is not enough to conduct e-training every two years. Especially in the age of digital transformation, compliance must be anchored in the minds of all employees. This can be supported in a practicable way by a relieving IT-based CMS with digitized processes and solutions. The: The compliance officer can therefore see who has read rules or completed training courses. At the same time, compliance with essential documentation requirements is also facilitated.

conclusion

There is no ready-made compliance solution. The cornerstone is a good corporate culture, which is built up through communication work, homogeneous team work and, above all, exemplary leadership work. It is essential to initiate sustainable cultural change by management, to perceive employees as co-entrepreneurs and to provide a user-friendly compliance platform. Because a CMS, no matter how good, is worth nothing if it is not lived and implemented by the entire company.