Don’t Divorce the GC and Compliance Officer

by Benjamin W. Heineman, Jr for The Harvard Law School Forum, December 26th, 2010.

The role of the chief compliance (and ethics) officer is currently a hot, if confused topic. What does she do — ensure good process or enforce strict compliance? To whom does she report — GC/ CFO or to CEO/board? What is her role in shaping the company’s voluntary adoption of ethical standards — beyond what the law requires?

This issue has been thrust into high relief by regulators and enforcers who, in light of various scandals, want a more independent compliance function in corporations. For example, changes in the federal sentencing guidelines would give corporations extra credit if the “specific individual” in the corporation with “day-to-day operational responsibility for the compliance and ethics program” has direct access to the board of directors. The issue has also received attention in the resolution of various high-profile cases, including a recent Pfizer Inc. settlement of criminal and civil matters with the U.S. Department of Justice and the U.S. Department of Health and Human Services, which required that the company’s chief compliance officer bypass the GC and report directly to the CEO.

Let me offer a somewhat contrarian, more nuanced view about the critical importance of a chief compliance officer, but in a right-sized role.

There are three broad organizational options:

  • The chief compliance officer is independent of the GC and CFO and reports directly to the CEO and board.
  • The GC is also the chief compliance officer (CCO).
  • The CCO reports to the GC and the CFO, and deals primarily with the process of compliance across all substantive subject-matter areas. (continue reading… )




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