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CCOs in the Boardroom: Linking Compliance and Strategy

Edna Twumwaa Frimpong

CCOs in the Boardroom: Linking Compliance and Strategy

Listen to Episode 79 on Apple Podcasts

Guest: David Greenberg, former CEO and special advisor of LRN and director at International Seaways

Hosts: Dottie Schindlinger, Executive Director of the Diligent Institute, and Meghan Day, Senior Director of Board Member Experience for Diligent Corporation

Summary:

In this episode of The Corporate Director Podcast, hear David Greenberg, former CEO and special advisor of LRN and director at International Seaways, discuss the importance of bringing a compliance perspective into strategic boardroom discussions. 

In This Episode:

  1. One CCO’s Journey to the boardroom: Greenberg discusses his career background and how it led him to board service as a former Chief Compliance Officer (CCO).
  2. The Value of the CCO Perspective: Greenberg breaks down the unique perspective that CCOs contribute to boardroom discussion and business strategy.
  3. How to Build the CCO and Board Relationship: Greenberg gives practical steps for how to cultivate a strong relationship between compliance and the board.

One CCO’s Journey to the Boardroom

Greenberg starts by sharing his career background and why that changed his perspective on having CCOs in today’s boardrooms: “As a lawyer and an MBA holder, I have about 40 years of working on the proper relationship between companies and society. I began as an opponent of the corporate sector. I worked for Ralph Nader and for Consumer Federation of America, a fervent consumer advocate in congress. As I learned more, I became one of the only representatives who sat with the business community to find common ground. I also had a 20-year stint as a senior executive at Philip Morris companies.”

He goes on, “Over those two decades I came to believe that while the business community had a point of value, the anti-smoking and health community had a strong and valid point of value when I worked against them. As a CCO, I kept asking myself and the company, what are the promises we need to keep, to the marketplace, employees, and society? This led me to serve on three boards, including my current one, exploring those questions from a director lens.”

Greenberg builds on from his earlier point: “In some cases, courts or the Department of Justice in the US have required or encouraged boards to appoint someone with an ethics and compliance background, particularly for companies coming out of reorganizations and bankruptcies. As chairman of the corporate governance committee, I’m in charge of the process of selecting new directors and am familiar with the criteria. Today, the ethics and compliance point of view increasingly has a seat at the table. It won’t happen all the time, but will become more of a regular if small percentage of appointments.”

 “In the last few years, it’s becoming more common to have CCOs in boardrooms. Why are they joining? Boards are increasingly focused on risk, culture and reputation. Those are very strong themes in the day-to-day and long-term thinking of ethics and compliance professionals.”

-David Greenberg, special advisor and former CEO of LRN, and director at International Seaways

The Value of the CCO Perspective

Greenberg shares insights on how CCOs add unique value in boardroom discussions: “They bring discipline and experience. They’re trained to start with big thoughts, which lend themselves to the existential issues boards deal with. They can take an evaluative look at the implicit and explicit promises companies make to the marketplace, employees, and society. This is the backbone of good ethics and compliance executives.”

He also touches on risk: “Risk is a stock and trade of ethics and compliance professionals. Most risk assessments are dealt with by these teams. Boards see that other companies are getting into trouble with misconduct and are taking the right steps as a board to prevent that, to preserve reputation and value, to do the right thing, and translate that into our behavior. Those questions are front and center for ethics and compliance professionals.”

LRN conducted research on board oversight on ethics and compliance a few years ago. They found a huge number of gaps in this regard. Greenberg elaborates, “According to that research, boards on average are spending less than 2 hours a year on ethics and compliance. This is about how we influence human behavior in a complex organization; you aren’t going to get meaningful answers with 2 hours a year being spent on this. Boards also often don’t understand big picture ethics and compliance strategy and usually don’t connect it to culture. These are only a few of the litany of gaps we identified. One way to bridge those gaps is bringing on someone with that experience day-to-day.”

How to Build the CCO and Board Relationship

Greenberg then turns the conversation to how boards can foster good relationships with compliance professionals and better integrate them into strategic discussions: “First, the board needs to make building this relationship with the CCO and ethics team a priority. This starts in part with giving E&C a real seat at the board table, and the status as a member of senior management. The mindshare at the board level to think about significant issues on the plate of E&C, to approach those issues with real strategies and metrics, appropriate focus on culture and understanding of what drives the issues and cause misconduct in the company. They also need to focus on holding senior executives responsible for E&C outcomes on their watch.

He discusses potential issues with tasking oversight to the audit committee: “Ensure the committee tasked with the mechanics and basics of oversight of E&C has the time to focus on it. It is impossible for some audit committees to do a good job here, because too often the audit committee agenda is simply too long. E&C ought to be viewed as mandatory, but it’s ranked below a litany of other tasks audit must accomplish each quarter. Some audit committees do a great job, but if I were starting from scratch, I don’t know that I would put this issue area in audit’s jurisdiction. For example, we put ethics and compliance under the corporate governance committee, but the chair of the audit committee sits on my committee, and I sit on hers.”

A lot of directors could not pick their Ethics & Compliance Chief out of a lineup. If this is someone who must come to you in a crisis, it would be good if you had an established relationship with that person.

-David Greenberg, special advisor and former CEO of LRN, and director at International Seaways

Also in this episode…

Greenberg gives some advice to compliance professionals seeking to build better relationships with the board: “You have the choice of playing big or small. You better play big wherever you can. You have some latitude in what you bring to the board and how you approach them. Make sure the board understands the relationship between what you do and company culture.”

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Edna Twumwaa Frimpong
Edna Frimpong is an experienced research analyst with a demonstrated history of working in the information technology and services industry. In her role with the Diligent Institute, Edna oversees and directs corporate governance research projects and partnerships internationally, outside the US. She joined Diligent Institute in 2021 after six years with CGLytics' -- a corporate governance analytics firm based in Amsterdam, The Netherlands, acquired by Diligent -- where she served as Head of Research for the EMEA region. Previously, Edna held research positions at firms including Sustainanalytics and Carnomise.' She received her Master's Degree in Finance and Law from the Duisenberg School of Finance in Amsterdam, and her Bachelor's Degree in Administration, Insurance and Risk Management from the University of Ghana.