[00:00:00] Speaker A: You've got questions and we've got answers. I'm Julia Boyes and this is Bella Asks.
The Business Ethics Leadership Alliance, or BELA as we like to call it, is a community of organizations committed to strengthening their ethics and compliance programs and maturing their speak up cultures. They do this several ways, through events, resources, data sharing, peer connections and more.
And whereas we believe that every organization can benefit from being a Bella member, we believe that there is no competition in compliance and we are not interested in gatekeeping best practices.
So with that, we developed BELA Asks, an Ethicast podcast in which we can take questions directly from BELA members and give answers for the whole community.
As always, we are very thankful to be joined today by Ethisphere's Chief Strategy Officer and Executive Chair of BELA, Erica Salmon Byrne. Hi, Erica, it's so good to see you today.
[00:01:11] Speaker B: Hi, Julia, thank you so much for having me back.
[00:01:14] Speaker A: Yes, well, today's question is very exciting and I know that you have a special story surrounding this one. So today's question is what does the data tell us about governance as it applies to ethics and compliance?
[00:01:27] Speaker B: Yes. So I got this one in person, Julia. This week at the Greater Houston Business Ethics Roundtable event, Women of Women and Women of Integrity Conference, which was hosted by the wonderful folks at Cisco and featured about 200 compliance professionals from the greater Houston area. I was fortunate enough to be invited to go down and speak and I had a fan of at the cast say to me, hey, I know you guys have lots of information on this. Would love to hear what your data has to say about specifically the relationship between the ethics and compliance program and the board. So when this particular individual said governance, what he was talking about was really governance of the program. So where does it roll into, where does it sit? You know, all of those kinds of pieces. And he was curious to hear what the data said about that.
[00:02:18] Speaker A: That is really, really cool. And it just goes to show that Ethicast is everywhere.
[00:02:22] Speaker B: Ethicast is everywhere. It's everywhere. So. So I did some digging for him and for our broader Bella Ask audience. And here are a couple of the things that I found.
Over the course of the last couple of years, our data has stayed pretty stable in terms of where the ethics and compliance function sits inside an organization. So it's, it remains about a 70, 30 split with about 70% of, of honorees rather than WME honorees telling us that the, the function sits inside of the legal team. So even if the individual chief ethics and compliance officer has aligned to the board which in almost every case they do. The function itself sits inside of Legal. And so from an org chart perspective, that's where people see compliance. Ethics and compliance is sitting. The 30% that don't sit inside of legal, 23% of those. And again, this has been pretty stable over the last couple of years. It's, I think last year it was 22%. This year it's 23%. So it's kind of fluctuated in that not quite yet a quarter bucket report into the CEO so that, you know, they sit as a control function alongside the legal team reporting into the CEO. Then that remaining 7% are some combination of risk, audit, chief administrative officer, chief operating officer. So they're reporting somewhere else, not the CEO, not, not necessarily the CEO, but somewhere else where they would kind of be seen as sitting on, on roughly an equal footing with the legal team.
So that was, that was, you know, governance question number one. The second thing I asked myself is, you know, we've been asking over the years about the board's interaction with the. The person who runs the program around things like, can the person be fired without the board knowing who does performance evaluations for the person? Right. The factors that govern the behavioral choices that someone in this kind of role is going to make. And so this is what the 2026 data tells us. So, Julia, very exciting because we just, of course, changed the data year over this week, and so we're now starting to have a chance to work with the 2026 data, whereas if you and I were doing this earlier in the year, we'd still be working with 2025. So here's what the 2026 data tells us. And again, very, very similar story to the last couple of years.
A little bit more than a third of the WME honorees indicated that the board has a formal role in evaluating the job performance of the person who runs the program. So there, there is a place in the performance evaluation process where the board is weighing in 37% of the WME honorees. So a little bit more than a third say that the board has to not only be notified, but also approve of termination. And that is in the charter that, you know, the chief ethics and compliance officer cannot be fired without board approval.
Almost 60% say the board has to be notified, formally notified before, you know, I, as the chief compliance officer, can just vanish, you know, and not show back up again in terms of who actually does the performance evaluation process, because we get that question a lot, like, it's all well and good to say the board provides input, but who's the person actually doing it? Not surprisingly, most common answer but by far is the chair of the oversight committee. So you've got a great relationship with the person who's chairing the committee.
That person is providing input into how you're doing as far as your, your role is concerned. And then this year we asked a question about where on the board does the oversight responsibility sit?
So what part of the board does the has responsibility for overseeing the ethics and compliance program? And 72% of this year's honorees said the audit committee can tell you it has been the most popular choice for a bazillion years.
But we did see, you know, a sizable percentage of companies saying that they've got a risk or regulatory compliance committee that is responsible has responsibility for the program.
A very small percentage, said Nomgov.
And then everybody else said some other committee that we did not list. So interesting stats in terms of know where, where we see oversight responsibility sitting.
But, but some, some good governance highlights for those of you who are wondering sort of how to think about the relationship between the program and the board. And I can tell that you want to ask me a follow up question but I'm going to give you one more data point before you do so and that is around involving the rest of your team in board presentations. So we ask a series of questions about who is in the room when the, when the person who runs the program is, is reporting to the board.
[00:06:52] Speaker A: Right?
[00:06:52] Speaker B: Reporting out on the program to the board. And 50%. So we're at half, 50% of honorees this year. Finally we hit the, we hit the halfway mark.
Said that they had different members of the team in the room within the last year to present themselves or participate in the, in the, the update to the, to the committee.
You know, we're getting answers like I had my, my sanctions head in or I had my head of investigations come in or the person who ran my conflicts of interest disclosure program came in and gave that portion of the update so that the board is able to hear directly from the individuals that are doing, actually doing the work and can answer questions most efficiently and most effectively. And then we had another 8% who said within the last two years I've had people come in and do those businesses.
So we're now at a, at a, you know, a majority of honorees saying that sometime in the last two years the board has heard from somebody other than the individual who is the senior most level person responsible for the program. And we love that practice For a couple of different reasons. One, it's really good for succession planning. Right. You know, if you win the lottery tomorrow, who's going to take your job?
So there's. There's that. There's that really important question. And it also gives the board direct access to hear from different voices who have different perspectives on how the program is performing. So really, really pleased to see that we're now at a. Over that tipping point of a majority of companies that are engaged in that practice of bringing people in.
[00:08:22] Speaker A: Erica. I think that that's really, really special because it's just reinforcing that so many people help create strong programs. So to have the head of investigations, to have your sanctions people coming in and speak, I think that's very cool.
[00:08:40] Speaker B: Yep. And. And it really gives. And the other thing I like about it, too, Julia, is, is it. It gives the board a much bigger sense of the. The scope of the program.
Because if you just keep hearing from me over and over and over again, even if I talk about all of the other people on my team that are doing the work, those people become very abstract as opposed to. If I walk into the room with you and Bill and, you know, Sam and Emily, all of a sudden you have a. A sense of the scope of the team that does this work and provides, you know, far more. Far more grounding for directors. Now, you know, I know we're going to hear from somebody in response to this episode that says something like, our agenda is so controlled. I could never, you know, get anybody else into the room to talk to the board. And I would challenge that. I would challenge that. I would really challenge you to think about whether or not that a. Is that true and if it is true, is that to the benefit of the board as an oversight body?
Because if I were a director, I would want to hear from different people and have the opportunity to get that input.
So I would. Anybody who tells me they just can't make it happen, I would. I would challenge them to. To think a little bit more creatively than that.
And then the last thing I did. Just want to mention really quickly, Julia, because this is another thing that came up at that conference is getting the board involved in interviewing the individual who is applying for the chief ethics and compliance officer role. So, you know, this is, again, this is someone who is going to be important in the overall structure of the program.
And I think it's. I think, thinking about, you know, do.
Do we want to get that person's input when we are in the position of hiring a New Chief Ethics and Compliance Officer.
And it is a practice that we do see. It's not a majority practice at this point, but given how many SECO roles right now are turning over. Right. We've seen a lot of movement in this space.
If you are listening to Julia and I talk about these issues, I would, I would challenge you to ask yourself whether or not it would be appropriate if you're hiring somebody who is coming in to run the program, would it be a good idea to get the chair of the oversight committee involved in the hiring process? Because that's going to be a really crucial relationship for the function. And so making sure that that person has had the chance to give some input would be, from my perspective, time well spent.
[00:11:18] Speaker A: Yes, I love that. I hope that people can take that and consider it as we move into this year.
Real quick, I wanted to ask you some of the data that you shared, sort of at the front end surrounding some of the oversight practices.
Do you see any differentiation between what maybe smaller companies do compared to larger companies or is it just a best practice across the board?
[00:11:46] Speaker B: It's a really good question.
You know, and the WME data set is, tends to skew a little bit on the larger side in terms of the companies that wind up being honored in any given year. So you know, it will be interesting to see over the course of the year as more and more companies engage with the 2026 EQ, if any of those percentages start to move around a little bit.
Um, the, the bigger thing that I tend to see though with smaller companies is consult is combined roles. So you know, one of the things that I neglected to mention at the beginning of the, the conversation, Julia, from a skip logic perspective, if, if you indicate that the senior most person with responsibility for the program has a title that indicates that they have another full time job. So they're also the General Counsel, they're also the chief Audit Executive. They're also the head of hr. They're also, you know, the chief Technology Officer. We then ask, not in exactly these words, but basically with this sentiment, that's a full time job. So who's actually doing the work of running the program? Right. Have you designated a single person to oversee the program? Because if you are the general counsel, you can't also effectively be the chief Ethics and Compliance officer. There are two full, two full time jobs. So we asked that follow up question and what we tend to see in smaller companies is a higher likelihood that there isn't someone who is running the program on a full time basis. Instead, it is program oversight by committee. So the person who's also the general counsel has a piece of it. They have a couple people on the team who are, you know, legal function X ethics, or, you know, they've got, maybe they have a learning and development person, but they don't really have a single person who holds that ethics and compliance officer title and is responsible for running the program in the same way that we do see that very strongly in place at larger organizations.
[00:13:50] Speaker A: All right, well, that's so helpful. Thank you.
[00:13:53] Speaker B: My pleasure.
[00:13:55] Speaker A: All right, Erica, I feel like I could ask so many more follow up questions, but you have a lot to get going with our Global Ethics Summit coming up in just a week. So I'm going to let you go.
[00:14:07] Speaker B: Yeah, well, and for those of you who are listening to Julia and I and you're saying to yourself, but I want more data and I have more questions come to at the Sphere's Data Intelligence Lab at the Global Ethics Summit. We will have a function in that lab called Ask us Anything and you can come in and literally ask us anything. So I look forward very much to hearing what is on everybody's mind at the Global Ethics Summit in Atlanta. Whether you're with us there in person or you're one of the thousands of people who are going to join us virtually, we are there to answer your questions. And so I hope you'll take advantage of that opportunity.
[00:14:42] Speaker A: Yes. All right, thanks, Erica. Take care.
[00:14:44] Speaker B: You too.
[00:14:46] Speaker A: For more conversations like you heard today, subscribe to our YouTube channel or wherever you get your podcasts. And like Erica said, if you are going to be joining us at the Global Ethics Summit, come to the Data Intelligence Lab. We're going to have it in person and in our virtual experience.
Additionally, like Erica mentioned, our brand new 2026 Ethics Quotient data has been released. So if you're interested in what that means in taking the Ethics Quotient survey or in getting your own data, reach out to us so that we can help you make sure that you can access all of our newest, most up to date data in the sphere.
If you're interested in more information about a BELA membership, write to us
[email protected] and most importantly, keep the questions coming. It is so great to get questions from the BELA community. Whether it's in person, at events like Erica was at in Houston or via email. We want to be able to answer your questions.
I'm Julia Boyes and this is BELA Asks.
