Episode Transcript
[00:00:00] Speaker A: Foreign hi everyone. You've got questions and we've got answers. Welcome to another Bella Asks episode of the Ethicast. I'm your host, Bill Coffin. The Business Ethics Leadership alliance, or bella, is a global ethics and compliance community that provides exclusive access to helpful data, benchmarking events and and other resources to advance your ethics and compliance program. One of those resources is Bella's Concierge Service, in which members can submit any question at all regarding ethics and compliance and our internal experts will provide an answer, plus helpful resources with more information. Now, while we invite everyone watching and listening to join bella, we know that there is no competition in compliance, so we're using this program to thematically respond to high level questions from the Bella community for the benefit of EC teams everywhere. And joining us once again to answer those questions is Bella Chair Erica Salmon Byrne. Erica, it's good to see you again, particularly for this special Halloween themed episode of Bella Asks.
[00:01:08] Speaker B: Bill, thank you so much for having me. And particularly for suggesting that given the fact that Friday was Halloween, we should do a Halloween themed edition of Bella Asks. And on top of it, we got the perfect question for this episode because it is the scariest question an ethics and compliance professional can get.
[00:01:31] Speaker A: It absolutely is. It comes from an especially thoughtful concierge request we received.
And yes, it is unsettling, perhaps even scary, and the question spine tingling, blood curdling even.
But the question and the commentary around it was so thoughtful and compelling that I'm going to share an anonymized version of it here with the audience. I think it deserves to be read in full. And it reads, we were asked to present to the board on the value of ethics and compliance programs generally and then a bit more about the value of our group. I recall seeing a presentation from Bella on the comparison of companies with ENC functions outperforming their peers. But I was wondering if you have materials that we could draw from to discuss this topic with our board. I would imagine we're not alone in having to justify this function. High Level. I was going to generate some materials about how it's very difficult to prove a negative the government enforcements or fines that didn't happen due to our actions. We could provide a slide on fines in our particular industry and the sheer size of them. I was going to see if our team has information about employee retention with improvements to our helpline and investigations function. The idea being that people feel more confident that complaints are heard, properly looked into and addressed. But that might be wishful thinking.
Erica, this is perhaps the most fully fledged question we've ever received on this program. It's already my favorite. What are your thoughts?
[00:02:53] Speaker B: Yeah, and you know, Bill, as I said, it's. It is a scary question. And it's a scary question for a couple of reasons. You've got a board of directors that is looking at a budget this time of year, budget season. You've got a board of directors looking at a budget, and that board of directors is inviting control functions to justify their existence. And that is a really significant, scary place to be. Unfortunately, it's also a really common place to be, especially when you have situations where companies are looking at what they might potentially see as extraneous spend.
And so there's two potential paths that this particular battle member could take, or anybody out there listening to you and I could take in response to these kinds of requests. And to a certain extent, I recommend that you walk both.
The first is the path on the left, which is what the person who wrote the question in was articulating fines, avoided fines in the industry potentially as a way of providing a sense of the scope.
What did we not have to deal with because of the quality of the program?
And some of those things can be extraordinarily impactful, particularly if you are fortunate enough that there was a significant issue in your industry where you can distinguish the way something went down at that company compared to what might have happened if a similar set of circumstances had come up within your organization. And Bill, I know when it comes to this negative piece, you've got some great context to set on that front.
[00:04:28] Speaker A: Well, I do. On the topic of potential losses, according to the Violation Tracker website. And by the way, Violation Tracker is a great website. Everybody who's listening to the show should Google it and bookmark it right away. It is a treasure trove of really helpful material. But on Violation Tracker, since the year 2000, US companies alone. All right, we're just talking US companies. Since the year 2000, US companies alone have given up more than $1 trillion. That's trillion with a T due to regulatory fines, penalties and legal settlements. And since that number is so big as to defy meaningful comparison, I'm going to go with something a little bit more relatable. Since 2020, right. Just over the last five years, US companies have lost more than $222 billion to fines, penalties and settlements. And to put that into perspective, consider this. The net worth of all the franchises that make up the National Football league is about 207 billion. And TikTok is currently valued at 14 billion. So imagine deleting both of those companies and you start to get a picture of what is really at stake.
[00:05:30] Speaker B: Yep, yep. The challenge and look very helpful data, absolutely something you should get your hands on if you can. As I said, particularly if you are in a position where there's been something that's gone wrong at a really analogous company and you can provide a contrast. The challenge with using figures like that is it is a very natural response for the board or the leadership team at your company to say we'll roll the dice, right? We'll roll the dice.
Regulatory enforcement is down, not going to happen to us.
So that's where you also want to simultaneously walk the path on the right, which is the value add path.
And here are a couple of ideas of some things you can think about there.
Go talk. If you're publicly traded to your investor relations team.
Is anything coming up in the conversations that they are having with long term investors that pertains to the quality of your program? If you are being reviewed, for example, by the MSCI team for your, your impact initiatives, there are a variety of characteristics in that analysis that relate to ethics and compliance. Anti fraud, anti money laundering, anti corruption. They're looking for controls and policies and programs in that area that allow you to get a better rating. S and P.
S and P Global has, or yeah, S Global has something similar. Moody's has something similar. So look at the ratings agencies. Talk to the people inside your companies that think about the ratings and see whether or not there's a value story you can tell there. Go to your head of sales.
Ask your head of sales whether it would be valuable in their RFP responses to be able to talk about the quality of your controls. Right. It's often, particularly in B2B, it is often a selling criteria or something that can give you an advantage if you can put something in an RFP or, or you can put something into, into the documentation.
Talk to your credit raiders, right? Your credit agencies.
Can you lower the cost of lending by talking about the quality of your controls? And if you can, can you quantify how much money you have saved the company because of that conversation? I was talking to one company about a year and a half ago now in the utility space. So this is obviously an organization has a lot of very complicated lending relationships and this particular compliance officer had given a presentation to the lenders and had been able to reduce the cost of lending to the company by 15%.
That 15% more than offset the budget that was spent on his program. So don't overlook what you can potentially do in terms of decreasing the cost of credit, particularly in this market, private credit. Right. So think about what's happened at First Brands.
Can you demonstrate that you are in a far better position and are therefore a less risky lending entity because the quality of your program probably not something that has occurred to every company listening to us right now. Go talk to the people who are responsible in your finance teams for having the conversations with your, with your lending organizations, DNO Insurance, and you get a break on the quality of your D and O insurance because of the quality of the controls that you have in place from a compliance program.
Don't overlook talking to the people who talk to your insurers. So those are all some options that you can potentially use to save the company some money and thereby quantify the value that you have contributed to the organization.
This particular Bella asks question Bill, this Bella member was already thinking about some of the information that HR might have that would be helpful. So employee retention.
I love this one. Take your Culture survey results, the places where people are most comfortable speaking up. Put those up against your employee turnover.
I will bet you seven bags of candy corn, Bill, that that they match. Right? The places where you have the highest levels of psychological safety, the places where your people are the most comfortable using their voice at work, you're also going to see the lowest turnover because we don't leave jobs, we leave managers in most cases. Right? So, so definitely go to your HR team. Figure out what on earth can they tell you about what's happening with the employee base. Put that up against your Culture Survey results. Incidentally, you should do that regardless of whether you're being asked to justify your program, because it's just a good practice. But in particular, if you're, you're preparing for this board presentation, that would definitely be something to do.
And then the third thing I would say is look at data from organizations like ours. So we know from our own research that of the publicly traded companies in our Culture data set and just the level set for everyone out there listening, we have a little bit north of 4 million employee responses in our Culture data set. And so when we analyze those employee responses for public companies and we look at public company performance, what we see is those companies where the employee responses to the Culture survey are one standard deviation above their benchmark, they saw on average a 40% higher return on assets. And you cannot tell me a board member or a finance chief on the planet that would not think that a 40% higher return on assets is Worth it. So that is absolutely something to add into the positive side of the mix and try to tell that story on the negative side. Bill, the path on the left bucket of data points. The other thing I would look at is I would look at IP and confidential company information loss and what the cost of that is. And to the extent that you can show that, you know, you are engaging in protective activities for things like that, maybe you're part of the responsible AI use policy, maybe you're working very collaboratively with your IT team, those kinds of things to prevent the kinds of disasters when confidential company information gets into the wrong hands. That would be another, you know, potential data point that you could throw into the mix. But, you know, it's really about, at the end of the day, it's about telling a story to your directors and for the board in particular. You know, Bill, I want, I want to just talk about that group as an audience because this particular member is going to have to present to the board. So talking about the board as an audience, there's two pieces of information that I would keep in the back of my head that would structure the narrative that I'm trying to tell.
One is at the end of the day, those directors have a fiduciary responsibility to safely shepherd the organization with, you know, a good faith focus on risk mitigation. So that is what directors are supposed to be doing.
Structure the way you talk about the value of your program from the perspective of risk mitigation and from the perspective of thinking about the ways in which you are enabling directors to discharge their fiduciary duties, that's really what you're doing.
The second thing would be remember that in today's day and age, over 80% of most companies worth, whether you're private, public, PE backed, I don't care how you're capitalized, over 80% of your worth is tied up in intangible assets.
And when you frame that right, what you all are doing as ENC professionals is you are protecting 80% of the company's worth. Because intangible assets are your brand, your reputation, your people, your confidential information and your ip. And you guys touch every bit of that.
So keep that in your framing too.
Talk about the work you do in the context of we are part of the reason people trust us. We are the part of the reason people buy from us. If you're a B2C company in particular, look at consumer behavior in your industry segment and ask how you can weave that into your story. Yeah, so hopefully those are a few good pieces of advice for somebody to take away from this. It's a scary place to be, unfortunately.
[00:13:38] Speaker A: It can be. It can be, you know, but as you mentioned, we have both tricks and treats on the side of this. We have negative things to avoid. We have good things to reach for. So look, when your last name is Coffin, every day is Halloween. But Erica, I want to thank you very much for joining us today on this special Halloween themed episode of the Ethicast. And especially thank you so much for weighing in on this question about justifying the ENC function to the board. I know it's on the mind of a lot of ENC professionals. So once again, thank you for your time and your. And for your thoughts.
[00:14:05] Speaker B: Yeah, absolutely. Bill 100 My pleasure. You know, to all those Bella members out there, keep those questions coming and particularly when you're dealing with thorny stuff like this.
You know, we are here to help. Hopefully Bill and I gave you a couple of good ideas in this conversation. But you know, it is certainly an ongoing conversation that we have here. We're constantly looking for new ways for you all to demonstrate the value of the programs that you've worked so hard to build and to make sure that, that you know, to the extent you're able to do so, you hold on to and even enhance the values of your programs. And to that end, Bill, we have an ethic. We have a webinar coming up in a couple of weeks that I would recommend everybody join us on because Bill and I will have more time to dive into this topic in particular, which is how do you defend your budget in moments where you are under threat because of external factors. So don't hesitate to join us on the 10th of November for that particular conversation. We're really looking forward to it.
[00:15:02] Speaker A: Absolutely. Absolutely. And to learn more about Bella, Visit@the sphere.com Bella to request guest access to our member resource hub and and to speak with a Bella Engagement director. And if you have a question that you would like to see answered on this program, contact the Bella Concierge Service and we'll get to work on it for you right away.
Well, we're just about out of time, so this has been another Bella Asks episode of the Ethicast. Thank you very much for joining us, everyone. We hope you've enjoyed the show. If you haven't already, please make sure to like and subscribe on YouTube, Apple Podcasts and Spotify. And please be sure to tell a colleague about us as well because it really helps the program.
That's all for now. But until next time, remember, strong ethics is good business. Happy Halloween, everyone.
[00:15:41] Speaker B: Happy Halloween, everyone.
