Why 2016 should be the year boards get ahead of the regulators on ethics and compliance oversight.

• Author: Penman, Carrie
• Position: ROLE OF THE BOARD

In 2016, corporate boards should be focused on jump-starting their engagement in ethics and compliance oversight. As regulatory agencies ratchet up their own oversight, boards need to take proactive steps, ask the right questions, and set the right expectations if they are to meet their oversight responsibilities.

They should also have a sense of urgency, given recent regulatory developments. The U.S. Department of Health and Human Services, Office of Inspector General (OIG), recently released new guidelines about health-care boards' compliance responsibilities, and the Bank of England Prudential Regulation Authority took similar action, perhaps signaling a global trend. Because regulatory agencies share best practices on enforcement actions, and because much of the direction provided for health care boards is broadly applicable in any business, boards of companies in all industries should review the OIG guidance and take appropriate action.

The OIG specifically defines what it means to have "reasonable oversight" for the implementation and effectiveness of corporate compliance programs. And, if the OIG's direction contains one supreme universal oversight guideline, it is this: "A critical element of effective oversight is the process of asking [the compliance officer] the right questions," to determine the adequacy and effectiveness of the organization's compliance program. These questions could include:

* What standards are the foundation for the compliance program and do they address our highest risks?

* Is there a confidential reporting system in place to take reports of misconduct and legal violations, and is it adequate and appropriately resourced to respond to the concerns raised?

* What assurance does the board have regarding timely escalation of appropriate matters--those that involve allegations against executive leadership, have serious financial consequences, or could cause significant harm to the organization's reputation?

* What compliance education is expected of the board?

* How do you know the program is effective?

To ensure a focus on the right questions, the OIG also says that "a board can raise its level of substantive expertise with respect to regulatory and compliance matters by adding to the board, or periodically consulting with, an experienced regulatory, compliance, or legal professional."

The next step

The next step is to reassess current board training. Using the new guidance as a framework for a board retreat or...