Ethics & Compliance Professionals: You Have Your Board’s Attention

Ethics and compliance expert Ingrid Fredeen explains the importance of board training in the wake of #MeToo and the Time’s Up movement.


Boards must have an understanding of all potential organizational risks and how to minimize or prevent them. Unfortunately, according to research by ethics and compliance software and services company NAVEX Global, one in four companies are not training their board on ethics and compliance risk. 

FEI Daily spoke with research author and Vice President and Senior Product Manager of NAVEXEngage, Ingrid Fredeen about the surprising results of the 2018 Training Benchmark Report and why companies should provide more training to their boards of directors.

FEI Daily: This year’s report shows that 73 percent of organizations are now training their board of directors on compliance. It was lower than 60 percent for the past two annual surveys. Do you see this as a direct result of the #MeToo movement?

Ingrid Fredeen: Yes, in 2017 it was 44 percent, in 2016 it was 58 percent. I think it's being really driven by the #MeToo movement and the reason being is that the #MeToo movement has exposed executives. If you think about the high-level terminations and separations that have occurred in the wake of #MeToo, this never happened through standard litigations. You could have an executive make mistakes, or do things that are unacceptable, or violate the policies, and because it was pretty invisible, this level of disciplinary action was never meted out.

If you were to report something two to three years ago, it would go to your HR professional or your compliance and ethics person and they might investigate, and you might learn a little bit about what they investigated, but you might not learn that much, and you would probably never know what actually happened to the person. So it's a somewhat invisible process for you and there's a lot of legal reasons why that's the case, but it also results in you, as the person who made the complaint, feeling like maybe they didn't hear you, they didn't take action, they didn't take you seriously. Or in the worst case, they really didn't take action. And where do you go now? And #MeToo changed that. People can speak out. And not just speak out. They can get media attention, they can get support.

How can an organization keep a CEO or senior executive that's been accused of horrific sexual assault or violence or abuse or violations in place? And that's the difference, and so I do think it is driving a different level of attention because the risk is hitting home.

FEI Daily: Why is the board an important player here?

Fredeen: We've been talking about board training for a couple years now, that it's insufficient. The boards are supposed to have this oversight responsibility for the Ethics and Compliance Program. They have to, at some level, have some knowledge about how to run an effective program: what it looks like, what kind of parts should be in it. They should understand the risk areas. So when you have training at that level, at 44 percent or even 58 percent, there are a lot of organizations that are completely leaving their boards in the dark. And even at 73 percent, that means one in four companies are not training their board on ethics and compliance risk. So 73 percent is good. It should be higher. 

The dark side of this is the self-assessed skill level. When we ask the ethics and compliance professionals, ‘How good are you at educating your board?’ 46 percent of organizations rate themselves as either poor, fair, or average at board reporting. That's half of organizations are saying, ‘I don't really think I'm really good at it.’ How can you educate your board on your risks if you have such low confidence in your abilities? Only 20 percent said they're excellent. And people typically self-assess a lot higher than they are. Only 20 percent said they're trying to improve in that area over the next 12 months. So not only are we not good at it, we're not focused on it. I think boards need to expect more of their ethics and compliance leaders and they need to get more from their compliance program to that they can do a better job of oversight. 

The issue of lack of time and inability to get in front of the board has been around forever. Now is the time. You have their attention. They feel a need to become more educated because the reputational risk is so great and the risk is so great that they're probably at their peak of willingness to listen.

When I look at what the ethics and compliance professionals are saying about leadership support as well, the number one way that they believe they can pursue a culture of ethics and respect is executive-level buy-in. And board support comes in at number three, at 35 percent. We want to pursue this culture of ethics and respect. We know that executive buy-in and board support is critical. 

Now when you get a little bit deeper and you look at the topics that they're covering, on training the board on code of conduct, 25 percent said ‘never,’ and 29 percent said ‘we only train them one time.’ That's for the values of your organization. That's for your main risk areas. That's the one way you can at least get them introduced to the things that are most important to you. Harassment? 44 percent say they never train their board on harassment.

FEI Daily: How does training differ for boards, compared to executives? What about compared to senior management?

Fredeen: Let's say that you've got the money and the funds. You've got budget, you've got time. The number one way that boards typically get trained is live training. Custom-developed, it's specific to your organizational risk areas.

The second most popular trend is they give them the same e-learning courses that we provide to their own employees. If you can't afford live training and you're training your employees at some level, at least expose your board to that.

Other things are articles, or they have specially-designed e-learning, they go to seminars, things like that.

FEI Daily: We talked about the topics that are being covered and should be covered. What about the frequency of training? What about that concerns you?

Fredeen: It's the ‘never’ or the ‘one time’ that's problematic. Your code is a living document. You're not going to cover all your risk areas in any given year. ‘Never’ is obviously a problem

It doesn't have to be a full-blown training. It doesn't have to be six hours of training. There’s an organization that I'm working with now and they have an ‘in the news’ newsletter kind of thing that takes contemporary hot issues, puts them in context and the risk profile for their own organization and they share that with the board. ‘Here's why this matters to us.’ Training can be lots of different things, as long as you're educating and advancing knowledge.

FEI Daily: How can an organization choose the right kind of training?

Fredeen: One factor is prior education. Do they have any baseline knowledge? A lot of times we assume that because they're high-level they're going to have some knowledge. That is not the case. We see, on a regular basis, executives making missteps. Pretty egregious ones, especially in the harassment arena and you think, ‘How in the world could that happen? How could they think that was okay?’ We want to avoid the mistake of assuming they know something when they don't. 

We want to think about the culture and how this group learns and interacts, how they're going to be receptive to the information, and we want to think about making it relevant to them. How can I put this in context for them? How do they receive communication today? Are they using one of these high-tech board apps? What are the vehicles in which you can reach them effectively?