Using Incentives in Your Compliance and Ethics Program

Author: Joseph E. Murphy

August-25 2016

With 40 years in the field of compliance and ethics, Joseph Murphy, CCEP, has worked internationally in these fields. An accomplished author, Joseph currently serves as co-editor for Ethikos. The following is an extract from Using Incentives in Your Compliance and Ethics Program. Click here for access to the full white paper.

For those with compliance and ethics program responsibility, or for those called upon to assess these programs, one of the questions to be addressed is the role of incentives in the program. This issue was highlighted by the 2004 revisions to the Federal Sentencing Guidelines standards, which require, in item 6 of the 7 standards:

    (6) The organization’s compliance and ethics program shall be promoted and enforced consistently throughout the organization through (A) appropriate incentives to perform in accordance with the compliance and ethics program.

What does this mean, and what is the appropriate role of incentives in a program? Item 6 of the Guidelines goes on to address discipline separately, so it is clear that this means something other than negative incentives. In other words, the simple proposition, “you get to keep your job if you don’t break the rules” will not be enough.

Although incentives are an essential element of compliance and ethics programs, surprisingly little attention has been paid to this topic, as compared to other elements such as codes of conduct, helplines, training, and risk assessment. In this SCCE white paper it is our objective to help compliance and ethics professionals address this important topic.

The scope of this paper includes a variety of approaches to the topic. We start with likely objections to using incentives, and then discuss the reasons for including an incentive-based approach. We then analyse the different aspects of using incentives: personnel evaluations; considering compliance and ethics in promotions; compliance and ethics input in developing and assessing all incentive and reward systems; rewards and recognition for those employees and managers who show compliance and ethics leadership; rewards and recognition for the compliance and ethics staff; and the most controversial issue, rewards for whistleblowers (an increasingly sensitive issue, as a result of the whistleblower provisions in Dodd Frank). In this paper, we may at times refer to “incentives” to include all of these elements. Throughout, we refer to “compliance and ethics” as a term of art to incorporate the full range of activities in this field, whether they are described as compliance programs, ethics and integrity, business practices, specific risk areas such as privacy, or similar nomenclature. At the end we provide a list of credits for those who have assisted in this project, a bibliography and an appendix of examples and materials for use by the practitioner.

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