Should a company go beyond compliance? Is there any point in doing more than meeting basic regulatory requirements?
The paper’s broad conclusions apply to any organisation wondering whether compliance is a perpetual drain on its central purpose.
Suggesting their company should do more than it needs to makes no real sense to many senior executives. They already view ever-expanding financial and trade regulations as unwelcome and having an three-way adverse impact.
First, there’s the personal challenge. This involves the whole issue of coping with compliance in practice. In a recent UK study for example, executives said their greatest challenges in the coming year were how to implement and track regulatory changes.
Secondly, the steady stream of new or altered regulations spanning many industries is force feeding a demand for more systems. These are supposed to automate many aspects of a company’s regulatory process.
If they work, they highlight issues before these turn into breaches or reputation damage. Building and servicing these though is proving complex and an un-relenting effort.
The usual tick box approach to ensure that statutory and regulatory corporate governance reports are filed in time has failed to deliver the revised expectations of directors.”
V. Ramakrishnan, Managing Director,Organisation Development Pte Ltd, Singapore
Thirdly, there’s the still-rising demand for specialist staff. Some experts suggest more than half the new hires in the City of London in the last year were compliance staff.
…firms are continuing to bolster their first line of defence with seasoned professionals. Candidates are still at a premium and strong candidates with a solid resume can expect 20% – 30% salary increases.”
How productive are these new additions? Research shows they spend their time relating to legal, internal audit and risk departments. In the UK for example, nearly one in three compliance staff spend more than 10 hours a week just tracking and analysing regulatory developments.
Hardly surprising then top bosses doubt there’s a positive ROI from compliance and ask “Why do even more?”
The Wrong Question
While this question is understandable, sticking to meeting basic regulatory requirements will have an entirely predictable result. Despite large outlays a company will still not avoid the risk and reputation damage which compliance activity is meant to prevent.
The evidence for this is all around. Since the shocks of 2008 the resources diverted into compliance have been substantial and still advancing. Yet the extent of corporate mis-behaviour continues to grow rather than diminish.
The reason is much risk and reputation damage tends to fall outside the rigours of conventional compliance requirements. The latter is more a box ticking exercise to “show we are clean.”
This may look rigorous yet it often ignores basic human factors such as security risks the technology cannot fix. For example these systems do not prevent age old trouble from insider threats, faulty passwords, and other human frailties.
A more positive view sees compliance as only one side of the coin for achieving a responsible business. One side is stamped “Compliance” the other side shows: “Ethical Engagement”. Together, these can steer companies to reduce or avoid risk from ethical minefields, while also promoting creativity, innovation and growth.
Ethical engagement occurs when employees become closely involved in the task of running a responsible business. It means they don’t just go through the motions demanded by compliance systems. Instead, they rely on their own values to make difficult ethical judgements in their daily work, for the benefit of the organisation. They also speak up about questionable ethical practices before these turn entirely toxic.
Moving employees to a state of ethical engagement is a whole new discipline for most organisations. Research for example, suggests less that 3% of all employees are “ethically engaged” or “self-governing” as others choose to call it.
The new US White paper mentioned earlier highlights not only the impact of changes in one particular industry, the food and drugs business. Equally important is an evaluation framework for the best products and solutions to help the industry “realize value beyond compliance.”
When it comes to compliance, this White Paper helpfully identifies four main sorts of companies
1) Leaders: ahead of the curve in recognising value beyond compliance
2) Challengers: whose activity is limited to islands of excellence
3) Niche: companies who just don’t have the vision to see the whole picture
4) Laggards: whose focus only on compliance means they don’t recognise the opportunity for investment ROI
These divisions apply to any industry. Only a few enlightened companies realise why going beyond compliance can achieve “a next generational level performance in production”, “drive innovation” and create “superior customer service.”
How do these generate real benefits? We can discern at least three important drivers that can create company gains.
Driver 1: Thinking outside the box. Do only what the regulations demand and you have built yourself a prison—one with little room for fresh thinking and experimentation. By going beyond compliance you create a constant flow of new possibilities that for example raise helpful questions such as “why do we do it that way?” “Is there an alternative?” “What if we did it differently?”
Driver 2: Employee contribution. With an engaged work force endless improvements become possible; people willingly share their experience and knowledge to transform performance. They identify their own interests with those of the company and for example help protect it from unethical behaviour by lone wolves and less responsible employees.
Driver 3: Cultural shift. Compliance and innovation gains emerge when a company culture achieves the right climate.
For example, moving from an adverse culture that is prescriptive and relies on command and control, to a co-operative culture based on goal setting and dialogue.
In the latter culture companies become more concerned with learning than with punishment, promoting feedback rather than hierarchy, offering work that has meaning for people, and where going the extra mile becomes the norm.
Finally, whether business leaders like it or not, they tread a tightrope, operating with a “social licence”. That is, they must meet the expectations of society and avoid doing things which are seen as unacceptable.
In some cases, the demands of the “social licence” may be tougher than those imposed by regulation, resulting in going “beyond compliance even when sometimes it is clearly unprofitable.
For example a company may decide that while not required by regulation to take certain environtmental measures it will never the less do so to ensure its “social licence.” 
Moving beyond complaince and integrating environmental management into core business processes offers significant benefits to business”
Martin Baxter, Executive Director, Policy IEMA, STN Plc, June 2013
An opportunity not a problem
Going beyond compliance has many advantages, often unquantified and sometimes unquantifiable. The main attraction is opportunities which it can open up for a company such as new growth prospects..
For many firms the executive response of “let’s just do the basics” is really saying “let’s not grow.”
It’s no surprise that we found…businesses that made the most noise about regulation – chafing against its restrictions, complaining about associated red tape – were among the weaker performers.”
…companies that position themselves to thrive within regulation – not in spite of it – have the opportunity to leapfrog more combative players. 
PA Consulting, 2013
 S. Hammond and J. Walshe, Cost of compliance, survey 2013, Thomson Reuters
 See note 1 above
- Work with you to clarify what business ethics mean for your particular organisation
- Coach you to understand what it means in practical ways to be an ethical leader
- Run internal programmes to identify and develop core values–affecting company culture
- Assist leaders to learn to establish and communicate leadership tone–inspiring people to act responsibly
- Develop managers’ and leaders’ to talk about and promote business ethics with enthusiasm and confidence
- Advise on generating employee ethical engagement –where people go beyond the basic rules of compliance
- Develop new, creative ways to encourage people to speak up about ethical issues
- Strengthen HR Team and their ethical role
- Run forum theatre sessions to communicate about ethics in a highly interactive way
Write an article or feature for you on ethical leadership for your publication
- Be a keynote speaker about ethical leadership at your next company or public event