Chief Compliance/Ethics Officer (CCO)

Origin of the CCO Position

The CCO is a newcomer to the executive suite who owes his or her position primarily to a more demanding regulatory environment. Of particular importance are the following laws, regulations, and guidelines: the Foreign Corrupt Practices Act (1977) (making it a crime for American companies or their agents to bribe foreign officials or politicians to gain or retain business), the Defense Industry Initiative (1986) (the agreement of major U.S. defense contractors to promote sound management practices and comply with regulations), the U.S. Federal Sentencing Guidelines for Organizations of 1991 (building on the Defense Industry Initiative principles to outline a framework for corporate compliance programs), the Sarbanes-Oxley Act of 2002 (mandating stronger corporate governance, integrity, and transparency in financial reporting and effective internal controls for public companies), and the Amended Federal Sentencing Guidelines for Organizations of 2004 (expanding and clarifying the framework for effective corporate compliance and ethics programs).

In the wake of the corporate scandals of the early 2000s, companies came under regulatory pressure to centralize ethics and compliance responsibilities under one officer. For example, in a speech to the American Society of Corporate Secretaries in 2002, Securities and Exchange Commissioner Cynthia Glassman stated that it was important for companies [Page 283]to designate a corporate responsibility officer so that someone within the company had ownership of corporate compliance and ethics issues.

Ms. Glassman's remarks proved to be a precursor to the U.S. Sentencing Commission's revisions to the Federal Sentencing Guidelines in 2004. The Guidelines, as originally drafted, made clear that an effective compliance and ethics program could lead to greatly reduced fines and penalties for a company convicted of a crime. The amendments to the Guidelines highlighted the criticality of a company having a knowledgeable governing authority (board of directors) to provide reasonable oversight of the program and designating overall responsibility for the program to a high-level executive or executives.

The Shared Role: A Different Approach to Ethics and Compliance Leadership

Although many companies have centralized responsibility for ethics and compliance under one officer, other companies, both public and private, have resisted this trend. Historically, these companies have considered responsibility for ethics, compliance, and governance to reside in the offices of the general counsel, the corporate secretary, and elsewhere and have seen little benefit in altering their structure. According to a 2006 chief compliance officer survey of nearly 400 companies conducted by The Society of Corporate Secretaries & Governance Professionals and Corporate Secretary magazine, nearly half of the companies surveyed did not have a dedicated CCO position. Many of these companies, instead, assigned compliance and ethics responsibilities to either the general counsel or the corporate secretary.

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