S7E01 | What will make E&C programs more effective in 2022?

Abstract:

The most crucial factor LRN has identified in our years of research is that a values-based approach to governance is essential to ethics and compliance. It builds and sustains ethical culture, which is the essential element of effective E&C programs. But what does that look like today, as our world continues to be disrupted by the COVID-19 crisis and the aftermath of racial and political unrest? In this episode of the Principled Podcast, host Susan Divers, Director of Thought Leadership and Best Practices with LRN’s Advisory group, talks about how values can sustain ethical performance—and even excel—in the face of change and adversity with Forrest Deegan, Vice President of Ethics and Compliance for Victoria's Secret. Listen in as the two draw insights from the 2022 edition of LRN’s annual Ethics & Compliance Program Effectiveness Report—available now to download.

 

What You’ll Learn on This Episode:

[2:17] - Reflections on the findings of LRN’s 2022 Ethics and Compliance Report.

[7:20] - The impact of core values vs. rules.

[9:02] - The surprising data and how access to data can drive improvements in collaboration.

[12:00] - The curse of compliance.

[13:22] - The two driving factors in demystifying your values and how boards discuss value.

[17:15] - What is causing ethics and compliance to lag behind in innovations compared to other departments?

[22:30] - The innovations of customized, remote-accessible training.

 

Additional Resources:

• Get the 2022 Ethics & Compliance Program Effectiveness Report.
• Subscribe to E&C Pulse, the LRN newsletter offering weekly insights on ethics, compliance, corporate culture, and reputation.
• Visit us for more information at lrn.com.

 

Featured guest:

As of July 2021, Forrest is the VP of Ethics and Compliance for Victoria’s Secret & Co., responsible for overseeing the global ethics and compliance program. Forrest spent the prior six years as the first Chief Ethics and Compliance Officer for Abercrombie & Fitch Co., where he built A&F’s corporate compliance and third-party risk management programs. Forrest serves on the Editorial Advisory Board for Compliance Week and has served on the Leadership Team for the Retail Industry Leaders Association (RILA) Compliance Council. Forrest regularly speaks at national compliance conferences and international events, including those sponsored by RILA, Compliance Week and the Association of Corporate Counsel. Forrest was selected by Compliance Week as a “Top Mind" for 2018.

Forrest previously served as the Director and Senior Director of Compliance at A&F, where his responsibilities included a wide range of compliance program assessment, training and enhancement projects as well as international business development via joint venture and franchise.

Prior to moving in-house, Forrest worked for nine years at Arnold & Porter in Washington D.C., representing multinational pharmaceutical, financial and consumer products companies in advocacy and consulting capacities. Forrest clerked for Judge Kazen on the U.S. District Court for the Southern District of Texas, after receiving his J.D. with honors from Duke Law School and his B.A. from the University of Texas at Austin.

 

Featured Host: 

Susan Divers is a senior advisor with LRN Corporation. In that capacity, Ms. Divers brings her 30+ years’ accomplishments and experience in the ethics and compliance area to LRN partners and colleagues. This expertise includes building state-of-the-art compliance programs infused with values, designing user-friendly means of engaging and informing employees, fostering an embedded culture of compliance and substantial subject matter expertise in anti-corruption, export controls, sanctions, and other key areas of compliance.

Prior to joining LRN, Mrs. Divers served as AECOM’s Assistant General for Global Ethics & Compliance and Chief Ethics & Compliance Officer. Under her leadership, AECOM’s ethics and compliance program garnered six external awards in recognition of its effectiveness and Mrs. Divers’ thought leadership in the ethics field. In 2011, Mrs. Divers received the AECOM CEO Award of Excellence, which recognized her work in advancing the company’s ethics and compliance program.

Mrs. Divers’ background includes more than thirty years’ experience practicing law in these areas. Before joining AECOM, she worked at SAIC and Lockheed Martin in the international compliance area. Prior to that, she was a partner with the DC office of Sonnenschein, Nath & Rosenthal. She also spent four years in London and is qualified as a Solicitor to the High Court of England and Wales, practicing in the international arena with the law firms of Theodore Goddard & Co. and Herbert Smith & Co. She also served as an attorney in the Office of the Legal Advisor at the Department of State and was a member of the U.S. delegation to the UN working on the first anti-corruption multilateral treaty initiative.

Mrs. Divers is a member of the DC Bar and a graduate of Trinity College, Washington D.C. and of the National Law Center of George Washington University. In 2011, 2012, 2013 and 2014 Ethisphere Magazine listed her as one the “Attorneys Who Matter” in the ethics & compliance area. She is a member of the Advisory Boards of the Rutgers University Center for Ethical Behavior and served as a member of the Board of Directors for the Institute for Practical Training from 2005-2008.

She resides in Northern Virginia and is a frequent speaker, writer and commentator on ethics and compliance topics. Mrs. Divers’ most recent publication is “Balancing Best Practices and Reality in Compliance,” published by Compliance Week in February 2015. In her spare time, she mentors veteran and university students and enjoys outdoor activities.

 

Transcript: 

Intro:

Welcome to the Principled Podcast brought to you by LRN. The Principled Podcast brings together the collective wisdom on ethics, business and compliance, transformative stories of leadership, and inspiring workplace culture. Listen in to discover valuable strategies from our community of business leaders and workplace change-makers.

Susan Frank Divers:

At LRN, the most crucial factor we've identified in our years of research and work with thousands of organizations worldwide, is that a values-based approach to governance is crucial. Being values-based builds and sustains ethical culture, which is the essential element of an effective ethics and compliance program. But what does this look like in a world that continues to be disrupted by the COVID crisis and the aftermath of racial and political unrest?

Susan Frank Divers:

Hello, and welcome to the first episode of season seven of LRN's Principled Podcast. I'm your host, Susan Frank Divers, Director of Thought, Leadership and Best Practices within LRN's Advisory Group.

Today, I'm joined by Forrest Deegan, Vice President of Ethics and Compliance for Victoria's Secret, and lecturer in law at the University of Chicago Law School. We're going to be talking about how values can sustain ethical performance and even allow organizations to excel in the face of change and adversity, during On Insights, from our 2022 edition of LRN's annual Ethics and Compliance Program Effectiveness report. And on Forrest's experience in the retail industry in particular.

Susan Frank Divers:

Before coming to Victoria's Secret, Forrest has spent two decades in ethics and compliance, including Chief Ethics and Compliance Officer for Abercrombie and Fitch. So Forrest, thanks very much for coming on the Principled Podcast, and let's jump right in.

Forrest Deegan:

Thank you, Susan. It's a pleasure to connect with you again.

Susan Frank Divers:

The same. We've had some interesting discussions preparing for this podcast about the 2022 Ethics and Compliance Program Effectiveness report. What surprised you, and what resonated the most, particularly with your experience in the retail industry throughout the ongoing crisis?

Forrest Deegan:

I'll start with what resonated the most. Preliminary matter, really enjoyed reading through the insights that were collected here. Reading through it I start with the resonation because there are a number of charts that go through the concerns that folks identified in the early days of the pandemic about the challenges of transitioning to a hybrid or remote model with respect to their controls, with respect to their ability to audit, and to support the programs. This comes across in both some of the stats around the activities they thought would be of concern and then what they actually worked on. And then looking at how training actually was supported, where obviously, people weren't able to travel. People weren't able to use all of their old tricks in this new time. And so starting off seeing the fears and the concerns that folks were raising in 2020, and that list itself was pretty fulsome and reminded me what it was like in the retail space with all of the uncertainty that came in the spring of 2020.

Forrest Deegan:

With the closure of the majority of all stores, at least temporarily in the US. I remember the day we were kicked out of our home office, I'm sure everybody has a similar recollection to mid-March, walking out with your computer in your bag and not knowing when you'd be back. This brought back some of that uncertainty. That resonated with me, but what also resonated with me was the introduction around values and how that programs that leaned in to their values did well. And this idea that kind of everybody took on new and different obligations with the pandemic, with a time of crisis. A time of crisis can be a time of unification. I certainly saw that to be the case. I remember that leaders at my company were voluntary take pay cuts, to make sure that folks and the staff could stay on so that we could avoid layoffs. There was an insistence on treating folks equitably within, right? So really living your values in those moments of crisis. This report speaks to both those fears and some of the solutions that came out of it.

Susan Frank Divers:

That's such an impactful example, because there's no rule that said that executives had to give up pay or benefits to keep other people employed. And we saw a lot of that last year in our report, and what's very heartening from LRN's point of view is, we've been saying for years, that values work better than rules as the basis for a program. And last year's report and this year's report, really proved that, I think in a lot of ways, and I look at stats like on page seven, that 82% of the programs we surveyed this year, that their ethical culture is stronger as a result of their experience during the pandemic. And you just opened it to that too, that people come together in a crisis, but relying on values was clearly the way to get through it.

Forrest Deegan:

The second part of your question was around things that might have surprised me in here. And honestly, the stat you just pulled about the 82% feeling ethical culture was stronger. That wouldn't surprise me a bit because it was 2021, not a 2020 stat. In fact the number went up, it seems like from the prior year's version of the report where it was 79%, the prior year, this year was 82%, that their ethical culture was stronger as a result of experiences coping with the crisis. So that was something that surprised me, that sentiment not only continued, but seemed to increase a bit because we've all heard about it and all have felt the fatigue in the past year as the uncertainty has continued as we've continued to have to be flexible in our approach. Yes.

Susan Frank Divers:

Forrest what you said was very impactful because one of the key findings, obviously in the report, that’s actually on page seven is that 82% of our nearly 1200 respondents worldwide reported that their ethical culture became stronger during the pandemic rather than weaker. And at LRN we've said for years, that values make an impact much more than rules and that's living proof that that's true. So I'd like your thoughts on that.

Forrest Deegan:

With respect to the second part of your prior question on what surprised me with respect to the study, I would have to say that that very stat, that 82% of the respondents last time felt that ethical culture was strong longer as a result of the experiences. That rose, that sentiment was an increase, improvement, from the prior year. That surprised me a bit because we've heard so much about and felt so much of the fatigue as the uncertainty has continued as the need to adjust our approach and our responses has just continued onward. I was pleasantly surprised to see that the prior version of this report had shown 79% felt that the crisis was a bringing folks to their ethics and compliance program in a stronger way to see that go from 79 to 82, a small improvement, but you're already really high to begin with. I was pleasantly surprised to see that in here. And honestly it does make sense with respect to that ongoing uncertainty that you do need to lean upon those core values to continue to navigate. You really have to love the question, not the answer when it comes to a challenge of this size and that is constantly evolving.

Susan Frank Divers:

That's putting it so well, that you have to love the question, not the answer. And we were frankly surprised last year, and then pleasantly surprised this year that this year's results confirmed what we saw last year. And I was just looking at the chart on 33 that talks about E&C resources and standing. And you had mentioned that people were understandably anxious at the outset as to how the programs would do and whether they would have resources or whether there would be widespread misconduct or circumventing of processes. And that didn't happen. And then E&C programs have come out strong and well resourced.

Forrest Deegan:

Just those stats on 33, surprised me a lot of different ways. The first chart talking about: do ethics compliance functions feel they have the sufficient resources and authority. Some of your respondents are at the 95% level, 92% level, even for your medium impact programs. And even the lowest impact were at 67%. Those are really high scores. Those are really high scores. And I think that's right. I think that is a reason for optimism right now with respect to our ability to respond as companies, right? If there is that availability of resources, but also the buy-in with leadership.

Forrest Deegan:

And there's another stat there that I also was surprised by how strong the respond were around access to data, right? The highest impact programs were 89% of them felt that they had appropriate access to data sources in the org, whether it was HR audit it InfoSec in order to do their work.

I think data component there is so critical and reflects buy-in from not just leadership, your tone at the top portion, but also from your cross-functional partners, right. Access to the data can really help drive improvements, yes, in the day to day operation of the program, but all also in your ability to support and inform cross-functionally. And so I think those things are married together, right? The access to information. It's a great example of something where it's not just resources, right? It's not just dollars and cents. It's also that buy-in as reflected through real collaboration and through real partnership.

Susan Frank Divers:

I agree with you. And also it's affirmation that programs have gone from being something the legal department does, or maybe the legal and ethics and compliance department does to something that the whole company does. And that's a really positive development.

Forrest Deegan:

I think, right. I've been in house for a decade now, I was in private practice for a decade before that dealing with a corporate compliance space and really seeing an evolution in terms of scope and approach during that time. And so things were ... we already had increasing expectations and an accelerating space when it came to this field, both due to our internal stakeholders, our boards, obviously regulators like DOJ, but also customers and NGOs. They keep ratcheting up the expectations and corporate compliance has proven to be a responsive and reliable partner. And so this is when you get into what I call the curse of competence, right? If you execute effectively, you're going to be asked to do more. I do think this is been a real opportunity and awakening to the valuation of controls and monitoring and our ability, as professionals, to not just focus on the have tos, right, those rules that we talked about at the top, but also the want tos, right, that corporate purpose, the values associated with it. I believe corporate compliance offers the opportunity to marry the want to and the have to, and frankly, that's the only way it works really well is if people understand how those rules, how those requirements tie back to why they want to be at the company, what they're hoping to accomplish with respect to company values.

Susan Frank Divers:

Forrest, That was very insightful what you just said. And I want to talk a bit more about the connection between values and making programs more accessible and employee focused. That's another theme in the report and we see progress and we see best practices emerging, but I would argue that they need to emerge much more strongly and quickly, but take us back a little bit to board's values and talk about how values, when you demystify them, involve really bringing people into the program with the want tos, as well as the must haves.

Forrest Deegan:

For me, the stats around accessibility, they make a ton of sense in terms of your high performing programs are going to be focused on making the documents available, making them searchable, simplifying where possible, translating into the languages that you're employees leverage, right? To me, those actions are, are really table stakes with respect to an effective program and the thoughtfulness and the idea of keeping the end user in mind, that sentiment, which, which drives accessibility, I think, is communicated to your employees, right? When they see that when they have the access to it, where the information is in a logical place, where it's stored where the other corporate documents or the other FAQs guidance they look for from the company for an IT issue or for a T and E report. If the guidance documents around your compliance program are as accessible, if not more accessible I think that alone sends a message.

I do think that the percentages around those that are for focusing on accessibility they were still right around the 50% mark. I think those numbers need to go up. I also think that to really drive home your value system and to demystify a program and what it means to act with integrity, not only do you have to make the documents accessible, you've also got to work on making them actionable, right? You need guidance that is relevant and actionable. You can have a clear rule that is simple to understand, but if it is unclear how to operationalize that, or how it deals how it is imported into the day to day running of the business, then it's just words on a page. Maybe they can get to the page easier now, but they still can't use it effectively. So I think that those two concepts, accessibility and utility are really what drive an ability to demystify what your program is about.

Susan Frank Divers:

If I hear you correctly too, you are also saying that it reflects respect for employees.

Forrest Deegan:

Yes. I think that's so important. I'm just passionate about that idea that you can send messages, right? How you present your information can tell a lot about what the company values and making it accessible, including in your language, from your corporate purpose, your value statements, how your CEO talks on a day to day basis. If those hooks are appropriately cascaded through your ethics and compliance messaging, it's clear to everyone in the organization that these are priorities, consistent with how we talk about hitting our numbers for the year, or consistent with talking about our expansion for the year, if we're using the same language and if it rolls up in the same way, that's how you ensure it is embedded.

Susan Frank Divers:

Yeah. I completely agree with you. It's tempting to want to spend more time in this area, cause we're both passionate about it. I will just close it out by saying that only 25% of the organizations this year reported that they're using mobile apps. And when you think back on the pandemic and how people were fighting for bandwidth and may have had children at home using bandwidth and computers, we've seen some stirring examples of companies like Dell, really putting big components of their program on mobile apps. And I hope we see more of that.

But just to look forward now, as we draw to the end, we saw a lot of innovation and pivoting, and yet we also saw some areas that lag behind where people haven't, perhaps, revised their training curriculum as quickly as you might expect or made some of these other innovations like mobile apps. First, why do you think that it is? And secondly, what do you see happening in the next couple of years in terms of best practices for programs?

Forrest Deegan:

To use mobile devices and investing in making your program documents, your governance materials accessible and your training included there in, I was surprised at that 25% number. But as I thought about that particular number and kind of what's next, it made sense because I'm reminded of my own mindset in 2020 and the idea that we didn't know how long this is going to last. And so I'm confident when it comes to some of training activities, some of the new technology investments, the answers that you've got for the most recent running of the survey, I think they reflect everybody's hope, and their investment in that, that first year, year and a half the pandemic that we can ride this out, right. We don't, don't have to start over again with the entirety of our program here. And I think that folks, by now, will have come to the realization that, look, we're not going to get back to a place where everybody is in the office on the same system during the same hours of the day.

How does our program have to in this, whether it's remote or hybrid, certainly transitional time, how do we meet our people where they are and where they're likely going to be for the time being? So I do think your answers will change going forward when it comes to investments in mobile, when it comes to investments in audit processes and controls that take into account the lack of that ability to look over the shoulder, the lack of the ability to rely on tribal knowledge. I think that's going to be the future for all of us. The other thing that looking at kind of where the investments were and they'll go next, what really spoke to me was the idea there was value in having a system in place, right? I think back again to 2020 and those folks that did not have systems in place that relied upon those in-person trainings or audits or what have you, they did have to start from scratch when it came to, how do I do this job, or demonstrate this control in a remote way.

Whereas if you had an up and running third party risk management system, you would have to make changes, you'd have to make tweaks to your risks and what they counted for based upon financial instability, operational constraints, but you were working from something. You were able to make adjustments and not start over. And so I think that contrast also, I think, will serve programs well, because the utility of these systems, I think has been revalued by companies because they see how capable they were of pivoting in ways that some of the more informal methods just were not.

Susan Frank Divers:

To take an example of what I think you're saying. It's interesting to me that a lot of top programs still relied on a tremendous amount of in-person training. Yes, in-person, training's more effective in a lot of ways. It makes those connections, but they may have neglected a bit, their online training and I'm reminded of one, CECO who described it as sheep dip training. As you point out we are where we are and we're not going back two years ago. And so I think the level of innovation we're going to see in areas like training, making it shorter, more video, mobile friendly, more tailored to employees roles in the company. It sounds like that will happen because people have come to realize that they have to rely on their system, that the systems have to be good.

Forrest Deegan:

I'm glad you brought up the idea of training and the different types that are available in an online way. A stat that isn't in here is, is the idea of shorter training, right? And I think that as we need to put more arrows in the quiver of online training of remote accessible training, that innovation is going to continue and that not only will training get shorter and more customized, but the location of it, the availability of the rule or the lesson, right where the potential action could be. You've got to approve the invoice, the guidance for that should be baked into the system. Same thing with, if you have to approve the use of a new vendor, right? The expectations of the company, they need to be right there. They need to be tied directly to the process itself. I think, again, that works towards the idea of embedding the rules and the system into your actual day to day activity.

Susan Frank Divers:

Very well put, more of a just in time approach and again, that emphasis on accessibility for people. Well, I could have this conversation all day and there are so many areas in the current Program Effectiveness Report that we haven't had a chance to talk about, but I know you have other things to do. And I really appreciate you spending the time with us today Forrest.

Forrest Deegan:

It's my pleasure. I appreciate the opportunity to do a deep dive into the report. I love a quote from page six about the idea of having a cut of core values translated into understood behaviors can be more potent and powerful than a thousand rules. I love that cascade down because I think that is the approach that works. And when you couple that approach, which requires consistent communication, when you couple that with the ability to measure response, the ability to track change behavior, that's how you win with respect to these clear communication and standards that are transparent and that people are held accountable to.

Susan Frank Divers:

Thank you, Forrest. Talking with you about the program effectiveness report is truly a pleasure. Before we leave the podcast and I close it out. Was there anything else that you wanted to talk about or any other insight that you wanted to share?

Forrest Deegan:

It's always dangerous to ask me that question, but if you don't mind, there was one other kind of collection of stats that really me just because I think that they inform one another. I think it was on page 11, there's a number of stats around what top rank programs are doing. One was almost three times anticipate greater engagement by the boards of directors and almost two times expect more regular engagement by leadership, right? So there's an expectation that the board and leadership are engaged with the program and on that same spit page, it talks about having policies that are simplified and streamlined and having training that is interactive and web based. And to me one leads to the other. If you have a program that is simpler to understand and has been streamlined and has been built in a way to make it interactive, it is going to be easier to support leadership engagement and the board of director buy-in, if you are giving leaders simpler rules that resonate and reflect the reality of the business, you're going to obtain that buy-in in a natural manner.

Forrest Deegan:

And if you're able to talk about the program and if they're able to talk about that program and have that engagement, then that drives that next level with the board of directors. And so I think you pat have to develop a virtuous cycle here of building a program that's based in the reality of your business that resonates with the values of the company and what the company's priorities are, which will allow your business leaders in talking about those business priorities, to use the same language, to pull the same levers when it comes to their engagement with your ethics and compliance program, it really has to be considered part of that whole in order to work.

Susan Frank Divers:

Oh, I love how you've articulated that virtuous circle between the values focus, the simplified employee-facing messages and mechanisms, and then leadership becoming more natural.

Forrest Deegan:

That really is the heart of demystifying your program, right? You've got to make it based in your reality. And you've got to use the language of leadership in order to get there. And if you're doing that, you will have your buy-in at the top and in the middle and it can drive all the way down.

Susan Frank Divers:

Well, that's a great note to end on. Forrest, thank you so much for spending time with us today and thank you to our listeners for joining us for another insightful conversation. My name is Susan Frank Divers, and we'll see you next time on the Principled Podcast by LRN.

Outro:

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