Compliance Officers Oppose Reporting to Corporate Counsel and Having Corporate Counsel Serve as Compliance Officers

A January 2012 survey conducted by the Society of Corporate Compliance and Ethics (SCCE) and the Health Care Compliance Association (HCCA) revealed that 80 percent of compliance professionals believe that  their relationship with legal is a strong one, giving the rela­tionship a 4 or a 5 on a 1 to 5 scale.  However, 80 percent of the over 800 respondents to the SCCE and HCCA’s survey conducted during January and February 2013 were opposed to  having compliance report to corporate counsel and 88.5 percent were opposed to corporate counsel serving as the compliance officer. Interestingly, only 15 percent of the respondents reported that one individual serves as both general counsel and compliance officer of his or her organization.

The SCCE and the HCCA noted that although corporate integrity agreements with the HHS Office of Inspector General  and settlement agreements with the Department of Justice have specifically required compliance officers to report to corporate leadership rather than the general counsel’s office, some individuals argue that because “compliance is about following the law, compliance should be part of the legal department.” The results of the survey provide the perspective of the compliance community on whether corporate counsel should serve as an organization’s compliance officer and whether compliance officers should report to corporate counsel.  

Reason for Respondents’ Opposition: Conflict of Interest

Among the reasons given by the respondents for keeping the role of corporate counsel and that of the compliance officer separate was the conflict of interest between corporate counsel’s role of protecting and defending the company and compliance officer’s role of uncovering weaknesses, developing controls, and mitigating risks. In other words, one respondent said that the mission of the compliance officer is to “detect, disclose, and remedy.” While counsel represents the organization from a legal perspective, the compliance officer is representing the integrity of the organization.  Furthermore, respondents said that general counsel may not have the time to successfully fulfill both roles or have the skills required of compliance officers such as project management.

Similar to the reason given for being opposed to having corporate counsel serve as the compliance officer, the main reason respondents gave for their strong opposition to having compliance report to corporate counsel was the potential of conflicts of interest.  Other reason the respondents gave included (1) the need for unrestricted access to the chief executive officer and the board of directors; (2) legal takes too much time considering issues before reporting them; and (3) the roles were too different. More specifically, respondents noted that compliance officers need a direct line to the head of the entity to ensure that issues are fully communicated and that legal should control the fallout, while compliance should fix the problem.

The HCCA and SCCE’s Conclusions

The HCCA and the SCCE came to the following conclusions based on the results of the survey:

  • The most effective relationship between compliance and in-house counsel seems to be collaboration rather than cohabitation. Although the two play related and complimentary roles, compliance professionals see existing and potential differences between the two and believe it is better to keep the roles separate and on equal footing.
  • Keeping compliance separate from legal can benefit management. Because the difference between the need to ensure compliance and the need to defend the company is significant, by giving compliance a voice without being vetoed by legal, management is able hear differing viewpoints, which may lead to better decisions.
  • Forcing compliance and legal to be combined has the potential to significantly diminish the effectiveness and independence of compliance programs and management’s ability to make well-advised decisions.

Based on the results of the surveys and the conclusions of the SCCE and the HCCA, compliance and corporate counsel have a good working relationship and when they work together but keep their roles separate, there are tremendous benefits to the organization.