Compliance means following the rules, regulations and organizational policies. Compliance training is essential, to ensure that members of the organization do not break the law and to maximize productivity. Companies as well as nonprofit organizations can be held liable for the unlawful conduct of their employees, even if they have policies in place which prohibit such conduct. Such liability can be minimized if the employees receive sufficient compliance training and counseling.
Compliance training has numerous objectives, but the most important goal is to avoid legal liability. Even though a large company, a government agency or a university cannot prevent every possible misconduct of its members, the law holds organizations liable for unlawful acts of their members. Federal sentencing guidelines state that criminal liability can attach to an organization if an employee commits an illegal act, even if such conduct was contrary to instructions.
In other words, if an employee of your local gym opens your locker while you are in the shower and steals your cellphone, the gym can be held liable, even if the gym had clearly instructed its employees not to touch the personal belongings of patrons.
But if telling your employees not to break the law is not enough, what else can you do? This is where compliance training comes in. An organization can largely avoid potential fines (Federal Sentencing Guidelines prescribe a reduction of up to 95 percent) if it can demonstrate that it had put in place an effective compliance program.
So instead of merely telling employees not to touch the personal belongings of clients, the law requires the company to actually train and counsel its members. The training could discuss such issues as what to do when an employee sees unattended personal belongings, how to handle lost-and-found items and how to act when one employee observes illegal conduct by a fellow worker.
In addition to legal considerations that apply to each organization, many corporations are checked by state and federal regulators such as the Securities and Exchange Commission and Federal Communications Commission. Investment banks provide extensive compliance training to ensure that each member is aware of industry specific rules and regulations. Seasoned employees must also be updated when regulations change or the organization's status undergoes significant change.
When a company goes public, for example, it becomes subject to more stringent regulations with regards to how material information about its financial activities is disclosed, and all employees go back to the classroom.
Distinguished organizations usually set higher standards than what is required by law. If, for instance, the law prohibits financial analysts from making questionable promises about a potential investment to clients, an investment bank may go further and ban such conduct even when analysts interact with their own colleagues. Added constraints mean more potential for complications, which increases the need for good training.
Good for Profits
Compliance training also involves providing guidance on ethical and proper conduct, even where such conduct is not specifically mandated by law. Companies that teach their members how to act in a socially responsible manner and to respect each other consistently do better and last longer.
Hunkar Ozyasar is the former high-yield bond strategist for Deutsche Bank. He has been quoted in publications including "Financial Times" and the "Wall Street Journal." His book, "When Time Management Fails," is published in 12 countries while Ozyasar’s finance articles are featured on Nikkei, Japan’s premier financial news service. He holds a Master of Business Administration from Kellogg Graduate School.