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Roughly 60 percent of the companies named as Ethisphere Institute's most ethical for 2020 have an independent chief compliance or ethics officer who reports directly to the CEO rather than the manager of another business function.
AT&T Inc., U.S. Bancorp and LinkedIn are among the 132 companies Ethisphere named to be the most ethical for 2020.
Douglas Allen, managing director of data and services at Scottsdale, Arizona-based Ethisphere, said nearly every company named has someone who acts as a chief ethics or compliance officer. However, the number of companies that have independent, C-suite level compliance and ethics officers has increased from previous years. That independent role has led to better corporate behavior from the top down.
"Defining the role and allocating resources to this role sends an incredibly strong signal that ethics matter to the organizations," Allen said.
Tim Erblich, CEO of Ethisphere, said the pressure to act ethically and have someone in charge of company ethics comes largely from investors.
"As boards are thinking about this and are listening to their stakeholder community, they really have to have a plan for this," Erblich said.
In January 2019, State Street Corp. authored a letter to the board members of its portfolio companies and asking them to focus on company culture and compliance. BlackRock and Vanguard have also been active on emphasizing workplace culture to board members.
"We strongly believe this has to be linked to performance. Investors are always about the return. So the integration of behavior into performance strategy is important," Erblich said.
Outside of investors, CEOs are also beginning to take ethics and workplace culture more seriously, creating a greater need for a chief ethics or compliance officer. Thirty-nine percent of the 89 CEOs fired in 2018 were terminated because of their own unethical behavior or the behavior of an employee, according to a PricewaterhouseCoopers survey.
"That outdistanced financial performance as to why CEOs are being replaced," Erblich said. "If there is a behavioral breakdown your stock gets hammered and you lose your job."
In addition to a reliance on a chief ethics or compliance officer, Erblich and Allen said the following of the companies they recognized also had:
- Nearly 9 out of 10 companies have a mental health or wellness program in place. Allen said he would expect to have more data on mental health and wellness programs in the coming years.
- Companies are putting more resources into their value chain. They are helping their suppliers become more ethical and making compliance a business strategy over risk mitigation.
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Dan Clark
Dan covers cyber security, legal operations and intellectual property for Corporate Counsel. Follow him on Twitter @Danclarkalm.
