20 Questions Boards of Directors Should Ask About Their Compliance Committees

Thomas Fox
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Compliance Evangelist

We are moving to the place where every Board of Directors will have a Compliance Committee, separate and apart from its Audit Committee. With the speed of change we witnessed in the pandemic, compliance and greater risk management has become even more important. The Delaware decision in Blue Bell also mandated more and greater Board involvement in compliance and risk management.

In an area of inquiry entitled Oversight, the 2020 Update to the Evaluation of Corporate Compliance Programs asks three basic questions:

  1. What compliance expertise has been available on the Board of Directors?
  2. Have the Board of Directors held executive or private sessions with the compliance function?
  3. What types of information has the Board of Directors examined in their exercise of oversight in the area in which the misconduct occurred?

To facilitate the answers to these questions, consider this list of 20 questions to reflect the oversight role of directors. These are questions the Board should ask of both senior management and the Board should ask itself in the form of its Compliance Committee. The questions are not intended to be an exact checklist, but rather a way to provide insight and stimulate discussion on the topic of compliance. The questions provide directors with a basis for critically assessing the answers they get and digging deeper as necessary. Although the questions apply to most medium to large organizations, the answers will vary according to the size, complexity and sophistication of each individual organization.

Part I: Understanding the Role and Value of the Compliance Committee

  1. What are the Compliance Committee’s responsibilities and what value does it bring to the Board?
  2. How can the Compliance Committee help the Board enhance its relationship with management?
  3. What is the role of the Compliance Committee?

Part II: Building an Effective Compliance Committee

  1. What skill sets does the Compliance Committee require?
  2. Who should sit on the Compliance Committee?
  3. Who should chair the Compliance Committee?

Part III: Directed to the Board

  1. What is the Compliance Committee’s role in building an effective compliance program within the company? How can the Compliance Committee assess potential members and senior leaders of the company’s compliance program?
  2. How long should directors serve on the Compliance Committee?
  3. How can the Compliance Committee assist directors in retiring from the Board?

Part IV: Enhancing the Board’s Performance Effectiveness

  1. How can the Compliance Committee assist in director development?
  2. How can the Compliance Committee help the Board chair sharpen the Board’s overall performance focus?
  3. What is the Compliance Committee’s role in Board evaluation and feedback?
  4. What should the Compliance Committee do if a director is not performing or not interacting effectively with other directors?
  5. Should the Compliance Committee have a role in chair succession?
  6. How can the Compliance Committee help the Board keep its mandates, policies and practices up-to-date?

 Part V: Merging Roles of the Compliance Committee

  1. How can the Compliance Committee enhance the Board’s relationship with institutional shareholders and other stakeholders?
  2. What is the Compliance Committee role in CCO succession?
  3. How can the Compliance Committee foster great technical impact for compliance function?
  4. What role can the Compliance Committee play in preparing for a crisis, such as the discovery of a sign of a significant compliance violation?
  5. How can the Compliance Committee help the Board in deciding CCO pay, bonus and resources made available to the corporate compliance function?

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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