New Guidelines for Board Oversight of Ethics and Compliance

With increasing regulatory oversight of ethics and compliance programs, one of the general counsel’s key focus areas is formalizing compliance-related board relations, ensuring that their boards receive timely information about risk. Absent clear policies and processes, GCs are likely to find themselves caught in a challenging position between the board and other senior executives. While CEOs prefer to manage the information presented to directors, the directors, under increasing pressure from regulators, are likely to push for more disclosure.

The Office of the Inspector General (OIG) of the Department of Health and Human Services has released guidelines on what boards should do to meet their responsibilities. They are targeted at the health care industry, but are broadly applicable.

Adequate and timely information begins with standardizing communication protocols. Well-documented definitions of compliance roles and responsibilities should be in place, with their boundaries articulated, along with board-approved expectations for cross-functional cooperation and collaboration. Boards should consider engaging outside counsel to avoid putting GCs in an awkward position when directors with legal questions need advice that may run counter to the wishes of the CEO.

The OIG guidance could be the start of a trend toward creation of a single, globally applicable guide. We also could see a movement for evaluating compliance programs – and boards – with standardized criteria. Regardless of how these trends develop, boards with the help of the GC can use the latest OIG guidance to their advantage.