What is corporate compliance? In the 1980s, defense companies under contract with the Department of Defense grossly overpriced standard equipment they sold to the government. The scandal led to criminal convictions and fines for the companies involved. As a result, the government enacted legislation to only conduct business with companies with policies in place so they could create an organizational culture that promoted ethical behavior.

What is Corporate Compliance?

A company is corporate compliant when they have processes, standards, and procedures to make sure it is conducting business ethically and responsibly within its industry, the community, and its customer base. The company monitors its compliance and institute corrective actions when it finds problems.

Though there are standard compliance regulations across the nation, each state has its laws. It is to your benefit to make sure your organization is compliant. Compliance signifies you do the at least the minimum necessary to stay in good standing. Should you be convicted for violating the law, your punishment will not be as severe if you can demonstrate you have a preventive and remedial compliance program.

Maintain Regular Business Meetings

Part of staying in compliance with these regulations is making sure you have processes that demonstrate you have business formalities in place. For one, you must hold at least one official meeting per year. Your meeting must meet the following stipulations:

  • It must be planned in advance and on the calendar.
  • You must record meeting minutes and include attendees present.

Some states only require you hold one official meeting per year. Check with your Secretary of State's office to find out.

Separate Business and Personal Assets

Many companies have their corporate status revoked because they intermingle their finances with the business funds. Another corporate compliance rule forbids you from conducting business from your account. When you pay your bills, transfer the money from the business's account to your personal account. You must demonstrate both physical and transactional separation.

Establishing a Corporate Culture of Compliance

Corporate compliance is more than just following documented rules and policies. You must demonstrate that the business' culture , or organizational behavior, is one of ethics and law conformity. Establish a compliance committee with an assigned compliance officer. Write compliance documentation at a level that everyone can understand. Furthermore, make sure the company's standards, procedures, and policies are readily accessible to your staff. Stay up-to-date with on the laws and identify the areas that need improvement. Verify leaders and management continually mentor employees and encourage them to behave ethically.

Strategies for Maintaining a Compliance Program with Limited Resources

Not every organization has the resources to have a fully-staffed compliance department. You can implement either one of the following strategies if your organization does not have enough compliance resources:

  • Have managers and supervisors monitor their direct report for compliance and have them participate in creating and instituting solutions when a problem arises. The compliance staff can do periodic audits throughout year ensure standards conformity.
  • Create special committees or work groups from the different functional groups to help monitor and audit departmental compliance. By using this strategy, you engage employees who can help you maintain compliance.

Corporate Compliance Programs and Organization Ethics

The five elements of a corporate program where devised from several standards and guidelines include the U.S. Sentencing Guidelines, are as follows:

  1. Leadership. Senior Management and the Board of Directors must set the tone, engage fully, and empower the compliance officer.
  2. Risk Assessment. Conduct a risk assessment to identify areas in your organization that presents a compliance-risk. Analyze high-risk data, prioritize them, and deal with them accordingly.
  3. Standards and Controls. The three levels of standards and controls in your program include:
    1. Code of Conduct.
    2. Standards and Policies.
    3. Procedures.
  4. Training and Communication. Train all shareholders including officers, employees, and third-parties on all related compliance regulations, internal policies, and laws.
  5. Oversight. The compliance officer must not only implement the program, but they must also monitor for compliance. If an issue arises, then there should be corrective actions to remediate the situation.

Corporate compliance is serious business. You have more at risk than your corporate status, you can be fined or even jailed. Keep up with your state law and government legislature to make sure your business is in compliance.

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