Corporate America Taking Diverse Routes to Compliance, According to Exclusive Research From Compliance Week.

Leadership Roles. Reporting Structure Differ Widely as Corporations Define the Function and Attempt to Ensure Ethical Behavior, Independence

BOSTON -- Nearly six years after passage of the Sarbanes-Oxley Act, publicly held corporations are still taking vastly different approaches to comply with the law. According to exclusive research compiled by Compliance Week, no consistent structure has evolved to ensure corporations are in compliance with the latest regulations, standards, and codes of business conduct.

As a result, no "typical" compliance department structure exists, even within industries, sectors, or company size. The result: few industry standards exist that corporations can use as benchmarks to gauge whether they're doing a good job complying with SOX.

Compliance Week research shows that companies take many approaches to "ownership" of the compliance function. While a plurality (31 percent) of those who oversee compliance programs are truly compliance officers, 17.3 percent in the survey are financial executives--controllers, internal audit executives, even CFOs. Only 12.7 percent are general counsel or one step below the GC position (i.e., assistant or associate general counsel).

According to Compliance Week editor-in-chief Matt Kelly, the data reveal not only a nascent compliance role in transition, but one that has been customized for each corporation. "Every public company is unique, and the specific compliance issues they face appear to dictate the role--and rightly so," he says. Unfortunately, the distinctive nature of every program makes it difficult for companies to discern comparables or best practices. "The compliance function is relatively new at many companies, and executives are seeking industry standards or practices against which they can judge their own operations," says Kelly. "That's tough to do when every company does it differently."

Among the main findings detailed in today's story at www.complianceweek.com:

* Compliance is often a single job role. 31.7 percent of companies assign responsibility for compliance to an individual with the title of chief compliance officer. When all titles including the word "compliance" are included (such as "compliance and ethics officers" or "vice presidents of compliance"), the total rises to 40.2 percent. Other respondents commonly assign compliance either to the general counsel or some other legal officer (12.7 percent), or someone in the financial department (17.3 percent).

* No clear pattern exists for where to "put" compliance. A plurality of respondents (34.9 percent) say the firm's top compliance executive reports directly to the CEO. The second most-common reporting structure in the survey is the compliance officer who reports to the general counsel (20.8 percent) and to the CFO (19 percent). Only 10.6 percent report directly to the audit committee. These figures underscore how different companies approach "compliance" through a legal lens, a financial lens (i.e., SOX 404), or even a corporate governance or ERM lens.

* Large companies usually have a stand-alone chief compliance officer. Governance experts stress the importance of a stand-alone CCO role for assuring independence. Large companies do better; Of the 65 companies surveyed that had $10 billion or more in annual revenue, 36 have a chief compliance or chief ethics officer (55.4 percent). At the 46 companies with revenue below $250 million, however, only 12 have a chief compliance officer (26.1 percent).

* Independence remains an open question. Interestingly, only 2.5 percent of those who "own" compliance report directly to the full board of directors--the structure deemed to hold the greatest independence by governance experts. Experts suggest the optimal reporting relationships include "hard lines" to company management and "dotted-line" responsibility to a board or audit committee.

"In three to five years, this picture will probably look quite different," Kelly says. "Some companies, particularly large ones, may assign stand-alone CCOs, while smaller companies may assign the responsibility to legal or financial executives as compliance gets operationalized."

About the Survey

Compliance Week's compliance officer survey is based on the results of an online survey conducted of Compliance Week readers during a one-week period from March 19 to March 25, 2008. In total, 292 readers responded to the survey. Of the responses, eight (or 2.7 percent) were discarded as incomplete, leaving 284 responses. The survey asked readers, among other things:

* What is the title of the person who oversees compliance?

* To whom does that person report?

* How large is your compliance staff?

* Who oversees compliance training?

* In how many languages is training conducted?

* Is training localized for overseas jurisdictions?

Results of the compliance officer survey were made available to Compliance Week subscribers today and are available to members of the press on a limited basis. Details can be found at http://research.complianceweek.com, or by contacting the publication, below.

About Compliance Week

Compliance Week is an information service on corporate governance, risk, and compliance that features a weekly newsletter, a monthly print magazine, custom research, proprietary databases, and industry-leading events. Compliance Week subscribers include more than 25,000 financial, legal, risk, audit, and compliance executives at public companies. For more information on Compliance Week, visit http://www.complianceweek.com.