This excerpt boils down the essential elements of one of CFO’s more popular articles from the past month. To read the full article, click here.
CFO interviewed more than a dozen experts and examined several notable legal cases and compliance failures to determine the five most effective things finance executives can do to prevent risky or illegal activities.
1) Acknowledge that You Are Responsible
While the actions of a salesperson on the other side of the globe may seem well outside a CFO’s purview, Sarbox says otherwise. When CFOs sign off on financial statements, as they must do under the act, they are also verifying the accuracy of all corporate records, says Marie Hollein, president and CEO of Financial Executives International.
2) Make the Corporate Counsel Your Ally
As every finance chief knows, there is a crackling tension between compliance and the company’s or business unit’s mandate to perform. CFOs who tackle compliance issues may feel they are entering a political minefield. In such cases, don’t go it alone.
3) Really Deliver the Message
“I am sick of the phrase ‘tone at the top,'” says Tracy Coenen, a Chicago investigator. Sending a message from on high is far more effective, she says, when it’s coupled with some face time. Making the effort to deliver this important message in person shows that “you’re a real person, and [your employees] can hear you say that it’s important to have an ethical company.”
4) Educate Front-Line Managers
While senior executives must set the tone, it is critical that front-line employees feel comfortable in the role of watchdog. When these employees raise potential issues, midlevel bosses and front-line supervisors should know how to respond. Otherwise, employees who know about illegal activities may not tell anyone, out of a fear of being retaliated against or fired. A raft of research has shown that an employee’s behavior is far more influenced by his or her direct supervisor or operating-unit head, versus a C-level executive.
5) Simulate a Crisis
When a crisis occurs, consultants say that it can be extremely difficult for C-suite executives to subsume their type-A personalities and develop a consensus-driven plan that can minimize further damage. For top managers who want to learn how politics and personalities can lead to a cover-up that worsens a crisis, consultants recommend they walk through who would be in charge if a crisis occurred.