Can You Measure the ROI of Ethics and Compliance?

Can the return on investment of an ethics and compliance program be measured through numbers? If so, what metrics are included in measuring the ROI?

Posted by Joe Gerard in Ethics, Ethics & Compliance on October 5th, 2010

Can the return on investment of an ethics and compliance program be measured through numbers? If so, what metrics are included in measuring the ROI? At an ECOA (now ECI) conference, there was a session that they referred to as the “Great Debate.” The session was titled “Ethics and Compliance ROI: Ethics and Compliance as a Cost Centre, Profit Centre or Something Else.”

Debater information and their arguments are listed below, followed by a summary of my feelings related to the issues. Steve Priest and Jay Mumford (the debaters) were debating what justifies the existence- and budget, of an ethics and compliance department. Some of the opinions expressed during the debate included that there’s a lack of empirical evidence to support determining the ROI of ethics and compliance, measuring the return through legal fees and fines avoided due to an ethics and compliance program and whether or not ethics and compliance proves that a company is better than another.

Can the return on investment of an ethics and compliance program be measured through numbers?
Here are my notes from the debate. Please note that each person was assigned a side in the debate, therefore, the people involved were defending the side they were assigned and not necessarily their personal opinions on the matter.

Argument from Steve Priest

Founder of the Ethical Leadership Group, Senior Advisor at Global Compliance.

FREE Investigation Report Template

Prepare thorough, consistent investigation reports with our free report template.

Download Template

Argument- Emphasizing ROI for ethics and compliance is problematic for your business.

  • Ethics program – goal is to help the company be more ethical. Contribute to an organization’s health, leading to improved employee engagement, trust, less EEOC claims and commitment- not necessarily the bottom line on an accounting sheet.
  • Can’t justify that a company that acts ethically performs better than a company that does business in a conniving way.
  • No empirical evidence to support the statement that ethics pays.
  • Despite the evidence, the speaker believes that ethics pays- along with most other businesses.
  • An ethics and compliance program must be sincere- if a company makes a commitment to ethics and compliance purely because they believe E&C is profitable.
  • When codes and training are viewed as “check the box” support from the workplace decreases.
  • Would you gut the E&C department because it can’t provide financial proof that it makes business better?
  • Ethics means that companies must always do the right thing, even if it is difficult, and costly, making it hard to prove it brings a profit to the business.

Argument from Jay Mumford

Ethics and compliance director at Accenture.

Argument- Ethics and compliance ROI is real in its value, adequate to make the case to senior management to support ethics and compliance.

  • We have to make the case as business people, without extensive volumes of research, to make a decision in favour of ethics and compliance.
  • Ethics is special. Arguing “it’s the right thing to do” is unnecessary.
  • Must speak the language of business to influence business.
  • Effect on Expenses- Reduce expenses, losses. Help organization increase top line revenue. E&C decreases losses through reducing the costs associated with unethical conduct, averting misconduct. Money isn’t spent on law suits, legal/ administrative fees, fines and other hits incurred by acting unethically.
  • “Insurance policy against loss.”
  • Effect on Revenue- More revenue gets to the bottom line. Corporate culture and integrity improve business performance and reduce misconduct.
  • Employees know if a company is checking the box vs. walking the walk.
  • Don’t need peer review journals to serve as evidence.
  • Hard to determine the cost of accidents that have been avoided.
  • For example, FCPA penalties are increasing, and charges are being pressed more often, an ethics and compliance program helps companies work to avoid falling victim to these types of incidents. Consequences/ costs of noncompliance.

Something to Consider…

Justifying the ROI of an ethics and compliance program is difficult, as you can see above. I believe that companies that act ethically will perform better in the long run, but may face short term problems. For example, many companies that act unethically, such as Enron, have collapsed based on the discovery of unethical actions. I feel that companies that act ethically get hurt in the short term because they may lose business from companies that offer lower prices or are willing to compromise their own ethics and beliefs to gain contracts. This was a group survey question during the session, 60% of the audience shared in a similar opinion.

Some companies that are found guilty of ethics and compliance violations have an ethics and compliance policy, program and department established within their organization- so arguing the cost of not implementing one can be tricky, as these companies implemented such measures, and still faced fines for violations. Maybe in this particular case you could argue that funds are needed to ensure this doesn’t happen to your organization and properly enforcing an ethics and compliance program costs money.

On the other side of the fence, there are many companies that report that their employees stopped and thought about the implications of their decisions before acting on them, because of the efforts of the company’s ethics and compliance department. Therefore, fines were avoided because the employee chose to do the right thing. I’m not an expert and I don’t have the answers, but I do feel that in order for an ethics and compliance program to be successful, it requires the appropriate allocation of resources, as well as an organization wide commitment.

Joe Gerard
Joe Gerard

CEO, i-Sight

Spend my days showing off the i-Sight investigative case management software and finding ways to help clients improve their investigations. Usually working with corporate security, HR & employee relations, compliance and legal teams.

Visit Website

Want to conduct better investigations?

Sign up for i-Sight’s newsletter and get new articles, templates, CE eligible webinars and more delivered to your inbox every week.