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Shopping the Alignment of Compensation and Compliance Programs

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Shopping the Alignment of Compensation and Compliance Programs

While the Wal-Mart bribery saga goes on and on (as it should), a new development was announced this week. The Wall Street Journal reported that Wal-Mart would base some executive compensation this year on whether the company successfully overhauls its compliance operations.

We’ve seen this as best practice for a while. Several of our clients “bake compliance in” to their cultures, and one way in which they do that is to align compensation structures with compliance goals. It certainly seems intuitive that as compensation is assigned, priority will follow.

Under Wal-Mart’s policy, the company’s audit committee can choose to reduce or eliminate 2014 cash incentives for top executives if the company doesn’t meet certain compliance objectives, including “implementing enhancements to how we report and investigate allegations of wrongdoing world-wide.”

Senior managers are also now providing quarterly reports to Wal-Mart’s audit committee on their progress toward implementing the corporate compliance program, including standards and controls, compliance training and monitoring. While the company doesn’t disclose details, such as the compliance objectives, or the formula to determine how performance against them will affect compensation, it is at least a step in the right direction. But it’s important that the company follow through. If Wal-Mart is truly to turn the corner and elevate its compliance program, it needs to take this move seriously, and not just as a PR stunt.

As part of its compliance program overhaul, Wal-Mart has also taken other steps. It has merged its compliance, ethics, investigations and legal offices into one organization reporting to its general counsel. These are all good signs of a renewed focus on compliance by the world’s biggest retailer, and we’ve all seen many times before, others will play follow the leader (if Wal-Mart’s example is indeed a good one). We’ll just have to watch and see what transpires over time in Wal-Mart’s compliance structure and what that can tell all of us about our own.

About the Author

Cindy Knezevich, VP, Marketing Operations. Cindy is responsible for creating and executing The Network’s marketing strategy, including demand generation, public relations, social media, web marketing and analyst relations. Connect with Cindy on LinkedIn

1 Comment

  1. November 5, 2014 at 9:01 pm

    […] Blog Post: Shopping the Alignment of Compensation and Compliance Programs […]

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