History and Emergence of Ethics and Compliance

The past twenty years has seen an explosion of corporations, across the United States, creating new business programs that deal with ethics and compliance. One survey showed that eighty-three percent of corporations, that completed the survey, have developed a formal code of ethics or conduct (Deloitte and Corporate Board Member Magazine, 2003). It can be said that corporations generally don’t add extra personnel and undue expenses without justification. Why then are corporations creating these added expenses? Who, within the corporation, is developing these codes of ethics and compliance programs and why are they doing it? To answer these questions we must look at the history and emergence of the field of Ethics and Compliance.

Discovering the birthplace or emergence of “business ethics” is not an easy task. One reason for this lies deeply buried within the history of business ethics. Richard De George (2005) describes the history of business ethics as having three separate paths. The three separate paths or synergies of business ethics build upon each other in a way that makes the sum stronger than any other individual path.

Three Synergies of Business Ethics

The first path refers to “ethics in business,” which can be seen as “the application of everyday moral or ethical norms to business (De George, 2005).” Early examples of ethics in business can be seen in the Bible’s Ten Commandments, Plato’s Republic, and Aristotle’s Politic. As ethical philosophies took a more modern approach other views began to arise like that of Adam Smith and Karl Marx.

The second path refers to “business ethics” as it applies to the academic field. The 1960’s brought forth a new generation of social consciousness toward business. Viet Nam, Civil Rights, and Environmental Issues all became targets, for this new generation, to protest. Corporations looking to minimize public outcries formed social responsibility programs. Business schools began developing courses designed to address these social responsibilities. De George (2005) describes these courses as first having an emphasis on law with no systematic approach to ethical theory as empirical studies were the norm, as they developed or defended corporate actions. In the 1970’s the birth of “Business Ethics” as an academic field came into its own and by 1990 business ethics was deeply rooted in academia.

Ethics as a movement, the final path, shows how a business interweaves ethics into the structures of the organization through the creation of ethics codes, officers, committees and training. The business ethics movement began when new legislation was passed that targeted businesses. These laws included the Civil Rights Act of 1964, Occupational Safety and Health Act of 1970, and the Environmental Protection Act. Non-compliance with these laws could bring lawsuits upon organizations. Naturally, businesses wanting to mitigate their risks will need to comply with the laws. As more laws were passed, companies needed ways to keep abreast of each law.

Rise of the Corporate Ethics & Compliance Officer

The rise of the Corporate Ethics & Compliance Officer came in three phases (Swartz, 2003). The first phase came after scandles during the Reagan era. The next phase came in the early 1990’s after the Federal Sentencing Guidelines promised reduce fines for implementing an Effecive Compliance and Ethics Program (ECEP). The last phase came from a number of high profile corporate corruption case that include companies such as Enron, MCI/WorldCom, and Tyco.

Ethics and Compliance professionals come from vastly different backgrounds. Imagine each of the different types of organizations (businesses, corporations, partnerships, etc.) in the world and each one having their own view of what ethics and compliance means to their organization. The combinations are endless, making the path to becoming an ethics and compliance professional a daunting one. However, there are a number of key elements that play a role in determining what goes into the ethics and compliance program. How organizations interpret these key elements can shape what an organization looks for in an ethics and compliance professional, and with it, what the professional’s day-to-day activities will be.

One element lending a hand, in shaping “ethics and compliance” into a profession, is the Federal Sentencing Guidelines for Organizations (FSOG). In 1984 Congress established the U.S. Sentencing Commission. The commission set out to establish guidelines that federal judges could use when handing out convictions to criminals. It wasn’t until 1991 before chapter eight was added; creating sentencing standards for organizational defendants (Association of Corporate Counsel, 2005). The 1991 manual has undergone many changes over the years. Organizations can use the guidelines to decrease the amount of punishment by up to 95% (De George, 2005). One important element of the FSOG is instituting an “Effective Compliance and Ethics Program” (ECEP).

Companies now have guidelines to model their E&C programs after, within the ECEP seven element need to be addressed to mitigate an organization’s punishment, they are: (1) standards and procedures; (2) oversight by high-level personnel; (3) due care when delegating authority; (4) effective communication of standards and procedures; (5) auditing/monitoring systems and reporting mechanisms; (6) enforcement of disciplinary mechanisms; and (7) appropriate response after detection (Izraeli & Schwartz).

Compliance professionals interact with other departments within an organization. How compliance professionals interact with each department depends on what department is accountable for compliance within the organization. Some organizations place ethics and compliance responsibilities on the shoulder of the general counsel to ensure that, “[h]igh-level personnel of the organization shall ensure that the organization has an effective compliance and ethics program” and to stay compliant with the FSOG (Salmon-Byrne & Frederickson, 2010). However, Ethisphere (2010) builds the case that by placing the ethics and compliance function with the general counsel creates a conflict of interest.

Compliance professional’s interaction between departments is conducted through a variety of communication medians. Interaction can take place in work groups that help facilitate collaboration between different departments. Other obvious means of communication would include e-mail, phone, face-to-face conversations, text messages and even social media networks. Some E&C professionals act as a help-desk for ethical and compliant related issues, while other E&C professionals might facilitate training throughout the corporation.

A Corporate Ethics & Compliance Professional should also have a code of professional ethics; one such code was adopted by the Society of Corporate Compliance and Ethics (SCCE). The code of ethics has three main obligations, they are: (a) to the Public, (b) to the Employing Organization, and (c) to the Profession (Murphy, Walker, Anderson, Horowitz, Milano, & Doyle).


Over the last few decades the ethics and compliance profession has grown up from a philosophical idea to high-level personnel within corporate America. Guidelines, like the FSOG, have helped the E&C profession grow by leaps and bounds. Ethics and Compliance professionals must always be looking for new ways to reinvent their craft. Ethical values can change due to idealistic views perceived by the public; these changing views set the tone for acceptable values and standards in ethical thinking. As an ethics and compliance professional, the answer is not always found in the law books, it’s found when thinking beyond the words of law.


Association of Corporate Counsel. (2005, March). The New Federal Sentencing guidelines for Organizations: Great for Prosecutors, Tough on Organizations, Deadly for the Privilege. Retrieved August 20, 2010, from ACCA.com: http://www.acca.com/protected/article/attyclient/sentencing.pdf

De George, R. T. (2005, February 19). A History of Business Ethics. Retrieved August 13, 2010, from SCU.edu: http://www.scu.edu/ethics/practicing/focusareas/business/conference/presentations/business-ethics-history.html

Deloitte and Corporate Board Member Magazine. (2003, July). Business Ethics and Compliance in the Sarbanes-Oxley Era. Retrieved Auguest 20, 2010, from GlobalCompliance.com: http://www.globalcompliance.com/pdf/BusinessEthicsandComplianceSurvey.pdf

Izraeli, D., & Schwartz, M. S. (n.d.). Actrav.Itcilo.org. Retrieved August 22, 2010, from What Can We Learn From the U.S. Federal Sentencing Guidelines for Organizational Ethics?: http://actrav.itcilo.org/actrav-english/telearn/global/ilo/code/whatcan.htm

Murphy, J. E., Walker, R., Anderson, U., Horowitz, M., Milano, S., & Doyle, J. M. (n.d.). Code of Professional Ethics for Compliance and Ethics Professionals. Retrieved August 20, 2010, from CorporateCompliance.org: http://corporatecompliance.org/Content/NavigationMenu/Resources/ProfessionalCode/SCCECodeOfEthics_English.pdf

Salmon-Byrne, E., & Frederickson, J. (2010, May 25). The Business Case for Creating a Standalone Chief Compliance Officer Position. Retrieved August 21, 2010, from Ethisphere.com: http://ethisphere.com/the-business-case-for-creating-a-standalone-chief-compliance-officer-position/

Swartz, N. (2003, January 1). Rise of the corporate ethics officer. (Up front: news, trends & analysis). Retrieved August 19, 2010, from AllBusiness.com: http://www.allbusiness.com/human-resources/employee-development-employee-ethics/453806-1.html