by Steve Priest, President of Ethical Leadership Group, a Global Compliance Company

Lynn Turner, former chief accountant at the SEC, believes that effective ethics and compliance programs need to ensure that their whistleblower program has sufficient independence. Mr. Turner’s idea of independence departs from current practice by most major firms. In a September 2008 keynote speech to over 500 ethics and compliance professionals gathered at the annual meeting of the Ethics and Compliance Officer Association, Lynn Turner said flat out that “the whistleblower system cannot report to the General Counsel. It needs to be independent—and report directly to the Audit Committee.”

Our research indicates that about half of the ethics/compliance programs in corporate America report up through the Law Department to the General Counsel. This includes the whistleblower/hotline/helpline component. Yet Mr. Turner said “Employees don’t trust it (whistleblower line) if it goes to the General Counsel.” He continued “If it (whistleblower line) doesn’t report to the Audit Committee, it is worthless.”

Lynn Turner is not the first to make this argument. It was probably made most colorfully by Senator Charles Grassley in 2003 when he was corresponding with the CEO of Tenet Healthcare about an investigation his Senate panel was about to launch. “As general counsel, Ms. Sulzbach zealously defended Tenet against claims of ethical and legal non-compliance, e.g., the April 2001 qui tam suit, while as chief compliance officer, she supposedly ensured compliance by Tenet's officers, directors and employees. It doesn't take a pig farmer from Iowa to smell the stench of conflict in that arrangement.”

It is a curious fact. Five years after Grassley, in the wake of unprecedented scrutiny on conflicts of interest within corporations, half of our top companies leave themselves open to the criticism of people like Charles Grassley and Lynn Turner.

Are you open to this criticism? Do the benefits of having legal oversee ethics and compliance outweigh the risks? If you and senior management have not had this discussion, perhaps now is the time.

If you would like my assistance or that of another experienced professional at ELG to help you assess the pros and cons in structuring your ethics and compliance program, please let me know.