In a world of regulations, recession and corporate scandal, the creation of compliance and ethics roles has been on the rise. But what is dropping is the number of those newly created positions that are in any way tied to the legal department.

“The lawyer serves the corporation as a client, and it could engender a conflict of interest for the lawyer to also wear the hat of compliance officer or ethics officer,” Bentley University Center for Business Ethics Counsel John P. Hansen said.

Hansen, who also serves as chairman of the Association of Corporate Counsel’s compliance and ethics committee, said the number of organizations and support services that have popped up in relation to compliance and ethics is further proof of the increasing importance of the role. The ACC’s committee is just about a year old, he said, and already has 1,600 members.

“It was almost a secondary role 15 years ago, whereas it has evolved into a much more strategic and critically recognized function in an organization today,” Hansen said. “That is largely because of regulatory and legal inducements, but I think also companies just as a matter of governance see it as a prudent business practice.”

Historically, the ethics and compliance programs have been integrated into the legal department, with either the general counsel serving a dual role as chief compliance officer or the CCO reporting to the legal department, Hansen said.

In the past five years, there has been a shift in that trend, the committee’s vice-chairman, Robert Roach said. The compliance and ethics roles, which are most often handled by the same person regardless of their title, are now reporting either directly to the chief executive officer of the company or to a committee of the board, most often the audit committee, said Roach, who is the chief compliance officer of New York University.

This shift was brought on, in part, by a number of corporate scandals in which lawyers had to make interpretations of law in some gray areas. That backfired in some cases, he said. Corporations are starting to think it makes sense to have a check on the general counsel as well. Even if the CEO is doing something questionable, the CCO should put his job on the line and tell the board, Roach said.

Hansen said the U.S. Department of Health and Human Services recommends the compliance officer not be part of the legal department, which he said is “a recognition that law and compliance serve different masters.”

via Law.com – Compliance Officers Play to Bigger Room.