At a company’s core is the team of people who establish its mission, define values and contribute to success. As a company grows, it’s important to set the compliance of these founding principles. According to Bayer, corporate compliance is “the observance of statutory and company regulations on lawful and responsible conduct.”

Essentially, corporate compliance is a method of internal maintenance where someone within your organization monitors company policies and pertinent laws, making sure they are being followed by all employees, departments and company practices.

Why is Compliance Important?

Zenefits, an HR software startup, recently demonstrated the importance of corporate compliance. The company announced founder and CEO Parker Conrad stepped down after a series of errors. David Sacks, Zenefit’s COO stated, “Many of our internal processes, controls, and actions around compliance have been inadequate, and some decisions have just been plain wrong. As a result, Parker has resigned.”

After an investigation, it was determined that the company’s sales staff were acting like insurance agents without having the proper licensing in at least seven states. But Zenefits’s recklessness is deeply rooted in the nature of being a rapidly-growing startup and the compliance issue was simply a side-effect that had disastrous consequences.

As a result, Sacks is calling for change to the Zenefits culture and ethics. He says that in such a highly-regulated company with over 1,500 employees, it’s time for the company to grow up.

As Zenefits learned, having corporate compliance benefits companies in many ways.

  • Improved productivity. Internal compliance can improve employee safety, benefits, compensation, wages and protection, which can create a more positive and productive work environment. Satisfied employees who are properly compensated for their efforts will grow and improve with a business. Following rules regarding discrimination and harassment and strictly enforcing safety precautions also creates a better work environment, which can ultimately lead to improved productivity.
  • Fewer legal issues. Much like the Zenefits example above, many companies use corporate compliance to reduce the risk of legal issues. With so many regulations and laws, it is important to have someone monitoring the legal implications of company actions. With the proper compliance, companies can work to stay on the right side of the law.

Corporate compliance can also decrease your risk of penalties, fines, lawsuits and productivity interruptions. Some instances, such as failing to post employment information in the right place, may only result in a warning. In other cases, it could result in someone suing your company.

  • Improved reputation. With a number of lawsuits and investigations, it doesn’t take long for prospects to lose trust in your company, negatively affecting sales. An improved reputation from proper corporate compliance also helps retain employees. The more your employees feel protected and safe within the work environment, the more likely they are to stay.

To some organizations, like Zenefits, rules of compliance might seem like a lot of hassle. However, when you consider the bottom line, it makes sense. Improved productivity, fewer lawsuits, improved company reputation and better employee retention rates all positively impact your business for years to come.