There is only one way to ensure companies do the right thing: through management commitment and implementation of a compliance and ethics program. Mere statements and pledges won’t do it; management action is required. Compliance and ethics practitioners understand this point. Companies should have effective compliance and ethics programs to fight all kinds of corporate crime and misconduct, including foreign bribery.
We have the guidance we need on how to implement effective compliance and ethics programs. The U.S. Sentencing Guidelines standards first set the pace in explaining the nuts and bolts of an effective program. The OECD Working Group on Bribery’s Good Practice Guidance similarly provides practical advice. So governments have given us a clear direction. We know, too, that committing to compliance and ethics—the day-to-day work of preventing violations in our companies —is the right thing to do.
But there is more to the picture than this relatively straightforward proposition. The legal system, which is supposed to help prevent business crime, actually undermines company compliance efforts in surprisingly harmful ways. Instead of providing substantial incentives and recognizing the value of compliance work, there are strong undercurrents that undermine our efforts.
In the four decades I have been doing compliance work I have seen these developments, often endured quietly by our field. Instead of encouragement and recognition, our compliance work is used against our companies or treated hostilely and without the slightest deference.
Recently I was invited by the Rutgers University Law Review to submit an article on compliance, and I decided to confront this issue. My article Policies in Conflict: Undermining Corporate Self-Policing[1] attacks this conflict head on.
What are the obstacles to compliance I have seen in the legal system?
- Sacrificing compliance and ethics to litigation. Compliance program work can be and has been used against companies in litigation, even going so far as to allow notes from compliance training to be used to assess punitive damages in an employment discrimination case.
- The National Labor Relations Board has taken action against companies based on their codes of conduct and other employee guides.
- EU privacy regulators have undercut compliance helplines and in some countries even bar anonymous employee reports. It can be illegal to allow an employee victim to report misconduct by the boss unless the employee discloses his or her own identity (thus making it easier for the boss to retaliate!).
- EU competition enforcers (and courts, following their lead) have rejected in-house attorney-client privilege to get access to counsel’s legal advice to employees, undercutting counsel’s role in helping assure compliance.
- EU competition law enforcers also actually use companies’ compliance programs against the companies, and give no benefit for any program, no matter how rigorous.
- A variety of other agencies and courts have taken actions making compliance programs more difficult or risky.
There are certainly enforcers and agencies that value the role companies can play in fighting corruption. The Fraud Section of the Department of Justice’s Criminal Division has made it clear it considers compliance programs and will credit companies for diligent good faith compliance work. In the UK, the Bribery Act even provides a defense for companies based on having a compliance program.
But elsewhere in the legal system there are courts and agency officials who have no regard for the importance of compliance and ethics work. To them it seems to be nothing more than a foolish diversion to be dismissed as unimportant.
My article also exposes dangerous weaknesses I see in compliance programs, in part the result of these errant enforcement and judicial approaches. There is considerable controversy about this, but I firmly believe more must be done for these programs to hold up in corporate tests of strength. When the legal system undermines them, the odds against success are even greater.
We should not quietly accept these bad policies. In my article I propose a legislative solution to balancing other legitimate interests against the need to encourage and support corporate self-policing worldwide.
[1] 69 Rutgers U.L. Rev. 2 (forthcoming 2017), draft available at http://ssrn.com/abstract=2827324.