A Growing Divide Between Compliance Have’s and Have-Not’s
The Harvard Law School Forum on Corporate Governance and Financial Regulation 2012-07-10
In Semi-Tough: A Short History of Compliance and Ethics Program Law, presented at a May 2012 RAND Symposium on Corporate Culture and Ethical Leadership Under the Federal Sentencing Guidelines: What Should Boards, Management and Policymakers Do Now, I explore the legacy of the Federal Sentencing Guidelines for Organizations (“FSGO”) with respect to compliance and ethics (“C&E”) programs.
Since the advent of the FSGO in November 1991, the legal drivers for corporations to implement strong C&E programs have seemed to be ever on the increase, at least in the U.S. Indeed, the past few years alone have seen:
- Rigorous enforcement, to an unprecedented extent, of the Foreign Corruption Practices Act (“FCPA”) – a law which, because of its internal controls provisions, strongly encourages companies to have effective C&E programs.
- The imposition, also to an extent never before seen, of very large federal criminal fines, including but by no means limited to those meted out in FCPA cases.
- The initiation of a significant number of “Caremark” claims alleging failures by directors to oversee sufficiently their respective companies’ C&E programs.
- Revisions in 2010 to the FSGO to encourage independent C&E officer functions.
- Numerous other subject-matter-specific legal developments including (but by no means limited to) those regarding government contracting and energy utilities.