Results of a recent Ethics and Compliance Initiative (ECI) survey indicate that a majority of CCOs can’t be sure whether DOJ follows its own guidance when accounting for self-reporting and other incentivized action in the penalties it hands down. That uncertainty makes going after those incentives a risky venture.
Stronger and more frequent communication between the U.S. Department of Justice (DOJ) and the ethics and compliance (E&C) profession would help ensure greater understanding of DOJ guidance across companies and organizations, as well as to elevate the importance of E&C to strong and sustainable businesses. That is one of the principal conclusions of a recent survey of Corporate Compliance Officers (CCO’s) conducted by the Ethics and Compliance Initiative (ECI).
While corporate compliance officers and other leaders in the profession understand the importance of E&C to culture and DOJ guidance in terms of compliance, many indicate that they don’t have enough information about the DOJ’s decisions behind incentives and declinations to encourage full and timely cooperation with the DOJ.
In fact, respondents to the survey overwhelmingly agreed that reforms demonstrative of a cooperative approach rather than a punitive approach by DOJ would incentivize improved corporate compliance in organizations.
The survey was conducted by ECI and underwritten by the U.S. Chamber of Commerce Institute for Legal Reform. ECI asked approximately 250 chief compliance officers (CCOs) about the value and impact of four primary DOJ policy or guidance documents that communicate the criteria used by the DOJ to evaluate the effectiveness of corporate compliance programs in enforcement decisions. The survey further sought CCO input about ways the DOJ could further incentivize corporate compliance and encourage corporate self-disclosure and cooperation in the event of violations.
In a follow-on panel-discussion webinar about the report derived from the survey – Corporate Compliance Programs and U.S. Department of Justice Enforcement Policies – leaders in the compliance profession discussed the results and shared their opinions and concerns about two areas of insight from the survey:
- Despite relying on and valuing guidance documents, compliance leaders do not have a clear understanding of how the DOJ determines credits for programs, and
- Compliance professionals know that their role includes educating the business about the profitability that is realized when compliance is front and center in its focus, but many do not communicate changes in DOJ guidance to their organization’s board of directors, despite its compliance program oversight responsibilities.
Incentives and Credits
It is reasonable to assume that the DOJ’s goals in issuing guidance documents is to encourage self-disclosure and cooperation by companies when violations occur. ECI’s survey showed that an average of 54% of CCOs believe that the DOJ’s policies would make them more likely to disclose. However, there was a direct relationship between the DOJ’s consistency in awarding credit and CCOs indicating that their company would be more likely to self-disclose as a result.
That likelihood would be greater, according to the panel of E&C experts, if the DOJ clearly and expressly incentivizes cooperation and collaboration and demonstrates that penalties will be lower if professionals self-disclose. A major factor is confidence that the offer is understood to be genuine and whether the DOJ is going to welcome them. The panel suggested that the more punitive an approach the DOJ takes, the less cooperation and collaboration they may see from organizations.
In terms of corporate willingness to self-disclose violations, particularly with regard to the Foreign Corrupt Practices Act (FCPA), the False Claims Act (FCA) and antitrust violations, CCOs indicated that their organizations would be more willing to self-disclose and cooperate if they were aware that the DOJ is consistently giving credit to other organizations for doing so. The challenge, however, is that an average of 63% of CCOs indicated that they are unsure whether the DOJ is consistently declining prosecutions, awarding credit or negotiating plea agreements in alignment with its guidance.
CCOs offered suggestions in the survey as to how the DOJ could further incentivize corporate compliance programs. These included:
- Providing examples of E&C program practices that were influential in DOJ’s declination decisions;
- Providing more details of enforcement actions, improving guidance documents and engaging more with companies;
- Providing credit for company efforts to build a strong ethical culture;
- Dismissing qui tam action if the company maintains an effective compliance program in a situation where an employee failed to report internally before filing suit; and
- Eliminating the threat of debarment or exclusion for companies with effective ethics and compliance programs.
Regardless of the amount of information available, putting a best-practice corporate compliance program in place can offer significant dividends in terms of the discount given toward fines imposed. For example, there were two FCPA enforcement actions in 2021, both of which had no self-disclosure and had damaging facts to support enforcement. Yet both organizations received significant credit for having an extensively improved compliance program.
This example of receiving credit for having a strong compliance program by the fact that DOJ CCP guidance states that both the compliance program that was in effect at the time of the offense, as well as the time of the charging decision or conclusion of the investigation, are considered in enforcement actions. Therefore, CCOs should continue to improve their programs and demonstrate that they are committed to best-practice compliance efforts.
Educating the Board of Directors
The survey found that the extent to which CCOs briefed various stakeholder groups about the DOJ’s issuance of guidelines varied by the policy document. Every communication from the DOJ is looked at by CCOs for the implications it holds for their organizations, and CCOs were most likely to brief the E&C team and then the legal team.
Chief compliance officers were, however, less likely to have briefed the board of directors, senior management team, audit and the risk management committee. This is a missed opportunity for several reasons. First, the DOJ understands the importance of a strong corporate culture of integrity and how it relates to company leadership and board engagement. Raising awareness of guidance to the board not only raises the profile and conversation around compliance to a higher level in the organization, but also helps bolster commitment to compliance overall.
Taking information on DOJ guidance updates to leadership and to the board is significant and helps protect the company, particularly because of the obligation that board members have for oversight of compliance programs. Recent rulings require that board members be actively engaged in oversight and ensure that the corporate compliance program is active and effective. In reality, providing oversight and understanding how to ensure that the organization is compliant with all of its obligations should be a critical function of the board. And specific board roles have been established to ensure that the organization, the board, the CEO and other directors are all mindful of their obligations. From the DOJ’s perspective, the board is expected to be paying attention to responsibility.
Compliance leaders demonstrate responsibility by proactively communicating with their boards. On the other hand, boards must continually exercise effective oversight of compliance programs and related metrics and activities in the organization. As one panelist shared, CCO’s should place information from regulators in front of the board so they can consider it in the context of overall risk management.
Also, communication about DOJ guidance with the board offers an opportunity to broaden the discussion to other functional groups and areas of oversight in the organization. Critical data and information relevant to the mission of the compliance office is often held in other functional areas within the organization. Identifying and sharing it helps to identify additional opportunities for data mining and collection.
CCOs are advised to take any guidance update as an opportunity to get in front of their board in the journey toward building a high-quality ethics and compliance program.
Open and honest two-way communication about corporate compliance both internally and externally is critically important for a robust program that meets and exceeds DOJ guidance and creates a strong culture of integrity. CCOs and E&C professionals are as committed today as they were when guidance documents were initially introduced in communicating and working closely with the DOJ. They also are eager to learn from the DOJ, and we are hopeful that the DOJ will continue to work with the E&C community to create these open and honest lines of communication.
Evren Essen has nearly two decades of experience conducting workplace research. She brings research leadership skills to ECI as head of the team that manages the implementation, analysis and reporting of ECI’s premier, longitudinal study on workplace integrity, the Global Business Ethics Survey®(GBES®). Evren also oversees ECI’s Advisory Services, engaging with clients utilizing ECI’s tools to assist organizations in assessing, improving and strengthening their workplace culture.
Before joining ECI, Evren worked at the Society for Human Resource Management (SHRM) for 15 years. As director of workforce analytics, Evren led SHRM’s survey research projects on HR topics, including employee benefits, job satisfaction and engagement. She also served as the organization’s media spokesperson on workplace research.
