The DOJ’s new guidance for evaluating corporate compliance programs put the spotlight on organizational justice, or what we might simply call fairness.
This question was added to Monday’s version of the guidance: “Does the compliance function monitor its investigations and resulting discipline to ensure consistency?”
That new question appears under the heading “Consistent Application.” That part of the guidance already asked: “Have disciplinary actions and incentives been fairly and consistently applied across the organization? Are there similar instances of misconduct that were treated disparately, and if so, why?”
Why is the added emphasis on monitoring to “ensure consistency” so important? Because inconsistency — showing favoritism to those who violate the compliance program, or don’t implement it — undermines the entire idea of compliance, and those responsible for making it happen.
When corporate leaders give preferential treatment to internal wrongdoers, everyone else in the company stops trusting the leaders. What those leaders say about compliance becomes hollow. Their bad actions overtake their good words.
When that happens, a deep cynicism takes root. That’s when a compliance program becomes mere window dressing. Other executives and employees abandon the corporate “vision” and its values.
You get a sense of that corporate lawlessness from some of the biggest recent FCPA enforcement actions. In the Petrobras case, the SEC said “senior executives operated a massive, undisclosed bribery and corruption scheme.” In Ericsson, the DOJ said the bribery “involved high-level executives and spanned 17 years and at least five countries, all in a misguided effort to increase profits.” At Keppel Offshore & Marine, at least 15 managers were involved in large-scale corruption, and the effort to cover it up.
The idea that organizational justice is indispensable for effective compliance isn’t new. Since 2004, the federal sentencing guidelines have said: “The organization’s compliance and ethics program shall be promoted and enforced consistently throughout the organization through (A) appropriate incentives to perform in accordance with the compliance and ethics program; and (B) appropriate disciplinary measures for engaging in criminal conduct and for failing to take reasonable steps to prevent or detect criminal conduct.” The DOJ’s guidance cites the call for consistency in the sentencing guidelines.
“Tone at the top” is a tired cliché. And yet, is there anything more important to the success of a compliance program than the perceived fairness of corporate leaders? If they play favorites, if they let some bad actors off the hook, if they close their eyes to someone who flouts the requirements of the compliance program, the enterprise is headed for disaster. It won’t matter what’s written in the compliance program, or how hard honest compliance officers work to enforce it.
The DOJ has now said as clearly as possible that prosecutors and the rest of us should evaluate corporate compliance programs by asking: “Does the compliance function monitor its investigations and resulting discipline to ensure consistency?”
It’s a yes or no question.