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Navigating Compliance in Interesting Times

Post author By admin
Post date October 30, 2024
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I once had a boss whose catchphrase was, ‘May you live in interesting times.’ That applied back in the first decade of this century and is even more appropriate now. In a world that often feels like it is constantly shifting beneath our feet, the role of the corporate compliance professional has never been more crucial or challenging. In recent New York City Bar Association Compliance Institute remarks, Principal Associate Deputy Attorney General Marshall Miller offered timely insights on the Department of Justice’s (DOJ) evolving approach to corporate criminal enforcement. His message was that compliance professionals are essential to organizational success, national security, and the broader rule of law.

Individual Accountability as the Cornerstone of Corporate Compliance

Miller emphasized that individual accountability remains a primary focus of the DOJ’s corporate criminal enforcement. According to Miller, they are prosecuting individuals at the top or throughout the corporate hierarchy, as it sends a strong message that misconduct is not tolerated and reinforces deterrence across the board.

For compliance officers, this focus on individual accountability reinforces the importance of training and awareness programs that help employees understand the personal stakes of unethical behavior. Compliance programs must communicate that misconduct has consequences for the organization and those directly involved.

This means compliance professionals should regularly update training modules to reinforce the personal consequences of non-compliance. Consider scenarios that show employees how individual misconduct can lead to legal repercussions, strengthening the deterrence message.

Transparency and Consistency in Enforcement Policies

One of the most significant updates shared by Miller is the DOJ’s emphasis on clarity, consistency, and predictability across its corporate enforcement policies. In past years, self-reporting or cooperating with investigations was often perceived as a gamble. Today, under new DOJ guidelines, a clear framework outlines expectations, rewards cooperation, and even encourages voluntary self-disclosure of misconduct.

This transparency is a game-changer for compliance professionals, who often need concrete examples and assurances to secure buy-in from executives and board members. Compliance leaders can now present a more straightforward business case for ethical behavior, outlining the risks of non-compliance and the potential benefits of self-disclosure.

Every corporate compliance function should leverage the DOJ’s published guidelines to develop a compliance strategy that aligns with the DOJ’s expectations. Create resources for your leadership team that show the tangible benefits of voluntary self-disclosure, including reduced penalties and favorable resolutions.

Empowering Whistleblowers and Enhancing Self-Disclosure Programs

Miller announced the launch of a new two-part DOJ whistleblower program that provides different rules and incentives based on whether the whistleblower was involved in criminal conduct. For those not involved, a DOJ awards program now provides a percentage of forfeited funds to the whistleblower. For those involved, whistleblower non-prosecution agreements are available.

This change holds significant implications for compliance programs. Whistleblower protection and incentive structures must be communicated and properly managed, ensuring employees know their rights and the benefits of reporting unethical behavior. With DOJ’s strong support, compliance leaders can strengthen whistleblower protections and encourage a culture of transparency.

Expanding whistleblower training and reporting channels to reflect the DOJ’s updated stance would be best. Emphasize protection and incentivization and ensure employees understand how these policies can benefit them if they report wrongdoing.

The Role of Incentives and Compensation Clawbacks in Compliance

The DOJ’s updated compliance approach emphasizes the role of compensation structures in promoting compliance or enabling unethical behavior. DOJ now evaluates incentive structures as part of every criminal resolution, rewarding companies that utilize clawbacks when executives are involved in misconduct.

For compliance professionals, this focus on compensation is an opportunity to align reward structures with ethical performance. Compliance officers can work with human resources to design and implement compensation plans that deter risky behavior by incorporating elements such as escrow accounts for bonuses and clawback provisions for executives involved in wrongdoing.

This means every corporate compliance function and personnel should collaborate with HR to develop compensation structures that support compliance goals, such as incorporating ethical behavior as a performance metric or establishing escrow accounts that hold bonuses contingent on compliance-related performance.

Strengthening Governance Structures for Accountability

Miller’s remarks also underscore the need for solid governance frameworks that prevent misconduct from slipping through the cracks. Accountability measures, from board oversight to compliance committee functions, ensure corporate misconduct is detected early and handled appropriately. He noted that companies with rigorous internal governance structures and compliance frameworks are more likely to avoid criminal charges.

For compliance leaders, this means assessing and strengthening their organization’s governance structures to support effective oversight. It also means advocating for periodic audits, third-party evaluations, and regular reviews of compliance policies to keep governance on track. Conduct a governance review to identify potential gaps in oversight and ensure that compliance officers have the authority to raise concerns without interference. Advocate for regular compliance audits and policy updates to keep pace with regulatory developments.

Preparing for Emerging Risks Related to National Security and Technology

Miller highlighted increasing corporate criminal investigations involving national security, particularly in the construction, agriculture, telecommunications, and technology sectors. Fueled by sanctions evasion and emerging technologies like artificial intelligence, national security risks are now a major focal point for the DOJ.

Compliance programs need to reflect this shift. Compliance professionals must prioritize emerging risks, especially cybersecurity, AI, and national security. Integrating these areas into the broader compliance program ensures that companies are prepared for the expanding scope of corporate crime.

You should update risk assessments to include national security risks and develop response plans for data security, sanctions compliance, and AI ethics. Equip your compliance team to monitor these evolving threats through specialized training and cross-functional collaboration.

A Call to Compliance Professionals: The Business Case for Compliance

Miller concluded with a direct call to compliance professionals, emphasizing the DOJ’s commitment to empowering compliance leaders to advance corporate ethics and compliance. He stressed the importance of making a compelling business case for compliance, using DOJ’s guidelines to advocate for investment in robust compliance programs.

In today’s regulatory environment, compliance is a strategic advantage, not a cost center. Compliance officers must seize this moment to champion the business case for ethics, highlighting the DOJ’s transparent policies and the tangible benefits of voluntary self-disclosure, cooperation, and strong compliance frameworks.

Position your compliance program as an essential part of your business strategy. Use DOJ’s new approach as a lever to secure greater resources and authority, demonstrating that investing in compliance can directly impact organizational resilience and profitability.

Final Thoughts

Principal Associate Deputy Attorney General Marshall Miller’s remarks signal a turning point for compliance professionals, who are no longer seen as gatekeepers but as strategic partners in risk management and national security. With the DOJ’s commitment to transparent enforcement policies, expanded whistleblower incentives, and a stronger emphasis on accountability, compliance officers have a clear mandate to champion ethical business practices.

These changes offer a roadmap for compliance leaders to build stronger programs that protect their organizations and reinforce their role as trusted advisors in corporate governance. By adopting the DOJ’s updated principles, compliance professionals can safeguard their organizations, enhance their credibility, and make a compelling case for a proactive approach to corporate ethics.

In our “interesting times,” compliance is no longer just about rules and regulations. It is about building an integrity culture that benefits the organization and the broader community.

Tags accountability, compliance, corruption as National Security Issue, DOJ, national security, whistleblowers

The Ethics Experts

Episode 162 – Sam Silverstein

Post author By ComplianceLIVE
Post date October 16, 2023
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In this episode of The Ethics Experts, Nick welcomes Sam Silverstein. Sam Silverstein, a Hall of Fame keynote speaker, accountability expert, and the author of 12 books on accountability, leadership, and workplace culture, including the highly acclaimed “No More Excuses!” and “Non-Negotiable.” As the founder of The Accountability Institute, LLC, and a seasoned speaker who has worked with some of the biggest names in business, government, and communities worldwide, Sam has the expertise and experience to help your team overcome its most significant challenges and achieve tremendous success.

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Tags accountability, ethics, Sam Silverstein

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Great Structures Week IV – Gothic Cathedral and Compliance Incentives

Post author By admin
Post date October 20, 2022
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I continue my Great Structures Week with focus on great structural engineering and its innovations in the medieval world – that being the Gothic Cathedral. I am drawing these posts from The Great Course offering, entitled “Understanding the World’s Greatest Structures: Science and Innovation from Antiquity to Modernity”, taught by Professor Stephen Ressler. When it comes to Gothic Cathedrals, Ressler notes that they are a rich case study in the development of “architecture and the limits of empirical design, literally written into the walls of the buildings.”

The innovation of the Gothic Cathedral was to use elements of the Roman basilica but to add “height and light, featuring ever taller naves, pierced by ever-larger clerestory windows, and delineated by ever-more-slender engaged columns”. The first innovation came with the pointed arch followed by ribbing on the columns to help stiffen and strength them more effectively. However, the truly dynamic innovation was the creation of flying buttresses, which were huge additional columns outside the structure yet were designed to become load-bearing members so the highest point inside the cathedrals could be filled by light through ornately stained glass windows. Two of the finest examples of these Gothic Cathedrals are both found in France. They are the Cathedral of Our Lady at Chartres and Cathedral of St. Stephens at Bourges.

Just as the medieval world built up the structural engineering techniques from their forebears, as your compliance regime matures you can implement more sophisticated strategies to make your Foreign Corrupt Practices Act (FCPA) compliance program a part of the way your company does business. Using an article from the MIT Sloan Management Review, “Combining Purpose with Profits”, as a basis, I have developed six core principles for incentives, for the compliance function in a best practices compliance program.

Compliance incentives don’t have to be elaborate or novel. The first point is that there are only a limited number of compliance incentives that a company can meaningfully target. Evidence suggests the successful companies are the ones that were able to translate pedestrian-sounding compliance incentive goals into consistent and committed action.
Compliance incentives need supporting systems if they are to stick. People take cues from those around them, but people are fickle and easily confused, and gain and hedonic goals can quickly drive out compliance incentives. This means that you will need to construct a compliance function that provides a support system to help them operationalize their pro-incentives at different levels, and thereby make them stick. The specific systems which support incentives can be created specifically to your company but the key point is that they are delivered consistently because it signals that management is sincere.
Support systems are needed to reinforce compliance incentives. One important form of a supporting system for compliance incentives “Is to incorporate tangible manifestations of the company’s pro-social goals into the day-to-day work of employees.” Make the rewards visible. As stated in the FCPA Resource Guide 2^nd edition, “Beyond financial incentives, some companies have highlighted compliance within their organizations by recognizing compliance professionals and internal audit staff. Others have made working in the company’s compliance organization a way to advance an employee’s career.”
Compliance incentives need a “counterweight” to endure. Goal-framing theory shows how easy it is for compliance incentives to be driven out by gain or hedonic goals, so even with the types of supporting systems it is quite common to see executives bowing to short-term financial pressures. Thus, a key factor in creating enduring compliance incentives is a “counterweight”; that is, any institutional mechanism that exists to enforce a continued focus on a nonfinancial goal. This means that in any financial downturn compliance incentives are not the first thing that gets thrown out the window and if my oft-cited hypothetical foreign Regional Manager misses his number for two quarters, he does not get fired. The key is that the counterweight has real influence; it must hold the leader to account.
Compliance incentive alignment works in an oblique, not linear, way. The authors state, “In most companies, there is an implicit belief that all activities should be aligned in a linear and logical way, from a clear end point back to the starting point. The language used — from cascading goals to key performance indicators — is designed to reinforce this notion of alignment. But goal-framing theory suggests that the most successful companies are balancing multiple objectives (pro-social goals, gain goals, hedonic goals) that are not entirely compatible with one another, which makes a simple linear approach very hard to sustain.” What does this mean in practical terms for your compliance program? If you want your employees to align around compliance incentives, your company will have to “eschew narrow, linear thinking, and instead provide more scope for them to choose their own oblique pathway.” This means emphasizing compliance as part of your company’s DNA on a consistent basis — “the intention being that by encouraging individuals to do “good,” their collective effort leads, seemingly as a side-effect, to better financial results. The logic of “[compliance first], profitability second” needs to find its way deeply into the collective psyche of the company.”
Compliance incentive initiatives can be implemented at all levels. Who at your company is responsible for pursuing compliance incentives? If you head up a division or business unit, it is clearly your job to define what your pro-social goals are and to put in place the supporting structures and systems described here. But what if you are lower in the corporate hierarchy? It is tempting to think this is “someone else’s problem,” but there is no reason why you cannot follow your own version of the same process.

Looking for some specific compliance obligations to measure against? You could start with the following examples of compliance obligations that are measured and evaluated.

For Senior Management

Lead by example in your own conduct and in the decisions you take, to the resources and time you commit to compliance.
Facilitate and proactively practice in day-to-day activities the key compliance competencies, both internally and externally.
Support specific initiatives from the Chief Executive Officer (CEO), legal and compliance functions.

For Middle Management

Demonstrate, facilitate and proactively practice in day-to-day activities the key compliance competencies, both internally and externally.
Support specific initiatives from the legal and compliance functions.
Ensure that all employees, agents and contractors directly or indirectly reporting to you fully complete all required training and communications in a timely manner.
Provide full cooperation with investigations conducted by the compliance or legal functions of any alleged violation of compliance policies.
Include the Chief Compliance Officer (CCO) or another legal or compliance function representative in your management meetings at least twice per year, per geography.
Identify instances of non-compliance and support compliance monitoring and reporting systems. Partner with compliance in resolving compliance issues.

For Business Development or Company Sales Representatives

Certify that all employees, agents and contractors directly or indirectly reporting to you have fully reported all sales and marketing interactions with all government officials in a timely manner.
Certify that all employees, agents and contractors directly or indirectly reporting to you have fully, promptly and accurately reported all expenses with third party sales representatives have occurred.

The Gothic Cathedral is one of the greatest structural engineering feats mankind has ever created. It combined a dimension of height not surpassed for nearly 1000 years with an ingress of light not previous seen in structures. This use of light facilitated the development of the artistry of stained-glass windows and directly led to the continued beauty and relevance of these magnificent structures.

Join us tomorrow as we conclude our series by looking at the Tacoma Narrows Bridge Failure and preventing failure in your compliance program.

Tags accountability, CCO, compliance, compliance incentives, compliance programs, Gothic Cathedrals

Accountability: The Heart of Compliance

Executive Forum on Ethics and Accountability

Post author By admin
Post date October 30, 2020
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We have been getting accountability all wrong in the compliance profession. It’s not a set of tasks – it’s a way of thinking and it has to come from the heart as well as the head. On Accountability: The Heart of Compliance Tom Fox and Sam Silverstein dig into what accountability means to the corporate compliance function and business organizations and most significantly, how to make it an integral part of your culture. In this episode we post the recent Executive Forum on Ethics and Accountability. It focused on effectively expanding the effectiveness of your ethical program, how to use The Accountability Assessment™ to spot deficiencies, and how to build and protect your organization’s ethical culture. Finally how all of this tie directly into the DOJ’s Evaluation of Corporate Compliance Programs.
For more information on Sam Silverstein and his work on accountability, click here.