An Analysis of Institutional Guidance and Case Law in the USA Pertaining to Compliance Programs

Abstract

Well-designed and implemented compliance and ethics programs are integral in the prevention of corporate misconduct. In the United States, such programs play an especially critical role due to the recent increased targeting of violators and enforcement of relevant laws and regulations, especially the Foreign Corrupt Practices Act. Although programs may manifest differently depending on the structure of the organization in question, there is a general consensus on the baseline components of effective programs, including a code of conduct, clear policies and procedures, substantial involvement by management, training programs, disciplinary measures, and ongoing monitoring and improvement. Moreover, there are multiple benefits of effective programs that provide incentives for proper design and implementation. These incentives include preventing reputational penalties, mitigating legal liability, and potentially improving financial performance. Unsurprisingly, however, there are also potential risks and criticisms that should also be considered, the most significant being ineffective and costly programs. Various sources from the United States are instructive in providing guidance regarding the components and qualities of effective ethics and compliance programs. These sources include legislation, case law, sentencing guidelines, and various memoranda, reports, and publications from the Department of Justice and Securities Exchange Commission, who are primarily responsible for enforcement and investigation. With all these factors considered, the evolution of the role of compliance and ethics programs is promising as a strategy and tool in the fight against corporate misconduct.