Organizational Sentencing Guidelines Research Articles

Is Formal Ethics Training Merely Cosmetic? A Study of Ethics Training and Ethical Organizational Culture

ABSTRACT:U.S. Organizational Sentencing Guidelines provide firms with incentives to develop formal ethics programs to promote ethical organizational cultures and thereby decrease corporate offenses. Yet critics argue such programs are cosmetic. Here we studied bank employees before and after the introduction of formal ethics training—an important component of formal ethics programs—to examine the effects of training on ethical organizational culture. Two years after a single training session, we find sustained, positive effects on indicators of an ethical organizational culture (observed unethical behavior, intentions to behave ethically, perceptions of organizational efficacy in managing ethics, and the firm’s normative structure). While espoused organizational values also rose in importance post-training, the boost dissipated after the second year which suggests perceptions of values are not driving sustained behavioral improvements. This finding conflicts with past theory which asserts that enduring behavioral improvements arise from the inculcation of organizational values. Implications for future research are discussed.

The Failure of the Organizational Sentencing Guidelines

In order to deter corporate crime, corporate sanctions must be structured to induce large corporations to help federal prosecutors detect and punish corporate crime. Specifically, firms must be encouraged to detect and report wrongdoing, and to cooperate with the government’s effort to identify and sanction the individuals responsible for the crime. Firms will not engage in these activities unless they face lower expected sanctions if they detect, report, and cooperate than if they do not. This Article examines whether the Organizational Sentencing Guidelines achieve this objective and shows that they do not. Although the Organizational Sentencing Guidelines offer sanction mitigation to firms that adopt effective compliance programs, self-report, and cooperate, this Article shows that these provisions offer too little mitigation to encourage firms to detect, report, and help prosecute the employees’ crimes. Indeed, the Guidelines’ mitigation provisions are particularly inadequate in the very circumstances where corporate detection and investigation is most important: in cases involving crimes committed by managers of large firms. As a result, U.S. efforts to deter corporate crime are undermined by adherence to the Organizational Sentencing Guidelines. This may partly explain why the Department of Justice adopted an alternative strategy for encouraging corporate reporting and cooperation, one that differs materially from the Organizational Guidelines. To help deter corporate crime, the Sentencing Commission should reform the Guidelines.

Regulatory decision making: structure and agency in the development of the organizational sentencing guidelines

The United States Sentencing Commission promulgated federal organizational sentencing guidelines in 1991. The final product eroded the guidelines’ original severity, as drafts were rejected over a period of 4 years. The initial goal of the Commission was to implement organizational guidelines that were on par with individual-level sanctions in order to remove any suggestion that powerful corporations receive lesser penalties than individuals convicted of “street crimes”. This study analyzes the erosion of the Commission’s stated goal by evaluating the organizational structures, individual and group characteristics, and the social, political, economic, and historical contexts involved in the evolution of federal sentencing guidelines for organizations. Results indicate that, while structural-level variables played a large part in explaining the development of the guidelines, a more accurate and complete understanding of this process is possible by including an analysis of the individual-level characteristics of Commissioners, including their professional backgrounds, ideological perspectives, styles of leadership, and future goals.

Images of Organizations and Consequences of Regulation

Government can control conflicts of interest in business firms by either issuing obligatory commands to behave in a specified way or by creating incentives to alter private behavior. In order to choose between these two approaches, we also need to know something about the nature of the subject firms and the way that they are likely to respond to particular stimuli. Legislators and legal scholars often rely on intuition to predict the behavior of firms, but this will not suffice for such a complex situation. Fortunately, there is a well-developed body of scholarship that addresses organizational behavior; unfortunately, like many bodies of scholarship, it contains rival and conflicting approaches. This article discusses four of these approaches to organizational behavior: the nexus of contracts theory, an application of rational choice theory to corporations; decision theory; general systems theory and its recent autopoetic variants; and new institutionalism. It then uses each of these approaches to predict the way that firms will respond to obligatory commands and behavior incentives. The specific cases it discusses are the U.S. Sentencing Commission’s Organizational Sentencing Guidelines, the Sarbanes-Oxley Act, and contemporary compliance theory’s idea of reasonable, responsive, or cooperative enforcement.

Governmental incentives for corporate self regulation

This article presents an overview of traditional legal and regulatory incentives directed at achieving lawful corporate behavior, together with examples of more recent governmental incentives aimed at encouraging self regulation activities by corporations. These incentives have been differentiated into ’positive‘ incentives that benefit corporations for actions that encourage or assist lawful behavior, and ‘punitive’ incentives that only punish corporations for violations of legal or regulatory standards. This analysis indicates that traditional legal and regulatory incentives for lawful corporate behavior are overwhelmingly punitive in their intended effects, while more recent governmental incentives to encourage voluntary corporate self regulation are much more positive in their intended effects. A prototype private compliance system containing typical features specified in governmental incentives for corporate self regulation was then analyzed applying the same positive/punitive analysis that was performed with the governmental incentives. This analysis suggests that corporate compliance programs that are structured to comply with Department of Defense regulations for defense contractors or the new Federal Organizational Sentencing Guidelines will reflect the same overwhelmingly ‘punitive’ balance of incentives for lawful and ethical employee conduct as do the traditional legal and regulatory incentive systems for lawful corporate behavior. Finally, the question of whether governmental incentives for corporate self regulation are succeeding was investigated by examining the behavior of the Fortune 1000 companies in enacting or revising corporate codes of conduct, an essential feature of every governmental-encouraged system for corporate self regulation, during the period 1960 to 1994. This data indicates a dramatic growth in the enactment of voluntary corporate codes of conduct by the Fortune 1000 companies in the period 1985–1994 that broadly parallels the growth in positive governmental incentives for such programs. In addition, several dramatic increases in code enactment and revision activity that occurred, coincide with specific governmental incentives for private compliance programs offered during that period.

Sentencing Commission Takes on Corporate Crime

The advent of the Sentencing Commission's guidelines for organizational defendants, contained in Chapter 8 of the Guidelines Manual issued in Novem ber 1991, has forced all businesses, large and small, across all industries, to take a serious look at imple menting effective ethics and compliance programs as a means of combatting corporate crime. Under the organizational sentencing guidelines, businesses convicted of crimes may have their sentences reduced if they can demonstrate genuine efforts to prevent the misconduct through a compliance program. Although the guidelines have been around for four years, what constitutes an effective program remains a nebulous issue. While the guidelines outline seven criteria for such a program, the Commission deliberately wrote them to serve as a framework from which companies individually can develop programs that suit their particular firm and industry. To help corporate America better understand what the enforcement community is looking for in a compliance program, the U.S. Sentencing Commis sion convened a symposium September 7-8,1995, to educate and exchange ideas and experiences. The symposium, entitled Corporate Crime in America: Strengthening the 'Good Citizen' Corporation, brought together federal enforcement officials, legal experts, ethicists, corporate counsel, Commission staff, and business ethics officers to shed some light on these issues. It focused on how the organizational sentencing guidelines work and what a compliance program should entail in order to get credit for reduced sentencing.

Living with the Organizational Sentencing Guidelines

This article discusses a new federal law that will subject corporations and organizations convicted of federal criminal offenses to fines as high as $290 million dollars, and perhaps more in some instances. Under that law, however, a convicted company's fine may be dramatically reduced if the company had in place, before the offense, an program to prevent and detect violations of the law. An effective compliance program, as it has been described by the government, includes: the adoption of standards specifically tailored to the company's business; the involvement of high-level personnel; training programs and other procedures to educate employees about compliance; auditing, reporting, and disciplinary mechanisms; and the necessity for ongoing modifications and improvements to the program. Finally, the article also describes recent trends in the expansion of the criminal law that may subject more and more companies to the threat of criminal prosecution and explores the potential benefits of a compliance program outside the criminal context.

Organizational Probation and the U.S. Sentencing Commission

As part of federal organizational sentencing guidelines enacted on 1 November 1991, the United States Sentencing Commission included organizational probation. This sanction allows courts to place convicted corporations on probation, with conditions designed to reduce the likelihood of future law violations and remedy the effects of the original offense. This article explores the history, development, and significance of organizational probation. Its statutory foundations, rejection of market logic, linkage to organizational theory, and approach to regulatory relations are identified as its theoretical strengths. The forces shaping this unexpected legal outcome, particularly legitimacy concerns on the part of the Sentencing Commission and a business strategy of opposing the Sentencing Commission itself, rather than its specific proposals, are also outlined. The conclusion addresses the prospects for enforcement of organizational probation.

Legislating Organizational Probation: State Capacity, Business Power, and Corporate Crime Control

This study examines the development of organizational probation. That this sanction emerged from the long process of developing organizational sentencing guidelines as a clearly specified, widely available, and often binding sanction represents an unexpected statutory outcome: an interventionist, nonmarket sanction during a time of deregulatory free market policy and ideology. This outcome is explained through a multi-theoretical framework emphasizing the structural capacity of the primary lawmaking agency, the United States Sentencing Commission, the role of middle-level state workers, and the bounded rationality of strategic decisions made by business strategists and lobbyists.

Corporate Probation under the New Organizational Sentencing Guidelines

Corporate Probation under the New Organizational Sentencing Guidelines