The Guide for Maintaining Compliance - The Leading Ethics and the Federal Sentencing Guidelines for Organizations are included.
After the indictment was filed against SAC Capitol Advisors, the company bragged about its "strong culture of compliance" in the New York Times.The compliance program cost tens of millions of dollars with 38 staff, including top-notch lawyers and consultants.James Stewart asked, "Which sets up the question: What were they doing?"
I have followed the history of the Federal Sentencing Guidelines for Organizations since I was a federal prosecutor.The penalty for a corporation's criminal acts is set by the FSGO.Valuable reductions in fines and penalties can be generated by credits created for corporations that have established an effective ethics program.The end result of this prosecution will be impacted by SAC's compliance program.How much is it worth to have spent tens of millions of dollars?Is it any worse without the program?The outcome of the case will be watched by the ethics community to see if the FSGO is used to set criminal penalties.
There is a bigger question as it relates to the work of the Lab at the Safra Center for Ethics.Over the last decade, the FSGO has begun to have a life of its own outside of the criminal justice system and it drives the creation of thousands of ethics programs, including some in my area of interest.
Is there a way to outline the components of a comprehensive structure that not only prevents crime, but addresses the non-criminal aspects of institutional corruption?Is the structure and content of ethics programs from the bottom up or the top down?
An excellent study was released in 2012 by the Ethics Resource Center.Several challenges to the program were listed in the report.
Over the last 20 years, only five corporations have received the credit for having a good ethics program.The challenge is that the large companies seem to be able to get their cases dropped or settled prior to a trial.Larger corporations have more money to fight the prosecution.The goal is not to get credit for an ethics program at sentencing, but for the criminal indictment to never see the light of day.
The inconsistencies in applying ethics standards and making them transparent were noted by the ERC.The increase in complexity invites experts to offer costly solutions.There are ethics revolving-door phenomena.Those government employees who are familiar with the ethics regulations are in high demand in the private sector.
Lobbying efforts to lighten the requirements of the FSGO were successful in 2010.There is an opportunity for a monopoly or capture by a few attorneys who understand how to use the guidelines to their advantage.
The general nature of the guidelines makes it difficult for some people to comply and they need clear directions in plain English.If some people are not able to apply the 7 steps of the FSGO, there would be more of a problem with an analysis for institutional corruption.
The prevention and detection of crimes are the focus of the guidelines.There are seven components that need to be put in place.The simplified version is what I have.
What are the standards and procedures that will prevent legal and systemic corrupt influences in the organization?Is there any standards that could be applied in concise guidelines?Do they exist?Why not?Unless the concepts of institutional corruption are simplified for practitioners, people won't work with them.
2.The ethics program will have oversight by the Governing Board and there will be a high level person with direct access to the Board.
Risk assessments and reports to a Board on what is being done to prevent actual crimes are easier to do.It would be hard for an employee to report to the Board on issues that involve the more abstract concepts of legally corrupt activities in the culture of the group; this has been a recipe for disaster before.The economic future of the reporting ethics personnel is tied to what the Board thinks of them, and they can be blind to significant issues regarding legally corrupt activities.If they are not lawyers they will bow to the more sophisticated analysis of their attorneys.
Courage in reporting offenses, going against the group culture, and identifying more than just the crimes of the organization are positive characteristics for those in authority.How do we cultivate people who can take on institutional corruption?
This usually involves classroom settings or online courses.Values training can be added to the legal rules.The group would be introduced to the idea of institutional corruption and how it relates to our democratic institutions.If they have an emotional connection to the bigger picture, the more specific rules and values might stick.
5.To detect crimes and evaluate the program, there must be monitoring and auditing.There are ways to report crimes without fear of repercussions.
Is it possible to be anonymous reporting?It should be.People prefer to keep quiet because they don't want to lose their jobs.Is it possible that people will come forward with early warning signs of corruption?The focus on actual crimes is important, but it is only the first step in changing corrupt cultures that push the envelope on technical compliance with the law.
Number 1 is above.If the focus is only on criminal violations, it's too narrow.
Hopefully this isn't used in a more devious fashion in which the activity is continued, but done legally.
When the ethics code was released in July of 2000 it was in line with the standards that had been in effect for almost a decade.Lessons on fraud and institutional corruption will be learned from the breakdown of Enron.
One of the greatest gaming strategies of all times was pursued by Enron, according to a paper written by Malcolm Salter...There are challenges with the Federal Sentencing Guidelines when there are ambiguities in laws, unclear language and confusion.The programs that were put in place for ethics can be captured by the forces of institutional corruption.
The system is at the center of institutional corruption.If the program focuses on criminal conduct alone, it can be used as a controller for a large game.It should mean something to the public if a company or government heralds its ethics program.
The overarching construct that can be used to repair institutions is institutional corruption.The "tail wagging the dog" is caused by narrowing the scope of "ethics" programs to the prevention of crimes and legalistic regulations.
The Lab at the Safra Center for Ethics has a research in action website.