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Wednesday, August 14, 2013

Are Corporate Compliance Monitors Probation Officers?

The idea of a corporate compliance monitor often reminds people of a probation officer.  This makes sense because there are people called “monitors” who act like probation officers.  Courts sometimes order an external monitor as a condition of probation after the corporation has been convicted of a crime. 

In my current project, however, I make a concerted effort to limit my inquiry to corporate compliance monitors who are retained as a result of an agreement between the government and the corporation.  Imposed as part of a corporate probation program, a court-ordered monitor is typically charged with ensuring compliance with the court’s order and functions on behalf of the court.  In contrast, a corporate compliance monitor often has little to no interaction with the court and serves as an agent of the government.  In these instances, the corporate compliance monitor is often charged with much more than “monitoring,” as I mentioned in a previous post

Instead, the corporate compliance monitor is engaged in something more akin to root-cause analysis.  Root-cause analysis attempts to systematically determine the cause of the structural failure within the firm so that it can implement the policies and procedures necessary to prevent a similar subsequent failure.  To effectuate this analysis, the government and the corporation agree to enter into a relationship with the corporate compliance monitor who is charged with conducting this analysis. The monitor then provides counsel to both the corporation and the government regarding the steps the corporation should take to ensure future regulatory and legal compliance.  Court-ordered probation watches the corporation to see if it complies with legal and regulatory requirements, but a corporate compliance monitor assists the corporation in these efforts.  Thus, corporate compliance monitors appear distinct from, ableit related to, corporate probation programs.

Posted by Veronica Root on August 14, 2013 at 08:22 AM | Permalink


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I'm looking forward to reading your research on this.

Posted by: Marcia Narine | Aug 21, 2013 10:31:42 PM

Thanks for these posts. Corporate compliance monitors are really interesting and probably don't get enough attention. I agree with your assessment that monitors are not akin to probation officers because they do not report to the court, and often report in the first instance to company counsel (albeit ultimately to the government). For example, see paragraph 8 here: http://www.justice.gov/opa/documents/hsbc/dpa-attachment-b.pdf

I wonder, however, whether monitors should be seen as *assisting* the company in compliance efforts. Perhaps I'm too cynical, but I'm thinking about the difficult relationship between Legal/Compliance and Business in most large corporations (i.e. where Legal and Compliance are too often seen by the business-side as hurdles to be overcome). I suspect monitors will suffer even more in this regard because their ultimate duty runs to the government.

The difference, in the end, is whether we can better understand monitors as an active player in post-settlement compliance efforts, or rather as a mere check to confirm that the company meets some basic threshold of compliance through its own efforts. Or, put differently, how do companies treat compliance monitors in practice: as a resource or as a hurdle to be overcome?

Perhaps your view is that mine is the wrong question to ask; maybe it matters more how monitors view themselves than how companies view monitors? Either way, I'd be interested to hear your thoughts.

Posted by: Greg Gilchrist | Aug 14, 2013 1:19:27 PM

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