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Monday, July 30, 2018


The Organizational Sentencing Guidelines are meant to incentivize firms to create “an effective compliance and ethics program” that will “prevent and detect criminal conduct.”  This language serves as the basis for many organizations’ compliance programs.  The guidelines emphasize prevention and detection, thus firms create systems targeted to that admonition.  The Guidelines also assume, however, that failures will occur:  “The failure to prevent or detect the instant offense does not necessarily mean that the program is not generally effective in preventing and detecting criminal conduct.”  As a result, many firms expend a tremendous amount of resources on prevention and detection efforts with the knowledge that if they have robust prevention and detection programs, the sanction may be lessened. 

One of the themes that has struck me for the past year or so, however, is that many corporate scandals are significant not for their failure to engage in appropriate prevention or detection efforts, but instead for their failure to investigate claims brought to the organization’s attention.  Whether its complaints from Wells Fargo’s alleged whistleblowers or MSU’s athletes, misconduct within an organization that is allowed to fester often leads to scandals that are much more significant than necessary.  Having prompt, thorough, and complete investigations is just as, if not more important than, prevention and detection activities. 

As I review my case studies for my compliance course and determine whether I want to change to some more recent scandals, I am shocked all over again by the lack of response by so many organizations when confronted with allegations of misconduct.  Prevention and detection are important, but so are investigation and remediation.  Here’s hoping I have a bit less material to choose from next fall.

Posted by Veronica Root on July 30, 2018 at 08:25 AM | Permalink


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