- FCPA Professor - https://fcpaprofessor.com -

Incentives To Induce Action

There is very little in common with COVID vaccination rates and FCPA compliance – except that the government encourages both.

Yet in one instance, the government provides meaningful incentives to induce action and in the other instance the government does not.

As to COVID vaccinations, states are offering the following incentives to encourage more people to get vaccinated: lotteries, scholarships, pre-paid grocery cards, fishing and hunting licenses, passes to state parks, even custom hunting rifles and shotguns. Several states are automatically entering people who have been vaccinated into lotteries that pay out $1 million or more.

Obviously millions of individuals chose to become vaccinated prior to the government incentives, but the incentives are inducements to encourage more individuals to become vaccinated.

As to the FCPA, business organizations have incentives (indeed as to issuers legal obligations per the FCPA’s internal controls provisions or more generally per so-called Caremark standards) to have compliance programs, however the government keeps telling the business community that more compliance is desired – and survey data [1] seems to suggest that many business organizations remain deficient in certain areas of FCPA compliance.

For years, these pages have advocated for an FCPA compliance defense as the best way to induce FCPA compliance and thus increase “soft enforcement” of the FCPA. (See e.g., “Revisiting an FCPA Compliance Defense [2],” “Grading the FCPA Pilot Program [3].”

Soft enforcement generally refers to a law’s ability to facilitate self-policing and compliance to a greater degree than can be accomplished through “hard” enforcement alone. Stated differently, the goal of the FCPA is to prevent bribery of foreign officials and that goal is best accomplished not solely through ad hoc “hard” enforcement actions, but by also better incentivizing corporate compliance designed to minimize improper conduct. Numerous prior posts (here [4]here [5]here [6]here [7]here [8]here [9]here [10]here [11]here [12]here [13]here [14]) have highlighted this dynamic including how the DOJ has long recognized the importance of “soft enforcement” of the FCPA.

Some will say that the government already offers incentives to induce more FCPA compliance through its non-binding policy documents regarding its charging decisions and resolution practices. However, lessening the impact of an FCPA violation is far different than lessening the existence of a FCPA violation through a FCPA compliance defense.

[15]

Consider the following scenarios and ask yourself under which scenario is the compliance officer most likely to receive the budget and resources needed for a best-in-class FCPA compliance program?

Scenario A

Compliance Officer:  Boss, I need more money and resources to devote to FCPA compliance.

Executive:  Why?

Compliance Officer:  Well, boss, if anything ever happens within our business organization, an effective FCPA compliance program can lessen the impact of our legal liability.

Executive:  What do you mean?

Compliance Officer:  Well, the money we spend on FCPA compliance will not eliminate our legal exposure, but the DOJ and SEC have said that the existence of an effective compliance program may perhaps lower our criminal or civil fine or penalty amount and perhaps even persuade an enforcement attorney to go lightly on us in case our compliance program is ever circumvented by an employee. Indeed, the DOJ recently announced in non-binding guidance that it may offer us a criminal fine reduction to the extent we voluntarily disclose the conduct, cooperate with the enforcement agencies and remediate.

Scenario B

Compliance Officer:  Boss, I need more money and resources to devote to FCPA compliance.

Executive:  Why?

Compliance Officer:  Well, boss, an effective FCPA compliance program can reduce our legal exposure as a matter of law.

Executive:  What do you mean?

Compliance Officer:  Well, the money we spend on investing in FCPA best practices will be relevant as a matter of law.  In other words, if we make good faith efforts to comply with the FCPA when doing business in the international marketplace, we will not face any legal exposure when a non-executive employee or agent acts contrary to our compliance policies and/or circumvents our policies.

An FCPA compliance defense will not magically result in 100% best-in-class FCPA compliance in all business organizations – just as government incentives will not magically result in 100% COVID vaccination rates.

However, as these pages have long advocated an FCPA compliance will be best induce action and lead to greater “soft enforcement” of the FCPA.

FCPA Institute Online

The most comprehensive online FCPA training course available. Over 12 hours of narrated instruction from Professor Koehler allowing professionals to elevate their FCPA knowledge and practical skills at their own pace.    

Register [16]