Recently at the FCPA Blog, Richard Cassin authored a post titled “Gold Dust for Compliance Officers” which began as follows.
“What’s the first thing compliance officers need to do? We’d say it’s convincing management and board members they need an effective compliance program. That’s not easy. It takes advocacy, and advocacy takes credibility.”
Spot-on.
However, I disagree that the sources “compliance officers can find support” in – the DOJ’s Principles of Prosecution of Business Organizations – are the gold dust they are portrayed to be.
Whether the analogy is gold dust – or real carrots vs. baby carrots as I used in my article “Revisiting a Foreign Corrupt Practices Act Compliance Defense” – the issue remains the same: are the current incentives business organizations have to adopt best-in-class compliance policies and procedures sufficient, or can policy makers further incentivize corporate compliance with a real carrot – or gold dust if you prefer – through a compliance defense?
In my article, I argue, among other things, that an FCPA compliance defense will better incentivize more robust corporate compliance, reduce improper conduct, and thus best advance the FCPA’s objective of reducing bribery.
A previous FCPA Blog titled “We’re With You On This One, Prof Koehler” stated as follows regarding my article.
“Scholarship at its best can change things. It can cause judges to take a fresh look and lawmakers to fix problems. We hope Mike Koehler’s new scholarship will do just that. […] We agree with Prof Koehler on the need for the good faith defense. It would give companies the best incentive to work hard at compliance. And if there’s a downside to more compliance, we don’t see it.”
To demonstrate why a compliance defense is the best positive incentive to achieve greater FCPA compliance consider the following demonstration involving two persons: (i) the general counsel or compliance officer of a company (“compliance officer”); and (2) the board of directors / CEO / or other person who controls the purse strings of the company (“executive”).
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.
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.
Under which scenario is the compliance officer most likely to receive the budget and resources needed for a best-in-class FCPA compliance program?
Every time I have run this scenario in class, the answer has been unanimous. Scenario 2 will best allow the compliance officer to receive the budget and support needed to most effectively do his/her job.
I am under no illusion that an FCPA compliance defense will magically result in 100% best-in-class FCPA compliance in all business organizations.
However, I am confident in saying that if 50% of business organizations currently have best-in-class policies and procedures (and survey data seems to suggest that this figure is about right), an FCPA compliance defense will result in 50% + of business organizations adopting best-in-class policies and procedures.
And – as the FCPA Blog previously righly noted – “if there’s a downside to more compliance, we don’t see it.”
It is for this reason, why the DOJ and SEC should be in favor of an FCPA compliance defense. However, as noted in this previous post, this will take courage. An FCPA compliance defense may indeed result in less “hard” FCPA enforcement as certain business organizations will be able to avail itself of the compliance defense.
The cheerleaders of more FCPA enforcement (and there are many, including various civil society organizations) who frequently publish enforcement statistics may not be happy. However, more FCPA enforcement is not necessarily an inherent good and ought not be the singular goal of the FCPA or other similar laws. The goal ought to be constructing an enforcement regime that best promotes compliance, reduces improper conduct, and best advances the FCPA’s objective of reducing bribery.
The FCPA has witnessed courageous moments before and a courageous moment is once again presented.
