The Corporate Compliance Program


Compliance programs are relatively common among very large corporations in the US. Now, they are becoming more common among multinational corporations with a significant presence in the US. Here's why.

Definition A compliance program is a presentation on the law applicable to a corporation in a specific area directed to those employees of the corporation, both high and low level, who work in the fields in which these legal principles have particular applicability. The program is normally presented both orally and in writing. The form of the written presentation is usually a pamphlet or manual which describes the key legal principles at work in the area of law in question and then gives specific illustrations of the application of those legal principles to hypothetical situations which might arise in the work environment. The oral presentations summarize and reinforce with further examples the points made in the written materials. The oral presentations also give an opportunity for employees with questions to raise them and have them answered.

A compliance program may also include two other features: 1. an acknowledgement document which each affected employee is expected to sign signifying that the employee has read and understands the compliance materials; and 2. a review of operating files in the applicable offices, departments or sections of the corporation. The latter kind of review can help the leaders of the compliance program better to tailor their presentation to real issues in the life of the corporation. This review can also help identify trouble spots that may already need some preventative attention.

Use Compliance programs have been used off and on by a number of, especially, larger corporations in the US, but never universally.

Now, however, we've entered a new age of attention to compliance programs in the US as a result of the adoption of the new Federal Sentencing Guidelines, which have generally made our criminal sentencing rules tougher, more precise and less discretionary for both individuals and corporations accused of criminal violation of US law. These sentencing Guidelines have turned compliance programs from the category of "nice to have" to the category of "necessary to have" for the well advised corporation doing significant work in the US. This is because the existence of effective compliance programs now can spell the difference under the Sentencing Guidelines between relatively light punishment for the corporation and very heavy Guidelinemandated criminal penalties in the event a violation nonetheless does occur notwithstanding the existence and operation of a compliance program. While a half-hearted compliance program which does little more than go through the motions will not serve this purpose, a program properly designed and well-executed can.

Types of Programs While certain types of compliance programs apply to specific types of corporations depending upon the types of business they do, other types of compliance programs have applicability to almost every corporation. A good example of a program of general applicability is an antitrust compliance program. The antitrust laws in the US are enforced both civilly and criminally, most specifically as to criminal enforcement for price fixing among competitors. These compliance programs, therefore, typically deal with issues of competitor contracts and pricing but often also deal with civil enforcement areas such as distributor and customer relations, price discrimination and monopolization. An example of a more specialized type of program is a Foreign Corrupt Practices Act compliance program. Other programs which are focused less on criminal enforcement than on prevention of civil violations of law can include, for example, programs on environmental issues and tax planning such as transfer pricing planning as discussed in my previous article here in the March, 1995 issue at p.60.

Advantages An effective compliance program can sensitize your corporation to what is expected under the law by sensitizing your employees as to what is expected from them. A good program makes the process engaging and interesting. lt does so by using realistic illustrations which will have your employees saying, "Hey, that just could happen to me! What should I do to deal properly with that?" It also does this by engaging your employees in a variety of interactive ways to help them learn and then to reinforce the learning. And what it especially does by education and by its presence is to reduce the risk of expensive violations of the law. In short, compliance programs when done right are generally an inexpensive way of preventing major problems for the corporation which uses them and now have the added benefit of offering significant advantages under the US Federal Sentencing Guidelines.