Ethics Resource Center

Published: October 28, 2008

The Policy Report
Ethics and the Law
By Paula J. Desio, ERC Chair on Ethics Policy

A research group working with the Conference Board will soon release its study on how the government weighs ethics and compliance criteria in enforcement decisions.

Supported by the Ethics Resource Center, the group is looking at a question of compelling concern to executives in the ethics and compliance field:  How frequently does the government take a sound ethics and compliance program into account when deciding whether to bring charges or recommend a reduced penalty?

Policymakers, especially at the federal level, have been talking up the benefits of ethics and compliance programs ever since the U.S. Sentencing Commission implemented its "seven minimum steps" for such programs (essentially a primer of good corporate oversight and management to prevent and detect misconduct) in 1991.

Several years later the Department of Justice issued its first formal policy guidance about the criteria used for charging corporations, criteria that included factors relevant to an effective ethics and compliance program.  DOJ officials regularly appear before business leaders to stress the importance of such preventive efforts, and recently refined their criteria again (http://www.ethics.org/ethics-today/0908/policy-report.asp).

In 2004 the Sentencing Commission amplified its criteria (from which the DOJ factors are derived). It included recommendations that companies involve their boards in the oversight of ethics and compliance programs and ensure that adequate resources and authority are provided for this critical function.

In the wake of such prodding, business leaders understandably want to see results. After receiving a strong endorsement from the membership of the Ethics and Compliance Officer Association and the Society for Corporate Compliance and Ethics, the Conference Board’s Research Working Group embarked on an ambitious project to canvass federal and state officials. They were looking for information about specific instances where ethics and compliance criteria played a major role –favorable or unfavorable – in the ultimate enforcement decision.

The group approached enforcement officials from the Securities and Exchange Commission and DOJ, and distributed a questionnaire to United States Attorneys offices and the offices of the state attorneys general and the Medicaid fraud units of each state.  Case law and government press releases were researched.  In addition, corporate counsel was canvassed, with the assistance of the Association of Corporate Counsel.  Arrangements were made to gather data without disclosing confidential information.

The results of this 18-month undertaking are being prepared, and the report (which also contains a section on ethics and compliance policies in international settings) should be of interest to corporations and government leaders alike for the light it will cast on this important topic.

In This Issue

• ERC Urges McCain and Obama To Stress Ethics in Washington
• Guest Column by Jason M. Zuckerman The Financial Crisis:  Whistleblowers Could Have Helped Avert It
• The Policy Report By Paula J. Desio, ERC Chair on Ethics Policy:
  • More Protection for Whistleblowers? Or More Ethical Culture?
  • Ethics and the Law
• Column By Patricia J. Harned, Ph.D. President, ERC
• 8th Annual Kiplinger Lecture Explores Ethical Business And World Peace