FSGO: Federal Sentencing Guidelines for Organizations at 20 Years
On November 1, 1991, the United States Sentencing Commission (USSC) put into effect the Federal Sentencing Guidelines for Organizations (FSGO). Under the FSGO, organizations with ethics and compliance programs meeting defined standards earn credit toward reduced penalties if employees engage in wrongdoing – but organizations with substandard programs receive far tougher penalties.
For two decades, these Guidelines have encouraged American businesses to create effective ethics and compliance programs (ECEPs). The research of the Ethics Resource Center (ERC) has shown consistently that when ECEPs are in place, companies are empowered to define and detect employee misconduct – and to move against it.
We felt the anniversary of promulgation was the right time to open a public discussion of the impact and relevance of the FSGO. Today, the FSGO are rarely applied to large companies because their crimes are often being adjudicated in the courthouse where the Guidelines apply; rather, they’re being settled out of court through Deferred Prosecution Agreements (DPAs) or Non-Prosecution Agreements (NPAs).
The FSGO incentivizes corporations to self-police and aim high on ethics. If these incentives are not consistently applied in prosecutorial decisions, will the Guidelines become irrelevant? Without an incentive to promote ethical cultures, will executives lower the bar? And if so, will corporate misconduct increase?
To address these questions, the ERC assembled an FSGO Advisory Group of distinguished law enforcement officers, federal judges, prosecutors, academics and compliance/ethics professionals. In the ERC report, The Federal Sentencing Guidelines for Organizations at Twenty Years, the Advisory Group examined the FSGO, its successes and failures over the past two decades, and opportunities for improvement. The purpose: to ensure that ethics and compliance remain a core discipline across corporate America. The final report on this site, released 21 years after the Guidelines were first examined by Congress, is the product of more than 12 months’ worth of discussions, meetings, writing shared by the 23-person Advisory Group, as well as comments from the general public received during a review period that started in November 2011.
The final report highlights four key challenges:
- There are few FSGO cases involving large companies because criminal cases against bigger corporate defendants are largely being detoured around the judges for whom the Sentencing Guidelines were intended.
- There is a lack of consistency in policies toward ECEPs across the various government agencies that play a role in corporate law enforcement and regulation because there is neither a requirement that these policies be aligned nor a mechanism available for doing so.
- Many compliance/ethics programs fall short of their potential because portions of the FSGO remain underemphasized or unclear.
- Too many business executives take a “check the box” approach to their programs, rather than satisfying the full intent of the FSGO
The Advisory Group did conclude that more consistent promotion and recognition of compliance and ethics programs by the U.S. enforcement community would incentivize businesses to invest more fully in self-policing efforts against corporate crime.
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