Federal Sentencing Guidelines for Organizations

Twenty years ago this month, 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.

These Guidelines 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.

But 20 years later, there is reason to discuss 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. This Advisory Group is examining the FSGO, its successes and failures over the past 20 years, and opportunities for improvement. The purpose: to ensure that ethics and compliance remain a core discipline across corporate America.

To gauge the Guidelines’ impact and relevance, and to encourage meaningful debate about corporate ethics and compliance programs, the ERC invites comments on its draft report from the public at large, businesses, law enforcement, interest groups and academics. By incorporating this input into the final report, we can ensure that the public will continue to be protected by pre-empting organizational misconduct before the damage is done.

Key areas to consider include the following:

• By using out of court settlements to “detour” corporate cases out of the sentencing process where the FSGO incentives are supposed to apply, are prosecutors actually keeping the promise to reduce penalties for companies that undertake rigorous compliance/ethics efforts?
• There are 25 government agencies involved in regulating and enforcing corporate conduct. With so many agencies establishing requirements for corporate compliance programs, is government speaking with a consistent voice, or through a patchwork of perspectives?
• What responsibility does corporate America have to voluntarily imbed the principles of the FSGO – creating and maintaining strong ethics and compliance programs – without the incentives outlined in the Guidelines?

This period for comment will conclude on November 30. The ERC FSGO Advisory Group will review the input, and include many suggestions in their full report to be released next year. This is your opportunity to speak directly to leaders in Washington, D.C.; the final report will be delivered to the US Sentencing Commission, Members of Congress, the U.S. Department of Justice and other enforcement agencies.

Please send your comments, feedback and any questions by email to fsgocomments@ethics.org.