Embracing Absolute Intolerance Towards Intolerance in Corporate Policies
In a significant move, the Department of Justice (DOJ) has recently announced a pilot program to promote transparency and accountability in enforcing the anti-fraud provisions of the U.S. Foreign Corrupt Practices Act (FCPA). The program, which reflects the trend towards swift-and-certain penalties, aims to encourage companies to voluntarily disclose any potential violations. In return, the DOJ may consider a reduction of up to 50% below the low end of the applicable U.S. Sentencing Guidelines fine range for such disclosures. Siemens, for instance, achieved a reduction of penalties by up to 50 percent for voluntary self-disclosures under the US Foreign Corrupt Practices Act by participating in a similar DOJ program.
However, the DOJ will not generally require the appointment of a monitor under this program. Instead, a declination of prosecution may be considered if certain conditions are met. This shift in approach is a departure from the traditional zero tolerance policies, which have been criticised for their rigidity and potential harm.
Zero tolerance policies, such as those that led to a 4-year-old being placed on in-school suspension for hugging a teacher, or a second grader being suspended for biting his Pop Tart into the shape of a gun, have been widely criticised for obscuring more than they explain. These policies have been found to demoralise the best people while encouraging the worst, and to lead to bad decisions and a culture of deception and cheating.
In contrast, the DOJ's pilot program encourages a more nuanced approach, recognising that audits should not only spot noncompliance but also help uncover the root causes of such noncompliance. Compliance processes should be flowcharted, showing steps, decision points, input/output documents, decision-making authority/accountability, and audit. Designing audit processes so they enable statistical-control analysis will help determine whether a problem has arisen from a special cause or a general cause.
A surprising number of global companies fail to define their compliance processes properly, and this program could provide a valuable opportunity for them to review and improve their processes. The program may also help a business make the best of a bad situation, by offering a chance to disclose potential violations and reduce penalties.
The DOJ's pilot program is a step towards a more balanced and effective approach to compliance, one that recognises the importance of transparency, accountability, and the need for a nuanced understanding of the complexities of noncompliance. A leader who advocates 'zero tolerance' is either a knave or a fool, and this program provides a much-needed antidote to such policies.
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