The Justice Department’s recent revisions to its Corporate Enforcement Program and its Evaluation of Corporate Compliance Programs stressed the importance of compensations systems and consequence management.  The theoretical underpinning of DOJ’s expanded focus is to increase the consequences to individuals who engage in misconduct or supervisors who turn a blind eye to misconduct. 

Individuals already face potential criminal prosecution for engaging in misconduct but the prospect of such prosecutions can be too remote to dissuade bad actors.  To add to the risk calculation, DOJ is requiring companies to implement compliance compensation programs that include financial penalties against those actors who engage in misconduct or supervisors that fail to rein in their underlings to ensure compliance.

A Compliance Compensation System works hand-in-hand with a Consequence Management System, which includes an effective internal investigation program; tracking employee reporting and disciplinary data to ensure consistent disciplinary measures; and the conduct of a root cause analysis. 

In this Episode, Michael Volkov discusses how to implement a compliance compensation system.