No full-text available
To read the full-text of this research,
you can request a copy directly from the author.
The Uncertain Professional Status of Compliance
Abstract
This chapter explores the background and reasons for the uncertain professional status of compliance by explaining how it has evolved to achieving professional status, but noting that this field does not possess all the features of a profession. The chapter then identifies several negative effects or consequences of compliance’s uncertain professional status and observes how, from time to time, legal authorities and practitioners assert control over compliance as if it were in their domain of influence, but at other times they have been passive or complacent with respect to compliance practitioners. The chapter offers reasons for the law’s ambivalence toward compliance and concludes with thoughts on the future of compliance as a profession, acknowledging at the same time that a different professional outcome may emerge in the future as it is a “young” occupation.
... 11 A great step was made in August 2023, when the Government of the Republic of Serbia approved the Draft Law on the Management of Enterprises Owned by the Republic of Serbia, which stipulates that every company of capital must incorporate the compliance function. 12 Even before this Draft, the compliance function was specifically prescribed for some state-owned enterprises, 13 such as electric utility power company Javno preduzeće Elektroprivreda Srbije and the largest infrastructure and logistic business system in the country -Javno preduzeće Pošta Srbije. 14 It is only a matter of time when and how compliance function will become equally important in all areas of economy in Serbia, since operating in accordance with the law is a priority of every company. ...
The first part of the paper analyzes the principle of legality in business and the basic features of the compliance function. Taking into account that the principle of legality in business is one of the core pillars for achieving good corporate governance, having a person who will perform the compliance function is of great significance. The legal position of the compliance officer may be differently regulated, whether as an employee or an outsourced expert. The second part of the paper deals with these two options taking into account the standing practice in the United Kingdom and Germany, where the compliance function has a long tradition. These examples may be challenging for Serbia to follow, since its compliance function is at the very beginning, although having a compliance officer (team) as an employee should be the ultimate objective. In the meantime, the authors propose for Serbian companies to hire compliance officers as interim managers as a solution.
The compliance officers' (CO) profession has been evolving over the last few decades. The expectations placed upon the individuals holding such a position vary across jurisdictions, but they are all expected to ensure employees and management of the business entity comply with the law. Given the limited research on CO in Europe, and the increasing public interest in this profession, the current authors have carried out a survey in Cyprus in an effort to map out and contextualize the CO' profession. The findings illustrate CO's academic and professional qualifications, their awareness of their legal liability, the level of knowledge and job performance of their duties as prescribed by law, as well as gaps in the performance of duties as expected by management, boards, and regulators. The policy implications derived from the study suggest coherence and synergies to be found through common exam and postgraduate qualification in the field of financial compliance.
It was the twenty-fifth anniversary of Organizational Sentencing Guidelines (OSG) in 2016, which has been the single greatest influence on the structure of corporations’ compliance programs. The government and corporations continue to place faith in the ability of corporate compliance programs to reduce illegal and unethical behavior by managers and employees. Despite these efforts, the levels of observed unethical behavior by corporate employees has continued at a steady level over the past decade. In response, there has been an increased focus on trying to understand how a corporation’s culture influences its compliance program’s effectiveness. Although many (including the US Sentencing Commission through their amendments to the OSG) have recognized the importance of a corporation’s culture for controlling unethical behavior, there continues to be a wide-spread lack of understanding of the relationship between the compliance program and the corporation’s culture. This Article explains corporate culture by bringing together the latest research in behavioral and organizational ethics to present a model of an organization’s ethical infrastructure. This model integrates, rather than separates, the ideas of compliance and an ethical corporate culture. To incorporate this model into policy, this Article proposes two short amendments to the OSG that have the potential to catalyze significant change.
We present and discuss a theoretical model of an organization's ethical infrastructure, defined as the organizational elements that contribute to an organization's ethical effectiveness. We propose that the infrastructure is composed of both formal and informal elements—including communication, surveillance, and sanctioning systems—as well as organizational climates for ethics, respect, and justice. We discuss the nature of the relationship between these elements and ethical behavior, the relative strength of each of these elements, and their impact on each other. Theoretical and practical implications of this model are presented.
Financial sector compliance officers have been referred to by prominent law enforcement and regulatory officials as "essential partners" in ensuring compliance with relevant laws and regulations. Yet a series of recent enforcement actions in which individual compliance officers have been sanctioned personally have placed strains on the partnership, fueling concern among these professionals that they are being unfairly targeted. Law enforcement and regulatory officials have responded with assurances that the partnership remains intact. In the rare instances in which financial sector compliance officers have been held personally responsible for program failures, they have stressed, the actions were undertaken only after careful consideration, where the facts demonstrated that the compliance officers "crossed a clear line." Efforts to justify regulators' charging practices have been ineffective, however, for the perception of targeting has endured. Indeed, it has coincided with increased attrition within the ranks of senior compliance officers in the industry. The Author offers several possible explanations for this "chilling effect." Regardless of the cause, regulators are confronted with a fundamental policy question: Whether the benefits of current charging practices justify the continued exodus of senior compliance professional from their firms or the industry entirely. The Author advances two proposals to reverse the perception of compliance officer targeting and its attendant chilling effect, including the adoption in the United States of a supervisory structure akin to the United Kingdom's "Senior Managers Regime" These proposals reflect a clear message. Actions must be taken to reverse the perception of compliance officer targeting before the "big chill" sets in, and the industry finds that this critical function has been robbed of its best and brightest.
Corporate compliance is becoming increasingly "criminalized." What began as a means of industry self-regulation has morphed into a multi-billion-dollar effort to avoid government intervention in business, specifically criminal and quasi-criminal investigations and prosecutions. In order to avoid application of the criminal law, companies have adopted compliance programs that are motivated by and mimic that law, using the precepts of criminal legislation, enforcement, and adjudication to advance their compliance goals. This approach to compliance is inherently flawed, however - it can never be fully effective in abating corporate wrongdoing. Criminalized compliance regimes are inherently ineffective because they impose unintended behavioral consequences on corporate employees. Employees subject to criminalized compliance have greater opportunities to rationalize their future unethical or illegal behavior. Rationalizations are a key component in the psychological process necessary for the commission of corporate crime - they allow offenders to square their self-perception as "good people" with the illegal behavior they are contemplating, thereby allowing the behavior to go forward. Criminalized compliance regimes fuel these rationalizations, and in turn, bad corporate conduct. By importing into the corporation many of the criminal law's delegitimizing features, criminalized compliance creates space for rationalizations, facilitating the necessary precursors to the commission of white collar and corporate crime. The result is that many compliance programs, by mimicking the criminal law in hopes of reducing employee misconduct, are actually fostering it. This insight, which offers a new way of conceptualizing corporate compliance, explains the ineffectiveness of many compliance programs and also suggests how companies might go about fixing them.
This Article, written for a symposium on compliance issues in financial-services firms, focuses on the role of the chief compliance officer (“CCO”). Contrasting the position with that held by a firm’s general counsel or Chief Legal Officer (CLO), the article argues that a CCO’s position holds distinct challenges. Additionally, although internal compliance systems and personnel may be characterized as functional substitutes for external regulation, assessing the strengths and weaknesses of internal compliance requires a willingness to look deep within firms. The article argues that the law and regulation may enhance firms’ incentives to invest in effective internal compliance but may also undercut internal compliance through unforeseen consequences of legal doctrine and regulation; the relatively underdeveloped status of compliance as a profession may also serve to weaken the effectiveness of compliance personnel. The article recounts several recent incidents stemming from evident failures in internal compliance to illustrate more systemic and general issues.
Lawyering has changed dramatically in the past century, but scholarly and regulatory models have failed to keep pace. Because these models focus exclusively on the "practice of law" as defined by the profession, they ignore many types of work that today's lawyers perform and many sources of ethical tension they encounter. To address these shortcomings, I examine significant twentieth- and twenty-first-century social dynamics that are fundamentally altering contemporary lawyers' work by broadening and blurring the boundary between law and business. Within the resulting boundary zone, a growing number of lawyers occupy roles for which legal training is valuable but licensure is not required. I argue that the ambiguity surrounding these roles-regarding what constitutes legal practice, what roles lawyers play, and what professional obligations attach-creates opportunities for abuse by individual lawyers and for ethical arbitrage by sophisticated corporate clients. The proliferation of these roles gives rise to key ethical tensions, ignored by existing models of the profession, that threaten to extinguish the profession's public-facing orientation in favor of its private interests. I conclude that we cannot effectively understand and regulate the twenty-firstcentury legal profession until we move beyond the rigid constraints ofexisting models and begin to study the full range of roles and work settings-both in and out of practice-that today's lawyers occupy.
Previous research has identified multiple approaches to the design and implementation of corporate ethics programs (Paine, 1994; Weaver, Treviño, and Cochran, in press b; Treviño, Weaver, Gibson, and Toffler, in press). This field survey in a large financial services company investigated the relationships of the values and compliance orientations in an ethics program to a diverse set of outcomes. Employees’ perceptions that the company ethics program is oriented toward affirming ethical values were associated with seven outcomes. Perceptions of a compliance orientation were associated with four of these outcomes. The interaction of values and compliance orientations was associated with employees’ willingness to report misconduct. In general, a values orientation makes a greater unique contribution to the measured outcomes when compared to a compliance orientation.
This Article argues that the compliance officer should play a major role in the ongoing reform of financial firms because compliance is now well established and accepted and compliance officers are close to decision-making at all levels of a firm. The contention is that the role of compliance must be rethought and reoriented if it is to contribute fully to the reform. Compliance officers now ensure that the firms and their employees comply with the numerous laws and regulations governing them and their activities, primarily by producing detailed compliance procedures and policies and then revising, and monitoring compliance with, them. The policies and procedures direct the conduct of employees by surrounding them with a web of detailed instructions, procedures, supervisory review, reporting, oversight and investigation, where necessary. This approach, which is based on a well-established “external” model of direction, discipline and surveillance, is necessary to prevent self-interested and opportunistic conduct by financial firm employees. However, there is a risk that employees follow only the letter of compliance and even at times ignore it because they understand that the rules are different from, and necessarily secondary to, the actual securities business. Moreover, the external approach “crowds out” another model that is necessary to achieve the most effective compliance. Ideal financial firm compliance would promote “internal,” in addition to external, compliance. The goal of the internal approach is to have firm employees internalize the policies of the laws and regulations and the professional and ethical standards so that they come into the foreground when the employees are making business decisions. In psychological terms, the internal model of compliance would ensure that the policies and standards do not “fade” in employee decision-making. Thus, rather than being only a transcriber of rules and monitor of their enforcement, a compliance officer would be an educator about policies, standards and the appropriate firm and industry culture and an adviser and counselor concerning how they should inform daily employee decisions.
The Growth of Large Law Firms and Its Effect on the Legal Profession and Legal Education, Symposium
This article reports on the first major quantitative study of businesses that explores the use and influence of lawyers. Previous research has only surveyed or interviewed lawyers. Our findings are particularly robust in regards to lawyer behaviors because they do not derive from lawyer self-reports. The professionalism thesis holds that what lawyers supply to clients is constrained by norms of professionalism, so that lawyers become compliance monitors. The devolution of professionalism thesis holds that what lawyers supply is constrained by client demand, so that lawyers enable client behaviors which are not oriented towards compliance. We find that neither thesis applies to the market for corporate legal services. The devolution thesis fails to recognize that clients vary in their attitudes towards law and legal risk. As a result of client demand, a significant portion of what lawyers supply is service as compliance monitors. The professionalism thesis fails to recognize that norms of legal professionalism support lawyers' action as gamesters and adversarial advocates. As a result, even when clients demand lawyers who act as compliance monitors, lawyers supply services that incline clients to increasingly accept legal risk and adopt a gamester approach to law and regulation.Our findings extend the market model by detailing mechanisms through which lawyers may influence compliance.
In this article, I describe the emergence of "law consultants" - lawyers who market their legal expertise decoupled from attorney-client relationships. In the first part, I situate these new types of professionals in the context of the rise of the compliance consulting industry. Many of the current legal regimes governing corporations - including regulation under Sarbanes-Oxley, OSHA, EPA, HIPA, and antidiscrimination case law - emphasize the internationalization of compliance programs within corporations. Led by large accounting firms, a substantial compliance consulting industry has arisen to provide compliance services to corporations. Among the new compliance specialists are lawyers who are opting out of traditional attorney-client representation and repackaging their services as consulting services. As I suggest, despite similarities between these compliance services and law practice, there are several reasons that compliance consulting is not likely to be sanctioned as unauthorized practice of law. Most significantly, it is difficult to argue that prohibitions against unauthorized practice, which are aimed at protecting members of the public, should be extended to services purchased by sophisticated corporations. In the second part, I consider the various incentives for corporations and lawyers to characterize their relationship as a consulting rather than an attorney-client relationship. On one side of the ledger, there may be diminishing advantages to corporations to entering formal attorney-client relationships, including the lessening value of the attorney-client privilege. On the other side, there are benefits to the consulting label, which permits these lawyers to avoid professional regulation that governs their conduct towards third parties.
Creating a Culture of Compliance: Why Departmentalization May Not Be the Answer
- M Destefano
The Behavioral Economics of Corporate Compliance with Law. Columbia Business Law Review
- D C Langevoort
- DC Langevoort
The Law of Governance, Risk Management, and Compliance
- G P Miller
- GP Miller
Preparing to Become a Compliance Officer, and the Academy
- J A Fanto
Dashboard Compliance: Benefit, Threat, or Both?
- J A Fanto
- JA Fanto
Avoiding Supervisory Liability
- T Urban
Corporate Governance in an Era of Compliance
- S J Griffith
- SJ Griffith
Compliance Management Systems-Guidelines, ISO 19600. Geneva: International Organization for Standardization
- Standard
- International Standard
The Behavioral Economics of Corporate Compliance with Law
- D C Langevoort
969 North Eastern Reporter 2d Series
- Sullivan V
- Harnisch
Compliance as a Profession
- J H Walsh
Introduction: From Regulation to Compliance
- C Parker
- V L Nielsen