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The DOJ Steps It Up

The DOJ Steps It Up

United States Deputy Attorney General Delivers Speech Outlining New Efforts to Curb Moral Hazard

And the hits just keep on comin’!

In a September 15, 2022 speech, Deputy United States Attorney General Lisa Monaco has once again stepped up the US Department of Justice’s efforts to get principles of ethics and compliance baked into the policies and practices of US businesses. For those business leaders striving to do the right thing, this comes as a blessing because it makes it more difficult for rogue companies to avert compliance via legal maneuvers. But, for those business leaders who believe it’s about what you can get away with, well, going forward that’s a whole lot less.

Monaco’s speech publicizes long-awaited new DOJ efforts to reduce moral hazard, which is a term that is often reference, such as during the 2007-2008 financial crisis, and at other pivotal times in business history. The Organization for Economic Cooperation and Development (“OECD”) defines moral hazard as “behavior when agents do not bear the full cost of their actions and are thus more likely to take such actions.”

In Monaco’s speech, she clarified that for too long business leaders have been getting away with wrongdoing that amounts to moral hazard by hiding behind their businesses, where the business gets the financial penalty – fines which ultimately come out of the shareholders’ pockets.  The business leader may get a slap on the wrist, which Monaco indicates doesn’t really discourage them from engaging in future risky behaviors, something Monaco’s speech highlights as a need for change.

New DOJ Efforts Protect Shareholders and Responsible Leaders

According to Monaco’s speech, with the new actions, the DOJ will:

  • Push companies to come forward with misconduct allegations more quickly, so that individual wrongdoers can be identified more quickly and convincingly, and the business gets the credit for the disclosure.
  • Provide companies that voluntarily disclose misconduct with prosecutorial credit—which allows the DOJ to find the actual individual wrongdoers and go after them.
  • Encourage companies to reward “compliance-promoting conduct” and implement clawbacks and other steps to punish misconduct of executives, managers and other staff. This will principally be determined when the DOJ evaluates corporate compliance programs to see if the business qualifies for any benefits based on its identified steps to act upon these measures.

These increased DOJ efforts provide increased tools for responsible executives and Board members by giveing them a greater means to protect the organization from prosecution by providing federal prosecutors with information about the people that acted improperly. These tools also potentially reduce moral hazard by minimizing the use of tricks companies have used over the years to shield apparently guilty individuals from prosecution. These actions also protect shareholder interests by not charging them for individuals’ crimes.

Syntrio’s Efforts in Encouraging a Speak Up and Listen Up Culture Align with DOJ Efforts

Syntrio encourages organizations of all sizes to develop a plan to encourage the workforce to promptly report suspected misconduct. Our philosophy encourages leadership and management to actively “listen up” to complaints and concerns and take prompt and corrective action (following a thorough investigation) when misconduct is found. By being forthcoming about missteps that may occur, we know the workforce will be more willing to come forward, thereby improving the organization’s opportunity to remedy potential issues before they become public (or the subject of a criminal investigation).

By removing the incentive to hide potential wrongdoing, organizations not only improve their internal culture, but also align themselves with the new policies introduced by the DOJ in Monaco’s speech. Syntrio welcomes the opportunity to partner with your organization on a plan for the improvement of your culture through a speak up and listen up program. We look forward to speaking with you about training courses and communication tools that are aimed at compliance through a healthy workplace culture. Contact us today to see how we can help you align with the goals set forth by the DOJ and other compliance focused agencies.

Monaco’s speech also addresses a couple other related efforts that may be of interest:

  • Better assessing a company’s recent misconduct based on its past misconduct and how the company responded to it.
  • Improving the appointment and actions of corporate monitors assigned to companies under federal prosecution.

Jason has worked in ethics and compliance for over twenty-five years, consulting with Fortune 500™ companies across the business ethics and compliance spectrum, including assessing and strengthening corporate values initiatives, instituting leadership engagement efforts, developing and revising codes of conduct and policies, designing and implementing related procedures, developing monitoring systems, conducting risk, culture and program assessments.

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