Testing Compliance

Abstract

Corporations must comply with a dizzying array of laws and regulations.  To accomplish this complex task, corporations increasingly turn not just to the legal department and outside counsel but also an in-house group composed of non-lawyer specialists who seek to educate and motivate personnel with respect to their obligations under the law and the corporation’s code of conduct.

Compliance programs aim to prevent a wide range of misconduct, from government bribery and financial fraud to environmental disasters and the creation of dangerous working conditions that jeopardize employees’ physical and mental health. Beyond the enormity of the task, what makes the compliance enterprise deeply uncertain is that the information generated by compliance efforts is simultaneously useful and dangerous.

Even the most craven corporate officers and directors seek to prevent behaviors that may jeopardize employee performance, customer satisfaction, and stock prices. However, documenting problematic behaviors creates a record that may be used against the corporation in future administrative, criminal or civil proceedings, or may become the subject of a media exposé.

Officers, directors, and the in-house compliance team may sincerely hope compliance programs are effective, but they may quite rationally avoid testing that hope. The end result will often be rational ignorance with respect to the effectiveness of corporate compliance programs.

This dynamic—the hope that greater attention to compliance will reap benefits drives more resources toward compliance efforts, yet fears about what examining the effects of those efforts might reveal hinders validation of compliance programs—creates a “compliance trap” that can ensnare corporations and regulators alike.

This Article explores ways out of this trap.  We argue that hope-based compliance—a mentality that leads insiders and outsiders to assess compliance programs by examining how many resources organizations are devoted to the effort and whether the programs appear well-intentioned or comply with accepted “best practices” within an industry—predictably arises from the incentives and practices evident under current laws. We propose a set of legal reforms that would create the conditions for a move to evidence-based compliance.

(Co-author: Greg Mitchell).

Brandon L. Garrett

(Invited by Tina Søreide)

Author of five books - among them Too Big to Jail, Harvard University Press, 2016.

BIO

Brandon L. Garrett is the L. Neil Williams Professor of Law at Duke University School of Law, where he has taught since 2018. He was previously the Justice Thurgood Marshall Distinguished Professor of Law and White Burkett Miller Professor of Law and Public Affairs at the University of Virginia School of Law.

His research and teaching interests include criminal procedure, wrongful convictions, habeas corpus, corporate crime, scientific evidence, civil rights, and constitutional law. Garrett’s work, including five books, has been widely cited by courts, including the U.S. Supreme Court, lower federal courts, state supreme courts, and courts in other countries.