Richard Levick is Chairman and CEO of LEVICK, which provides strategic communications counsel on high-profile, public affairs and business matters globally. This is the third of a four-part series originally published on Forbes.com. (Read Part I, Part II and Part IV.)
For someone who started his career in the Ralph Nader network, it is in some ways remarkable for me to write these words. The trend toward criminalizing normal business conduct not only hurts the executives and companies victimized by reckless prosecutors and regulators, it hamstrings the competitiveness of U.S. corporations in the global marketplace. Without doubt, certain individuals and companies (Travis Kalanick and Uber, come on down!), deserve the public humiliation they’ve received. They’ve betrayed shareholders, workers, consumers, and the public at large.
But others who have been put through the legal wringer, in many cases by overzealous prosecutors and officials? Not so much.
Many of the alleged crimes perpetrated by U.S. companies are, in the words of the Economist, “often obscure and the reasoning behind the punishments opaque.” The specter of public recrimination hangs over any potential trial, which is why so many corporations choose to settle.
“Even with respect to the most culpable companies, the system is a failure, as it allows the companies and their senior officials to evade the scrutiny and censure that would follow ‘an unequivocal criminal conviction,’” notes Kevin M. LaCroix, an attorney and the executive vice president of insurance intermediary RT ProExec.
Jacqueline Arango, the co-chief of Akerman’s white collar practice group argues that, “The convoluted web of rules and regulations to which businesses must comply means that even the most conscientious of companies encounters compliance issues. Maintaining compliance is an all-consuming job for a corporate general counsel’s office.”
What can U.S. companies do to inoculate themselves from potentially devastating legal and regulatory probes? There are no sure-fire remedies, but smart corporations should consider:
- Establishing a Corporate Compliance Framework that is endorsed by the board and embraced by all senior-level executives and managers; ideally the framework should outline a corporate code of conduct, investigation protocols, clear punishment for violations of company policies, regulations, and the law, and a crisis mitigation plan
- Developing a Communications Strategy that captures the corporate commitment to good governance, embraces transparency, strengthens the company’s commitment to corporate social responsibility, cultivates prominent third parties, and encourages “authenticity” at the top
- Devising a Crisis Mitigation Plan including cross-functional participants, outside counsel and advisors, in preparation for any crisis that might arise
- Insisting on Compliance Benchmarks in annual performance reviews for all levels of employees, including managers and executives
- Requiring Quarterly Reporting to the Board regarding compliance and regulatory matters
- Establishing Relationships with all Regulatory Bodies with oversight responsibility for your company, including providing regular updates to regulators on key issues, and
- Retain Outside Counsel specifically for the Board in instances where a legal, regulatory or compliance matter involves a member of senior management, so as not to put the GC in an untenable position.
Even if a company takes these preventative steps, it’s still not easy for it to make decisions in the “gray area,” where an action may be technically legal, but can be interpreted in different ways, sometimes leading to prosecution. All companies must make decisions in this gray area, but executives tend to underestimate the risk associated with these decisions, sometimes naively believing that a legal or audit opinion will protect them.
Special software now exists that enables companies to proactively identify when seemingly benign risks become dangerous. Companies using KeenCorp software liken it to a “check engine” light for legal, accounting, and social media risk.
Akerman’s Arango advises that the instant you suspect that the company may be in the government’s crosshairs, you should be consulting with white collar counsel. Too many company executives say and do things that cannot be reversed or mitigated once counsel comes on board. Before executives speak with anyone – internal or external – legal and communications counsel should be retained.
It’s not getting any easier for companies. DOJ and other enforcers have become increasingly aggressive by expanding their definitions of criminal liability, diminishing the role of intent in white collar prosecutions while dismissing the utility of voluntary corporate compliance programs, notes Arango’s Akerman colleague Scott Marrs, who serves as regional managing partner of the firm's Texas offices.
Even with the change in administrations, the trend toward corporate criminalization shows little sign of slowing down. All of which means companies need to speed up their contingency preparations for the day when a criminal prosecution – fair or unfair, warranted or unwarranted – could head their way.
Published April 4, 2019.