On March 17, 2010, in Washington, D.C., The Association of Corporate Counsel (ACC) offered comments before the U.S. Sentencing Commission on proposed amendments related to corporate compliance in Chapter 8 of the Corporate Guidelines Manual. ACC addressed how Chapter 8's Guidelines can better incent good corporate compliance initiatives and internal controls.
"On behalf of our 26,000 members, ACC is asking the Commission to clarify the legal responsibilities of in-house counsel to better support the development and execution of effective corporate compliance programs," says ACC senior vice president and general counsel Susan Hackett. "We believe this is best accomplished through a focus on compliance program outcomes, rather than on designating strict and specific activities, particularly with respect to self-reporting, independent monitors and mitigation or credit for a solid compliance program." Hackett adds, "With the institutional knowledge and breadth and depth of our members' expertise with respect to compliance, ACC hopes to offer both relevant and practical suggestions to fortify the Chapter 8 Guidelines. Our goal is to assist the USSC in incenting and rewarding good results in company policies across the country."
Specifically, ACC is requesting the Commission to consider revising language in three areas:
1) Corporate Monitor: In terms of remediation efforts, ACC believes new language discussing the appointment of a corporate monitor is extreme. Since appointing a monitor is not prohibited by the Guidelines, there is little point in offering the suggestion of appointing monitors unless the Commission is seeking to make that practice more routine. ACC, therefore, asks the Commission to remove the monitor references in the proposals to allow judges to work specifically with a company to identify leaders and solutions that will inform and improve its remediation, short of such a disruptive and often counter-productive practice.
2) Document Retention Policies: ACC is particularly concerned about new references to proposed language that would require that high-level personnel "be aware of the organization's document retention policies and conform any such policy to meet the goals of an effective compliance program." ACC believes this section (Section 8B2.1) is too specific in its dictates to connect executive leadership's responsibility and understanding of ethics and compliance to the operation of the company's document retention policies. It places too much emphasis on one specific part of a corporation's operations, and chooses for that emphasis a corporate function - records management - that is not even primarily related to corporate compliance initiatives. Taken to its logical conclusion, the current proposal can be read to suggest that compliant companies must "keep everything forever."
3) Methods for Encouraging Self-reporting: a) Credit for Compliance and Clarification of Board Reporting: The Commission seeks comment on whether it should allow an organization to receive a three-level mitigation for an effective compliance program even when high-level personnel are involved in the offense. The draft offered for comment proposes three conditions for this receiving this credit. ACC supports efforts by the Commission to make the three-level reduction available in more cases, and to not let the involvement of one high-level executive serve as the sole disqualifier.
In this section, it is proposed that the company must be able to evidence direct reporting authority to the board for "the individual(s) with operational responsibility for compliance in the organization." ACC argues that while the concept may have merit, the language is flawed. ACC believes it is not reasonable to dictate that every company must create a direct line of supervisory authority specifically answerable to the board or its audit committee that bypasses the CEO or other executive management leaders. What is important is that the board has access to reports from concerned employees and that concerned employees can be assured that their concerns will reach the board if they are valid. The Guidelines should not dictate detail or who the appropriate and responsible leader must be, but rather should seek to assure there are open and accessible lines of communication, and that the board has confidence that the company's systems will allow the board to hear concerns from employees with important stories to tell.
4) Definition of "Prompt Reporting" to Earn Credit: Also of concern to ACC is the condition that the organization seeking credit promptly reported the violation to the appropriate authorities. The new criteria's focus on "prompt" reporting will likely be subject to the interpretation of officials who have the benefit of 20/20 hindsight to inform their judgment, and will discourage even the most appropriate diligence in assessing a concern's merit before reporting it to authorities.
For more information or to interview ACC Senior Vice President and General Counsel Susan Hackett, please contact Marthea Davis at(202) 349-1519 or [email protected].