On the heels of recent remarks by DOJ officials (see our report: “DOJ Toughens Corporate Enforcement Policies”), in “DOJ Prioritizes Compliance; Boards of Directors Should Heed Warnings,” Holland & Knight recommends a series of measures companies should consider to mitigate the risks associated with a DOJ inquiry or investigation into alleged corporate misconduct. Suggested action items include formalizing board oversight of compliance at the committee level, regular reporting to the board by the Compliance head/function in executive session, documenting the board’s regular discussion of compliance at board meetings, conducting periodic compliance program audits, and documenting the company’s diligence of prospective third party business partners.
Dedicated board-level compliance committees are rare (6% of the S&P 500 according to Spencer Stuart’s most recent: S&P 500 Board Index), implying that compliance oversight is most often assumed by one of the other key standing committees or retained at the full board level. According to the joint Deloitte/CAQ inaugural "Audit Committee Practices Report," which we reported on last week, nearly half of ~250 respondent audit committees had ethics & compliance oversight responsibility. Sidley Austin’s recent memo: “Should Highly Regulated Public Companies Have Board-Level Compliance Committees?” (we reported on here) strongly suggests boards in heavily regulated industries, at a minimum, consider a stand-alone committee.
According to a November 2018 Society Quick Survey: “Ethics & Compliance Program Reporting to the Board,” a plurality of public companies said they reported to the board or a designated board committee on their Ethics & Compliance Program quarterly and nearly 83% said they reported specific metrics – most commonly, hotline/complaint and investigation statistics, training activity-related metrics, policy/code violations, internal audit findings, and risk assessments and alerts.
Access additional resources on our Compliance & Ethics, Whistleblowers, and DOJ Compliance & Enforcement pages.
This post first appeared in the weekly Society Alert!