Building a World-Class Compliance Program: Best Practices and Strategies for Success

Chapter 4. Caremark and Sarbanes-Oxley: Enhancing Compliance

"Glass, china, and reputation are easily cracked, and never mended well."

—Benjamin Franklin

There are many reasons to have a world-class compliance program. One important reason is to monitor and positively influence behavior in a company to achieve desired results. Some of these reasons reflect practical realities, that not all employees will independently follow the rules, and that the presence of bad employees, if left unchecked, can negatively influence others around them. Other reasons reflect the legal framework in which companies must operate. The law, by placing a premium on solid corporate governance, provides many reasons to operate a truly effective compliance program. As discussed in the previous chapter, the Federal Sentencing Guidelines for Organizations explicitly mandate that prosecutors take into account the existence or lack thereof of an effective compliance program, providing opportunities for reduced sentences if such a program exists. Beyond the Guidelines, other laws and regulations give companies strong incentives and reason to put a compliance program in place or to ensure that an existing program is as effective and runs as smoothly as it can be.

In fact, there are situations where a company is legally required to have a compliance program and the company's leadership can be liable for the failure to put one in place. Court decisions, in conjunction with strong efforts by the federal government, ...