In Like a Lion: DOJ Marks March with a Series of New Compliance Policies

DOJ is roaring into March with updates to its guidance on the evaluation of corporate compliance programs, a new pilot program on compensation incentives and clawbacks, and a revised policy on monitor selection, all released in the last week.  We are tracking and analyzing these updates in real time and will be issuing a series of in-depth analyses.

For now, here are the key takeaways coming out of last week:

• DOJ expects companies to address head-on the challenges presented by ephemeral messaging apps and the use of personal devices;
• DOJ expects companies to use compensation incentives and deterrents—including clawbacks—to drive compliant behavior;
• DOJ is focused on “consequence management,” which includes everything from tracking investigation-related data to publicizing disciplinary actions, as a measure of compliance culture; and
• There is no presumption for or against a monitor in settlements with DOJ, and DOJ is taking factors like diversity, equity, and inclusion into account when selecting monitors.

Read on for more details about these updates.

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DOJ’s “Evaluation of Corporate Compliance Programs” sets forth the criteria prosecutors use to determine whether a company’s compliance program is effective.  The most significant of the recent changes fall into two categories: (1) personal device and ephemeral messaging policies and procedures; and (2) incentives and disciplinary measures – which DOJ has rebranded as “Compensation Structures and Consequence Management.”

Personal Device and Ephemeral Messaging Policies

• DOJ has made clear that companies should have policies and procedures governing the use of personal devices, communication platforms, and messaging applications—and the updated guidance offers long-awaited insight into what those policies should look like.  Most importantly, personal device policies should be aimed at ensuring, to the greatest extent possible, that business-related electronic data and communications are accessible and amenable to preservation by the company.  Policies should be clearly communicated to employees and enforced consistently.
• The updated guidance provides a checklist of questions prosecutors will use when evaluating the strength and effectiveness of a company’s policies in these areas.  The questions fall into three categories:  communication channels, policy environment, and risk management.

Compensation Structures & Consequence Management

• There is a lot to unpack in the updated section on compensation structures and consequence management, but three takeaways stand out: (1) companies should be using compensation structures to foster compliance and deter risky behavior; (2) companies should track data to measure compliance culture and the effectiveness of the investigation function; and (3) companies should be transparent—to the extent possible—about disciplinary processes, compliance-related separations, and reasons for discipline.
  
  
  • DOJ expects companies to develop compensation structures that impose financial penalties for misconduct—including, where possible, policies and contract provisions that allow the company to recoup or reduce compensation for wrongdoers.  DOJ also expects companies to make compliance a significant metric for management bonuses, and to offer opportunities for managers and employees to serve as compliance “champions.”
  • The updated guidance suggests that companies should be tracking data related to disciplinary actions in order to measure effectiveness of the investigation and consequence management functions.  This may include substantiation rates for compliance-related allegations, time to complete compliance investigations, and effectiveness and consistency of disciplinary measures.  The updated guidance encourages companies to publicize compliance-related disciplinary actions internally as a deterrent.
• This guidance dovetails with DOJ’s new Pilot Program Regarding Compensation Incentives and Clawbacks, which requires companies entering into criminal resolutions with DOJ to implement compliance criteria in their compensation systems and provides for potential fine reductions for companies that seek to recoup compensation from culpable employees.  Read more about that program here.

Monitor Selection

• DOJ also released a revised policy memo on monitor selection, building on prior DOJ policies, procedures, and criteria guiding monitor selection.
• DOJ has long recognized that monitorships can have many potential benefits for a company, but they also come with a significant cost.This revised policy reiterates that monitors should never be used as a punishment. Consistent with recent guidance issued by Deputy Attorney General Lisa Monaco, the policy states that there is no presumption for or against a monitor. Instead, prosecutors consider a variety of factors, including:
  
  
  • Whether the company voluntarily self-disclosed;
  • The state of the company’s compliance program and controls;
  • The nature and pervasiveness of the criminal conduct; and
  • The company’s risk profile and level of industry oversight.
• In addition to the analysis of the need for a monitor, the revised policy adds that monitor selections will be made with diversity, equity, and inclusion in mind, and the cooling-off period for monitors increased from two to three years from the date of termination of the monitorship.

Want to know more about these changes and their impact?  Stay tuned:  these topics and more will be explored in greater detail by our team in the coming weeks.