Who feels the pain? And when?

Compliance enforcement measures sometimes fail because the wrong people are punished.

“Prosecutors Change Tune on Prevention,” Wall Street Journal, July 17, 2014 C2.  US Department of Justice and FBI officials are starting to realize that threatening prison for corporate officials involved in bad behavior isn’t as effective a deterrent as imposing fines large enough to make shareholders angry.  Especially when few corporate officials go to prison.  But how large do fines need to be before they are confiscatory?  And are you taking money from people who did nothing wrong?  Isn’t the objective compliance, not punishment?

Does imposing huge fines convince shareholders to lean on their Boards to do a better job of oversight and compliance?   Does that really have the intended impact?  And the shareholders at the time of the fines aren’t the same shareholders anyway.

I think the impact would be a lot more powerful, and the effect more immediate, if prison terms were a real threat.  You don’t want to hit your puppy on the nose two weeks after some other dog had an “accident.”


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Filed under Board, Compliance, Compliance Verification, Controls, Culture, Governance, Internal controls, Investor relations, Oversight, Risk

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