Effective Ethics Programs

November 1st marked the practical anniversary of the Sentencing Reform Act (SRA) of 1984, which went into effect on November 1, 1987. The Sentencing Reform Act created the U.S. Sentencing Commission and promulgated the federal sentencing guidelines; the latter, especially chapter eight, is especially important to compliance and ethics professionals.

Chapter eight, part B, section 2 of the SRA, “Effective Compliance and Ethics Programs,” also celebrated it anniversary on November 1—it became effective on November 1, 2004.  This section identifies the components of and effective compliance and ethics program, one of two factors that can mitigate an organization’s punishment if it is found to have violated federal law. The other factor is “self-reporting, cooperation, or acceptance of responsibility” (U.S. Sentencing Commission, 2016, p. 525).

Per the sentencing guidelines, “such compliance and ethics program shall be reasonably designed, implemented, and enforced so that the program is generally effective in preventing and detecting criminal conduct. The failure to prevent or detect the instant offense does not necessarily mean that the program is not generally effective in preventing and detecting criminal conduct.” So, what is a “reasonably designed, implemented, and enforced” program?

An effective compliance program must adhere, at a minimum, to seven requirements and must promote ethical conduct and an organizational culture that encourages a commitment to compliance with the law. The seven requirements are:

  1. Establish standards and procedures to prevent and detect criminal conduct;
  2. Ensure that the company’s governing authority (the board; top management; high-level personnel) exercises reasonable oversight of those standards and procedures;
  3. Make reasonable efforts to keep individuals whom organizations knew or should have known have engaged in illegal activities or conduct inconsistent with an effective program out of key positions;
  4. Communicate standards and procedures by training directors, employees and, as appropriate, agents, and by other means;
  5. Monitor and audit the program to detect criminal conduct, evaluate the program periodically, and have and publicize a system for reporting suspected violations and seeking guidance;
  6. Promote and consistently enforce the program through appropriate incentives and appropriate discipline; and
  7. After criminal conduct is detected, take reasonable steps to respond appropriately and prevent further similar criminal conduct, including necessary modifications to the ethics and compliance program.

These seven requirements do more than provide guidance on how to avoid or mitigate some federal legal problems. They also provide a general framework for organizational compliance and ethics programs. Well worth a review, don’t you agree?

Ethical Advocate provides comprehensive ethics and compliance solutions, including ethics and compliance training and confidential and anonymous hotlines, meeting Sarbanes-Oxley (SOX), Federal Acquisition Regulation (FAR), and other regulatory and reporting needs.


United States Sentencing Commission. United States Sentencing Commission Guidelines Manual 2016. http://www.ussc.gov/sites/default/files/pdf/guidelines-manual/2016/GLMFull.pdf