Compliance and Ethics Program - Federal Sentencing Guidelines For Organizations

Federal Sentencing Guidelines For Organizations

In 1984 Congress enacted The Sentencing Reform Act, which created a set of mandatory federal sentencing guidelines (Campbell & Bemporad 2006). As part of the Act, the United States Sentencing Commission was formed and delegated the responsibility “to provide “certainty” and “fairness” in sentencing, avoiding “unwarranted sentencing disparities” while “maintaining sufficient flexibility to permit individualized sentencing when warranted by mitigating or aggravating factors (Campbell & Bemporad 2006).”

On May 1, 1991, as an extension of the Sentencing Reform Act, the United States Sentencing Commission submitted to Congress the Federal Sentencing Guidelines for Organizations] (FSGO) (http://www.ussc.gov/orgguide.htm), a set of standards that govern the sentences federal judges impose on organizations convicted of federal crimes. Enacted on November 1, 1991, core to the guidelines was the Commission’s intent to “prevent and deter organizational wrongdoing” through its design of the organizational sentencing guidelines (http://www.ussc.gov/corp/advgrp.htm). These guidelines describe the elements of an organization’s compliance and ethics program that are required to be considered for eligibility for a reduced sentence if convicted. In general, the FSGO require an organization to establish standards to guide its employees and agents. These standards must reflect government regulations and industry standards and apply to almost all types of organizations including corporations, partnerships, unions, non-profit organizations and trusts.

In 2004, the United States Sentencing Commission voted to amend its existing organization guidelines to make the criteria for an effective compliance and ethics program more stringent. Two major standards were identified in the amended guidelines. The amended guidelines stated the need for directors and executives to take an active role in the management of its compliance and ethics program and the importance of promoting an organizational culture that is compliant with the law and demonstrates ethical culture. The amended guidelines outline minimum requirements for an effective compliance and ethics program (http://www.ussc.gov/2005guid/8b2_1.htm) and the amended FSGO has become synonymous with an effective compliance program.

The FCPA, Sarbanes-Oxley and the Federal Sentencing Guidelines represent just a fraction of the standards and requirements organizations need to consider today when developing and implementing their compliance programs. “Since the passage of SOX, the New York Stock Exchange (NYSE), NASDAQ, and the Public Company Accounting Oversight Board (PCAOB), have all proposed and implemented new rules relating to compliance programs (Martin 2004).” Organizations today are increasingly accountable to mandated laws, regulations and standards on a number of dimensions, which include geographical/regional considerations, as well as industry and functional discipline concerns. These regulations and standards apply to a variety of financial and non-financial areas. Adding to this complexity are the “voluntary” boundaries, which organizations have individually established such as organizational commitments, values, and contractual obligations. As a result of these dynamics, organizations at the very core of their business strategy need to establish the capacity and the capability to effectively address the conditions mandated by these external requirements and internally generated operating principles while still meeting their business objectives.

History set the tone for increasing regulations and rising standards. Over time, organizations will need to be more proactive in anticipating and addressing these considerations while simultaneously protecting and building the enterprise. More and more organizations will need to translate, integrate and simplify these various standards and requirements into a cohesive approach.