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By: Ted Banks

If you currently lack a compliance program, you might be wondering why people implement corporate compliance programs, codes of conduct, and ethical practices in the first place. The truth is that there is no single reason. There are a wide variety of reasons that businesses need corporate compliance programs. Laws and regulations are not to be taken lightly if you want your business to succeed, so consider the following reasons behind corporate compliance programs.


  1. Your Business is Required to Have a Compliance Program

First and foremost, many businesses are required by law to implement certain measures to decrease the risk of compliance failure. Industries that are heavily regulated need to have controls in place to make sure that unethical behavior that could harm employees and customers isn’t allowed to happen. If your business is in a highly-regulated industry and you don’t have a corporate compliance program in place, you are setting yourself up for a disaster.

  1. Adequate Defense for Your Business

Also, corporate compliance programs act as a shield for your business. They give you a certain amount of protection against penalties and fines, which can be large enough to shut down your business.  Under the Federal Sentencing Guidelines, you may be entitled to a fine reduction if you have an effective compliance program in place. The Guidelines define what they consider to be part of an “effective” program.  Individuals may be subject prison sentences, and organizations that are government contractos can be put in their own form of prison: debarment, or disqualification from doing business with the state or federal government. Your compliance program may provide the basis to negotiate a deferred-prosecution or non-prosecution agreement with a government prosecutor.

  1. Encourages Ethical Decision Making

Ethics and morals are the foundation that all businesses are built upon. Without them, a business will crumble into dust faster than you can say “compliance failure.” Furthermore, a corporate compliance and ethics program will help to dissuade people from looking the other way or turning a blind eye to unethical practices. Your organization needs resolute employees who won’t sacrifice their integrity for perks. These types of employees know right from wrong, and they will become a whistleblower if they have to.  Your compliance and ethics program can help make sure that your employees share these values.

  1. Isolation and Risk Mitigation

Even with a top-of-the-line corporate compliance program, you still may not reduce your risk completely. However, in the event that a compliance issue surfaces, a good program will be able to isolate the incident. For example, if an employee of your organization fails to meet compliance standards, the Department of Justice may not choose to prosecute the organization because it took more than adequate measures to prevent such behavior.  This is part of the definition of an “effective” compliance program under the Sentencing Guidelines.   Instead, only the individual(s) engaged in wrong-doing will be prosecuted. No, this is not an ideal situation – but it may very well save the future of your business. But if you don’t implement a compliance program, your business could be prosecuted to the fullest extent of the law.  A defense of “I didn’t know” usually doesn’t work.