- Explain the US Sentencing Guidelines for Organizations.
- List the compliance steps from the U.S. Sentencing Commission Guidelines.
Purpose of Sentencing Guidelines
Even when an employee’s actions go against company policy, the company can be held legally responsible, despite its best efforts to prevent unethical behavior. This applies only when the employee acts within the scope of employment. An employee who deals drugs while on the job is not operating within the scope of employment, so the company would not be held liable for the offense. However, if an employee uses the account information of bank customers to steal money from them, the bank would be held responsible. The most common offenses related to companies include fraud, hazardous waste discharge, tax evasion, antitrust offenses, and food and drug violations.
Punishment for corporate offenses is governed by chapter eight of the Federal Sentencing Guidelines for Organizations. These guidelines were designed to enhance two purposes of criminal sentencing: “just punishment” and “deterrence.” The guidelines apply to corporations, partnerships, nonprofit entities, government bodies, trusts, labor unions, and pension funds. They govern only sentencing for felonies and serious misdemeanors.
Guideline Compliance Steps
The US Sentencing Commission has done the hard work of designing an ethics program, and this model has become the backbone of every corporate ethics program. Essentially, organizations are offered incentives for detecting and preventing crime, provided that any offense is reported to the authorities, and no high-level employee has committed the offense. Some incentives include reduced fines, the avoidance of incarceration, supervised release, and reductions in the time to be served.
The guidelines are only a model of “corporate good citizenship” and do not include details for implementation. The compliance steps from the Federal Sentencing Guidelines include the following:
- Establish standards and procedures to prevent and detect criminal conduct, which starts with a code of ethics or statement of values.
- Senior management must be knowledgeable about the compliance and ethics program as well as oversee its implementation and make reasonable efforts to ensure its effectiveness.
- Make reasonable efforts to exclude any individual who has committed an illegal act or engaged in other activities inconsistent with a compliance and ethics program from substantial authority in the organization.
- Periodically communicate the aspects of the compliance and ethics program to its members by conducting training programs and disseminating relevant information.
- Ensure that the program is followed by (1) monitoring and auditing activities to detect criminal conduct, (2) periodically evaluating its effectiveness, and (3) employing systems that allow for anonymity or confidentiality if employees want to report criminal conduct without fear of retaliation. A common practice is a whistleblower hotline.
- Promote and enforce the program by offering incentives for performance in accordance with the program and instituting disciplinary measures for engaging in or failing to take reasonable steps to prevent/detect criminal conduct.
- Respond to criminal conduct and take steps to prevent future and similar offenses when criminal conduct has been detected.
By establishing and enforcing a compliance and ethics program, a company can prevent fraud and shield itself, although not completely, from the repercussions of the unethical and illegal acts of its employees.