Finding an Equilibrium Towards Corporate Compliance: Solving the Gordian Knot of Trade Violations Eliciting Institutional Corruption
50 Pages Posted: 8 May 2015 Last revised: 15 May 2015
Date Written: May 7, 2015
This working paper analyzes best practices in compliance and explores how a corporation could adopt an efficient compliance scheme. Such a scheme greatly benefits a corporation by helping it mitigate the risk of harmful procedures while allowing it to maximize profit. Corporate compliance programs also deter institutional corruption and serve the public interest. The difficulty lies in finding an equilibrium in compliance that allows the corporation to efficiently abide by the law while still achieving adequate business performance. Sanctions that might severely damage the ability of a corporation to generate profits do not serve the interests of the company, the regulator, or the public.
Focusing on the trade sector, the paper starts by exploring the nexus between corporate compliance and institutional corruption. Ineffective compliance involves poorly conceived and communicated sanctions on the regulatory side and inadequate commitment and implementation on the corporate side, both of which generate distrust of both private enterprise and government. Ineffective compliance in the form of trade violations also undermines trust in international trade regimes. From the regulatory perspective, we review the sanctions used to incentivize corporations to be compliant, as well as other good options available to the state. Turning to the corporation, we review the incentives for a compliance program and offer “ten commandments” that establish best practices. The end goal is to achieve optimal corporate compliance, which subsequently leads to openness and transparency, as well as minimizing, among other things, incidents of institutional corruption, fraud or negligence that generate liability.
Keywords: Corporate compliance, risk management, institutional corruption, transparency
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