Ethical Infrastructures and Evidence-Based Corporate Compliance and Ethics Programs: Policy Implications from the Empirical Evidence

61 Pages Posted: 5 Dec 2015 Last revised: 8 Dec 2015

David Hess

The Stephen M. Ross School of Business at the University of Michigan

Date Written: December 3, 2015

Abstract

In 2016 it will be the twenty-fifth anniversary of Organizational Sentencing Guidelines (OSG), which has been the single greatest influence on the structure of corporations’ compliance programs. The government and corporations continue to place faith in the ability of corporate compliance programs to reduce illegal and unethical behavior by managers and employees. Despite these efforts, the levels of observed unethical behavior by corporate employees has continued at a steady level over the past decade. In response, there has been an increased focus on trying to understand how a corporation’s culture influences its compliance program’s effectiveness. Although many (including the US Sentencing Commission through their amendments to the OSG) have recognized the importance of a corporation’s culture for controlling unethical behavior, there continues to be a wide-spread lack of understanding of the relationship between the compliance program and the corporation’s culture. This Article explains corporate culture by bringing together the latest research in behavioral and organizational ethics to present a model of an organization’s ethical infrastructure. This model integrates, rather than separates, the ideas of compliance and an ethical corporate culture. To incorporate this model into policy, this Article proposes two short amendments to the OSG that have the potential to catalyze significant change.

Keywords: Compliance and Ethics Programs, Corporate Culture, Sentencing Guidelines

JEL Classification: K14, K42, M14

Suggested Citation

Hess, David, Ethical Infrastructures and Evidence-Based Corporate Compliance and Ethics Programs: Policy Implications from the Empirical Evidence (December 3, 2015). New York University Journal of Law and Business, Forthcoming; Ross School of Business Paper No. 1293. Available at SSRN: https://ssrn.com/abstract=2698820

David Hess (Contact Author)

The Stephen M. Ross School of Business at the University of Michigan ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-763-9779 (Phone)

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