Designing Corporate Leniency Programs

Cambridge Handbook on Compliance, D. Sokol & B. van Rooij, eds., Forthcoming

Brooklyn Law School, Legal Studies Paper Forthcoming

23 Pages Posted: 24 Mar 2020

Date Written: March 17, 2020

Abstract

Corporate leniency programs promise putative offenders reduced punishment and fewer regulatory interventions in exchange for the corporation’s credible and authentic commitment to remedy wrongdoing and promptly self-report future violations of law to the requisite authorities.

Because these programs have been devised with multiple goals in mind—i.e., deterring wrongdoing and punishing corporate executives, improving corporate cultural norms, and extending the government’s regulatory reach—it is all but impossible to gauge their “success” objectively. We know that corporations invest significant resources in compliance-related activity and that they do so in order to take advantage of the various benefits promised by leniency regimes. We cannot definitively say, however, how valuable this activity has been in reducing either the incidence or severity of harms associated with corporate misconduct.

Notwithstanding these blind spots, recent developments in the Department of Justice’s stance towards corporate offenders provides valuable insight on the structural design of a leniency program. Message framing, precision of benefit, and the scope and centralization of the entity that administers a leniency program play important roles in how well the program is received by its intended targets and how long it survives. If the program’s popularity and longevity says something about its success, then these design factors merit closer attention.

Using the Department of Justice’s Yates Memo and FCPA Pilot Program as demonstrative examples, this book chapter excavates the framing and design factors that influence a leniency program’s performance. Carrots seemingly work better than sticks; and centralization of authority appears to better facilitate relationships between government enforcers and corporate representatives.

But that is not the end of the story. To the outside world, flexible leniency programs can appear clubby, weak and under-effective. The very design elements that generate trust between corporate targets and government enforcers may simultaneously sow credibility problems with the greater public. This conundrum will remain a core issue for policymakers as they continue to implement, shape and tinker with corporate leniency programs.

Keywords: corporate crime, compliance, leniency, white-collar crime, FCPA, Department of Justice, institutional design, signalling

JEL Classification: K14, K22, K23, K42

Suggested Citation

Baer, Miriam H., Designing Corporate Leniency Programs (March 17, 2020). Cambridge Handbook on Compliance, D. Sokol & B. van Rooij, eds., Forthcoming, Brooklyn Law School, Legal Studies Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=3555950

Miriam H. Baer (Contact Author)

Brooklyn Law School ( email )

250 Joralemon Street
Brooklyn, NY 11201
United States

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