The ECCP is meant to assist prosecutors in making informed decisions as to the adequacy and effectiveness of a corporation’s compliance program at both the time of the misconduct and the time the charging decision or resolution is issued. Prosecutors will evaluate the company’s performance on the topics noted in the ECCP when determining the type of resolution necessary for a particular case.
Business-related electronic messaging and preservation
First, Polite noted that the ECCP now emphasizes that business-related electronic data and communications should be preserved and accessible. In particular, companies should retain all business-related communications that take place on personal electronic devices, communication platforms, or third-party messaging applications, and should ensure that such communications can be produced to the government in the event of an investigation. Under the revised ECCP, the DOJ will consider how a corporation’s policies and procedures in this area are tailored to its specific risk profile and business needs. Polite noted that prosecutors will take the company’s performance in this area into consideration when determining an appropriate resolution following corporate misconduct. In particular, the ECCP states that prosecutors should consider factors such as:
- The electronic communication channels that employees are permitted to use at the company
- The mechanism the company has put in place to manage and preserve information contained in electronic communication channels
- The policies and procedures in place that ensure data is preserved when devices are replaced
- Whether the company’s data retention and business conduct policies are applied and enforced with respect to personal devices and messaging applications
- The level of oversight a company has over its employees’ business communications
- The consequences for employees who refuse the company access to company communications
- Whether personal device use at the company has impaired compliance or the ability to conduct investigations
- Whether these policies and procedures are consistently enforced
According to the ECCP, it is especially necessary for companies to focus on this area because the use of messaging applications has become ubiquitous in many markets, and the “hallmark of a compliance program that is working effectively is the existence of a well-functioning and appropriately funded mechanism for timely and thorough investigations.”
Compensation structures
Next, Polite stated that the DOJ Criminal Division has updated its policies with regard to corporate compensation structures. Expanding on Deputy Attorney General Lisa O. Monaco’s March 2, 2023, announcement, Polite stated that the DOJ has launched a three-year pilot program that will require every corporate resolution involving the Criminal Division to include a condition that the resolving company develop compliance-promoting criteria within its existing compensation and bonus system. Additionally, the program will require the Criminal Division to provide fine reductions to companies who seek to claw back compensation from corporate wrongdoers. The program will also ensure that those who pursue clawbacks in good faith but are unsuccessful are still eligible to receive a fine reduction.
Reflecting these changes, the updated ECCP states that prosecutors will consider whether a corporation has established a compensation scheme that provides incentives for compliance and disincentives for noncompliance. For example, prosecutors may consider whether a company has incentivized compliance by designing compensation systems that defer or escrow certain compensation tied to conduct that is consistent with company values and policies, or whether a company has enforced contract provisions that permit the recoupment of previously awarded compensation if an employee is found to have been engaged in wrongdoing. The ECCP notes that “compensation structures that clearly and effectively impose financial penalties for misconduct can deter risky behavior.” Similarly, positive incentives such as promotions, rewards, and bonuses for improving and developing a compliance program or demonstrating ethical leadership serve to advance a culture of compliance within the organization.
Finally, Polite noted that no one formula is used to assess the effectiveness of a corporate compliance program, as each company’s risk profile and solutions must be particularized. However, the revised ECCP will provide additional transparency as to how prosecutors will evaluate compliance going forward. Polite noted that a functioning compliance program is “absolutely critical” to the DOJ’s decision-making. As such, corporations accused of misconduct can expect to achieve more favorable outcomes if they abide by the guidance provided in the ECCP.
Client Alert 2023-063
