Wednesday, March 20, 2019
Veronica Root Martinez (Notre Dame Law School) has posted Complex Compliance Investigations (Columbia Law Review, Forthcoming) on SSRN. Here is the abstract:
Whether it is a financial institution like Wells Fargo, an automotive company like General Motors, a transportation company like Uber, or a religious organization like the Catholic Church, failing to properly prevent, detect, investigate, and remediate misconduct within an organization’s ranks can have devastating results. The importance of the compliance function is accepted within corporations, but the reality is that all types of organizations—private or public—must ensure their members comply with legal and regulatory mandates, industry standards, and internal norms and expectations. They must police thousands of members’ compliance with hundreds of laws. And when compliance failures occur at these complex organizations they can be significant and widespread in both scope and associated harms.
Yet, careful examination and assessment reveals that many of the most significant and damning scandals occurring within organizations of late were entirely avoidable. Research within the field of corporate governance focuses on how firms are structured, because those structures can result in better decision-making within the firm. Structure refers to the manner of separating the work in an organization into sub units and dividing the control of and responsibilities of the work. The field of compliance relies heavily on these insights from corporate governance, which has led to a focus on what organizational structures will lead to compliance programs likely to prevent and detect misconduct within firms. When it comes time to investigate potential incidents of misconduct and determine whether they are material events, however, complex organizations must go beyond issues related to the best manner in which to structure a compliance program. Instead, this Article argues that firms must focus on process-based reforms—or the actions, practices, and routines firms employ to communicate and analyze information—that will bolster a firm’s “Complex Compliance Investigations” and act as a safety net when compliance programs fail to detect or appropriately respond to misconduct within firms.