The least we can say looking at DOJ enforcement actions, is that the DOJ seems to be facing a sharp decline in the number of corporate criminal prosecutions it has conducted over the past few years. For the sake of comparison, the DOJ brought 14 FCPA actions during 2021, compared to 30 in 2020.
So when top DOJ official Lisa Monaco, unveiled this week new “sweeteners” for companies that cooperate with the DOJ, I just had to take a look at what they entailed.
The new DOJ corporate enforcement strategy, follows on Mrs. Monaco’s October 2021 announcement of an upcoming crackdown on companies, with a key “carrot”: trying to motivate more people, whether through the promise of leniency or other benefits, to come forward through voluntary disclosures (See earlier blog post here).
“With a combination of carrots and sticks — with a mix of incentives and deterrence — we’re giving general counsels and chief compliance officers the tools they need to make a business case for responsible corporate behavior” she emphasized this week.
Some key takeaways from this new strategy:
🔹the DOJ will crack down on corporate crime by luring cooperators. More companies will avoid charges if they self-report misconduct.
🔹zooming in on executive compensation: companies must demonstrate they are linking compensation with compliance, and will be pushed to design clawback policies that would apply when an executive is involved in wrongdoing, such as bribery and fraud.
A clawback policy may theoretically allow companies to recover incentives granted to executives for meeting financial performance targets on the basis of decisions and actions that ultimately turn out to be ethically and legally questionable, and which entail significant monetary and reputational liabilities on the company.
The DOJ has over the years investigated and issued punitive, and at times astronomical, fines to companies engaged in corrupt practices. The impact usually affects the share prices of listed companies upon the announcement of an investigation, a fine, and the payment of the fine, with returns severely affected at the conviction stage.
Increasing incentives for companies to deploy executive compensation clawbacks is expected to shift “the burden of corporate penalties away from shareholders — who usually play no role in misconduct — to those directly responsible”.
🔹 limit the use of probationary deals (NPAs and DPAs ). Given NPAs and DPAs have become a “cost of doing business” rather than a real deterrent, the DOJ aims to avoid multiple, successive non-prosecution agreements or deferred prosecution agreements, requiring additional ones to be approved at the deputy attorney general’s office.
🔹 further to complaints on the use of independent monitors, the DOJ issued its first-ever guidance as to when independent monitors are warranted, how to select them transparently, and how to tailor and oversee their work