Kusserow on Compliance: Senior executive exposure to liability for failing to embrace compliance

As the headlines continue to point to major misconduct and scandals involving senior corporate executives, compliance officers need to refocus their efforts and address a critical need. All too often, compliance officers have difficulty in requiring board members and senior executives to be briefed on the compliance program activities, undergo annual compliance training, and generally provide serious oversight and support for the compliance program. Many Board members and senior executives dismiss this as a waste of time that can be better used to carry out the mission of the organization.  The reality is just the opposite.  Over the last couple of years, the rumblings have increased significantly from regulatory and enforcement authorities concerning executives and Board members failing in their fiduciary compliance responsibilities.  Just listing the names of some of the initiatives and policy statements on the subject should be sobering, such as the following:

  • Responsible Corporate Officer Doctrine, in which the HHS Office of Inspector General (OIG) used enhanced  program exclusion authority against owners, officers, and managing employees of companies that are subject to criminal or administrative sanctions;
  • Yates Memorandum, which seeks greater accountability from executives of organizations found to engage in wrongdoing by placing higher prospective priority on executives over organizations;
  • Evaluation of Corporate Compliance Programs,” guidance issued by the Department of Justice (DOJ) Fraud Section, which is being used to assess “top-down” compliance programs, beginning at the Board and executive levels and cascading down through all levels of management; and
  • corporate integrity agreements negotiated by the OIG with entities found engaging in wrongdoing that create many stringent requirements on corporate officers and Board members, including personal certifications under penalty of law and requirements for compliance for leadership.

All of this movement by the DOJ and OIG make it clear that regulators and enforcement agencies consider failure of executives and Board members in supporting, empowering and overseeing compliance as the most significant compliance risks for any organization. This places a great deal of pressure on compliance officers, who must find ways to engage senior executives and the Board to understand their personal exposure to liability for failing to meet their fiduciary obligations towards the compliance program.  This in turn needs to move toward comprehensive training and education on compliance and executives’ and Board members’ roles in ensuring its effectiveness.   Compliance officers should consider reviewing all the material, including that in the hyperlinks provided in this blog to gain a fuller understanding about executive and Board member liability for not paying sufficient attention to and support for the compliance program.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2017 Strategic Management Services, LLC. Published with permission.