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14 N.Y.U. J.L. & Bus. 965 (2017-2018)
Evaluating the Effectiveness of Corporate Compliance Programs: Establishing a Model for Prosecutors, Courts, and Firms

handle is hein.journals/nyujolbu14 and id is 983 raw text is: NEW YORK UNIVERSITY JOURNAL OF LAW & BUSINESS VOLUME 14 SUMMER 2018 NUMBER 3 EVALUATING THE EFFECTIVENESS OF CORPORATE COMPLIANCE PROGRAMS: ESTABLISHING A MODEL FOR PROSECUTORS, COURTS, AND FIRMS EUGENE SOLTES* When prosecutors, courts, and regulators make charging and sentencing decisions, they must evaluate whether firms have effective compliance pro- grams. Such evaluations are difficult because of the challenges associated with measuring effectiveness. Notably, these obstacles are not limited to eval- uation by external parties, as firm managers also struggle to assess the re- turns associated with investments in compliance. To address these limita- tions and to facilitate a more consistent assessment, this article provides a framework to rigorously evaluate the effectiveness of compliance programs. I present empirical models that use data collected from compliance initia- tives-including whistleblower hotlines, training exercises, and disciplinary procedures-to evaluate whether the initiatives are fulfilling their desired objectives. By being able to more rigorously evaluate compliance programs with data and empirical analysis, prosecutors and courts will be able to more readily discern window-dressing and firm managers will be able to better understand the efficacy of their investments in compliance. I. HISTORY OF CORPORATE COMPLIANCE ............ 966 II. CONTEMPORARY COMPLIANCE AND MEASUREMENT .................................. 970 III. MEASURING COMPLIANCE EFFECTIVENESS .......... ..974 * Jakurski Family Associate Professor of Business Administration, Harvard Business School. I would like to thank Hui Chen, Chris Costa, Jesse Fried, Todd Haugh, William Laufer, Roman Weil, the Fraud Section in the Criminal Division of the Department of Justice, and corporate governance seminar participants at the Harvard Law School for their thoughtful feed- back on the ideas contained in this piece and earlier drafts. I also deeply appreciate the research assistance and perspective provided by Julian Sarafian while developing this article. 965 Imaged with Permission of N.Y.U. Journal of Law & Business

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