Sentencing corporate America: ethical or not?

How Does the Low-Key Independent Government Agency Set Sentencing Guidelines for Individuals and Corporations? LRN CEO Testifies Criteria Should Include Ethics

LOS ANGELES, CA (March 17, 2004) -- Corporate executives at corporations who break the law will have their jail sentences and penalties determined from guidelines handed down by the United States Sentencing Commission, an inconspicuous and independent government agency in the judicial branch. This same commission held public hearings today before changing the sentencing guidelines for companies and other organizations. LRN CEO Dov Seidman testified on the importance of including business ethics in the guidelines, rather than solely focusing on compliance.

“A company’s character is found in its culture – the record of acting on values of right and wrong, the stated and unstated influences that encourage people to do the right thing,” said Dov Seidman, CEO of LRN, the leading global provider of legal, ethics and governance management systems. “A corporation without the right culture, just like a person without the right character, will never approach the law with the right attitude. If the promotion of ethics is not incorporated into future sentencing guidelines, the Commission runs the risk of having its guidelines foster the same types of corporate cultures that allowed individuals to seek out loopholes in the law, leading to many of the recent corporate crises.”

Seidman testified at the public hearings held today at 9:30 a.m. as a part of the Commission’s first panel entitled “Chapter Eight: Scope, Preclusion, and Small Organization Concerns” held at the Thurgood Marshall Federal Judiciary Building in Washington, D.C.

“Corporate leaders inspire, motivate and communicate,” continued Seidman, who founded the Los Angeles-based LRN a decade ago. “They (corporate leaders) draw people to common goals and create an ethos. They build processes to communicate the right behavior, to educate, to check and balance, to assess risk, to respond to the acceptable and unacceptable. They build a culture by defining values, and bring them to life.”

The 7-member group of commissioners to whom Seidman made his appeal make up the U.S. Sentencing Commission whose responsibility is to establish sentencing policies and practices for the federal courts, including guidelines that prescribe the appropriate form and severity of punishment for offenders convicted of federal crimes, advise and assist Congress and the executive branch in the development of effective and efficient crime policy, and collect, analyze, research and distribute information on federal crime and sentencing issues. The Commission also serves as an information resource for Congress, the executive branch, the courts, criminal justice practitioners, the academic community and the public.

Much of the genesis of corporate compliance programs result from a 1991 decision by the Commission to provide a reduction in fines to companies that have programs that meet its criteria for an “effective program to prevent and detect violations of law.” When evaluating whether to prosecute corporations, the Justice Department looks to these Guidelines to determine and assess charges against companies. Those companies with strong compliance programs are likely to see a substantial reduction of potential fines, and may as a result, be less likely to face prosecution.

By acknowledging that promoting ethics is a critical element of a compliance program, Seidman said “the guidelines will encourage companies to use their best resources to respect the law, to think about the importance of law to our free enterprise system, and to build new norms of behavior across business communities that enhance and strengthen our system.

“The courts should be able to make character judgments about corporations based on their commitment to build ethical cultures. Guidelines that include ethics would make that possible.”

The hearings were open to the public.