A 30-Year Experiment in Ethics and Compliance

In his 2008 book Experiments in Ethics, the philosopher Anthony Appiah made a strong and important case that behavioral science ideas and information should be used to address ethical challenges. But for me the most compelling ethics-related experiment of modern times comes from the realm of political—rather than behavioral—science: the experiment that began in 1991, with the advent of the Federal Sentencing Guidelines for Organizations, which continues to this day.

Although we have become accustomed to living in an “Age of Compliance,” the Guidelines were initially considered “developmental,” as the then-Chair of the Sentencing Commission put it. The notion of government providing businesses with incentives for C&E programs and direction on how to make such programs effective was largely new and untested at the time. Of interesting historical note to behavioral ethics aficionados: Before the Sentencing Commission chose its current C&E-program-based approach to preventing corporate crime, it considered applying an “Optimal Penalties” strategy. The Commission’s ultimate rejection of that approach—which was premised on a hyper-rational (“Chicago School”) view of how business crime occurs—in favor of one that promotes strong C&E programs, can be seen as an early (albeit presumably intuitive) official endorsement of the behavioral science-based view of human nature.

Would we be better off with little or no sexual harassment training or protection of whistleblowers in corporations?

Thirty years later, it is fair to ask: Has the Guidelines experiment been a success?

It would be hard to prove or disprove success using traditional tools of measurement, since the Guidelines are, of course, a policy interacting with a wide range of real-world factors in an uncontrolled way, not a true self-contained experiment. But if the results were not positive to a significant degree, then it is hard to imagine that other governmental bodies—in the U.S. and increasingly around the world—would have followed suit to the significant degree that they have. While “success breeds imitation” is not an iron-clad rule, it is a pretty good description of what happens much of the time, including, I think, in this instance.

Another way to think about success here is to imagine a “counterfactual” world where C&E wasn’t as important as it has become under the Guidelines approach. Would we be better off with little or no sexual harassment training or protection of whistleblowers in corporations? Would we want to work for or do business with a company that made little or no effort to prevent its employees and agents from engaging in corruption, bid rigging or fraud? Indeed, one doesn’t have to strain one’s imagination to picture these counterfactual possibilities: They are the way things used to be before the Guidelines, at least in many companies.

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Looking forward, while a compliance-based strategy to business-crime prevention no longer faces a serious threat from the Optimal Penalties view of the world, one does hear what are occasional critiques of the C&E approach from a behavioral-science perspective (which is somewhat ironic, given the above-described history). The argument goes that C&E programs—by treating employees with suspicion, and thereby making employees resentful—can actually spawn wrongdoing.

This does not ring true to me, at least not insofar as it concerns serious offenses. Although there is no question that some companies engage in overkill with aspects of their C&E programs, employees should not (and I think do not) feel resentful that their employers try to help keep them safe from the risk of being sent to prison and having their careers destroyed. And even if there is some resentment, that is presumably a small price to pay for preventing serious harm to company, employees, and others.

Finally, I am very aware that my musings are themselves not scientific, and hope that in the next 30 years scholars and practitioners will find ways of assessing the efficacy of the many different strategies and tools for having C&E programs. There is lots of room for improvement in this area—and experimentation. At least to me, that’s much of what makes the field exciting to be part of.

But as to the basic notion of C&E itself—I think that’s here to stay, not so much as a matter of proof but of logic. On this point I give the last word to Joe Murphy—the visionary lawyer who (together with Jay Sigler of Rutgers) first wrote about what would ultimately become the Guidelines approach: “For those who ask ‘does compliance work,’ my response is to ask them, ‘does management work?’ One question makes as much sense as the other. C&E is a management commitment to do the right thing and management steps to make that happen. If you do not use management steps to do something in an organization, how on earth do you do so?”

Jeffrey M. Kaplan is a partner at Kaplan & Walker LLP and a member of the Ethical Systems steering committee.

Reprinted with permission from the Conflicts of Interest blog.