Ethics & Compliance Learning
DOJ Continues to Place Emphasis on Corporate Culture
One of the most significant workplace developments in recent years is the increased focus by the Department of Justice (DOJ) on corporate culture. In short, the DOJ has recently cracked down on corporate misconduct and now considers corporate culture to be a key factor in evaluating whether an Ethics and Compliance (E&C) program is effective.
The DOJ is now increasingly focused on holding companies—and at times, individuals—accountable for their roles in corporate misconduct and for having poorly established E&C programs.
Organizations are facing the pressure to have robust E&C programs in place and should be prepared to act if misconduct is discovered, or else possibly face hefty fines and reputational damage.
It is critical to recognize the DOJ is serious about prosecuting corporate misconduct. Organizations must take steps now to improve their E&C programs and reduce their risk of prosecution.
Companies must have a truly vested interest in owning culture. If not, they can find themselves facing reputational damage, public scrutiny, and potentially a judge.
Examining E&C Shortcomings
To discuss the current state of the DOJ and E&C further, Jon Bricker, Vice President of Sales, AMER Learning, SAI360, and Gwen Lee Hassan, Interim Chief Compliance Officer, Cordant Health Solutions, recently convened on a webinar, DOJ Trends over the Past Year. to discuss how strong E&C programs mitigate risk and help avoid government prosecution. They also shared tips for organizations looking to improve their E&C programs.
Here are a few examples they shared of companies that experienced significant E&C problems and what the greater implications of these situations may be.
1. McDonald’s
In the recent McDonald’s case—a derivative lawsuit filed by shareholders against McDonald’s Corporation and its directors following the Caremark line of cases in Delaware Chancery Court—allegations were made about breached fiduciary duties. The plaintiffs alleged the company’s HR department allowed sexual harassment and misconduct and that although directors were aware, or should have been aware, there was a failure to address concerns.
Additionally, plaintiffs in the McDonald’s case alleged the directors breached their Caremark duties by failing to implement basic Human Resources policies and procedures, such as having a clear and concise code of conduct and a robust employee training program on this code of conduct, as well as an efficient means of investigating and solving misconduct complaints.
Said Gwen, this case remains a lesson that compliance is not just a compliance team’s responsibility. The C-suite—and all officers, for that matter—must care about the culture within their span of control.
Compliance officers, therefore, must document everything and recognize they can be held personally accountable if no action is taken.
Added Jon, if you’re the Chief Compliance Officer of a global organization with great complexity, having things in place to ensure continuous monitoring and acting when issues arise must remain top of mind.
2. Activision Blizzard
Activision Blizzard is a video game publisher with popular franchises like Call of Duty and World of Warcraft. In recent years, the company has been criticized for its “bro culture” and a toxic, misogynistic workplace culture where women were subject to sexual harassment and gender discrimination.
Activision lacked the controls and procedures necessary to collect and analyze misconduct. As a result, management was unable to assess risk. Activision Blizzard paid a $35 million SEC fine in early 2023.
In 2022, Microsoft announced it would acquire Activision Blizzard for $68.7 billion and pledged to make significant investments in Activision Blizzard’s culture and workplace practices.
The Activision Blizzard incident seems to indicate companies should disclose to investors potential concerns they recognize may have a material impact, said Gwen.
Added Jon, it is critical to identify where repetitive cultural issues may arise that put your organization at risk.
3. Dollar General
In January of 2023, the United States Department of Commerce (USDC) filed a lawsuit against Dollar General Corporation, alleging the company violated the Fair Labor Standards Act (FLSA) by failing to pay its employees for all hours worked.
The lawsuit claimed Dollar General routinely forced its employees to work off the clock, including before and after their shifts, during meal breaks, and during breaks for rest and recovery. The lawsuit also claimed Dollar General failed to pay its employees for all the time spent traveling between stores and for all the time spent waiting for work. A total of $15 million in fines was tied to 180 safety inspections since 2017.
In the case of Dollar General, what is especially interesting is that individual officers were named, holding them accountable publicly, Gwen noted. Those companies who prioritize safety tend to have a more ethical culture, she added.
How to Improve E&C Programs
Organizations with strong corporate cultures are more likely to have employees who are committed to ethical behavior, and they are less likely to experience misconduct, which is a win-win for all.
Organizations can improve their E&C programs by taking the following steps:
- Develop a strong code of conduct that is clear, concise, and easy to understand
- Implement a robust training program that educates employees about the code of conduct and the importance of ethical behavior
- Create a reporting system that allows employees to report suspected misconduct without fear of retaliation
- Conduct regular audits to assess the effectiveness of the E&C program
By taking these steps, organizations can reduce the risk of government prosecution and protect their reputations.
Click here to watch our webinar, DOJ Trends over the Past Year.
