DOJ Doubles Down on the Compensation-Compliance Connection

In two recent speeches, the U.S. Department of Justice (DOJ) expressed its commitment to a recently announced two-part pilot program aimed at enforcing corporate compliance.  

The first part of the program requires companies to tie executive compensation to the success and effectiveness of corporate compliance programs. The second part rewards companies with fine reductions if they succeed at (or even attempt) clawing back compensation from executives responsible for wrongdoing.

In one speech, the DOJ explained that it “expect[s] companies to find innovative, effective, and targeted ways to use compensation to incentivize good corporate behavior and deter misconduct, using their own mix of carrots and sticks,” saying that “[C]orporate executives and board members have a responsibility to take note.”

Based on their oversight of executive compensation and responsibility to ensure effective compliance programs, corporate boards will be especially challenged to adapt to the DOJ's new policy. Despite these challenges, effective claw back and compliance incentive programs will benefit companies by ensuring compliance, or at least empowering companies to swiftly and effectively identify and remediate instances of noncompliance prior to the government's involvement.