Three Keys To An Effective Disciplinary Program

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discipline4The Justice Department and the SEC have underscored the importance of a company maintaining a clear disciplinary process so that executives, managers and employees are aware that a violation of the corporate code of conduct or the law will result in disciplinary action.

In addition, the Justice Department and SEC have emphasized the importance of including positive incentives for compliance with a corporate code and the law.

CCOs understand the importance of even-handed discipline and positive incentives.  A corporate discipline program has to adhere to some strict guidelines for administering justice.

Three principles stand out as critical to an effective disciplinary system – justice must be even-handed, justice must be swift and employees who raise concerns must be protected from retaliation.

If managers and employees perceive a disciplinary system as discriminatory, the company culture will suffer significant harm.  In order to encourage employees to raise ethical and compliance concerns, employees have to believe the system for investigating such violations and meting out discipline is fair and even-handed.  Companies that cannot meet this basic test are in for a rough time.discipline5

I have observed companies that suffer from this problem.  Companies with suspect disciplinary systems usually suffer from a perception that senior managers are given more lenient penalties than middle or low-level managers and employees.  It is hard to turn this perception around and strong affirmative steps are usually required which are implemented under the supervision and commitment of senior executives.

Discipline must also be swift.  Employees who raise concerns internally do not expect for an investigation to be resolved in a year, or even nine months.  Companies have to commit to conducting a fair and timely investigation within a few months.  If the matter is complex, the company needs to communicate this to a complainant so that the complainant is not surprised by the time it takes to complete the investigation.  If the matter is routine and can be quickly resolved, it should be completed in no more than two months.

Finally, at every step of the disciplinary process, from the receipt of an initial complaint to the resolution of a complaint, the company has to reiterate its commitment to protect the employee who raised the concern from any retaliation.  This is just as important in a situation where the complaint was found to be without merit as in the case when a complaint results in discipline against an offender.

It is not enough to state that a company will not tolerate retaliation against an employee who raises concerns about ethics and compliance.  A company has to proactively monitor the employee’s situation to ensure that no retaliation occurs.  A CECO should reach out to discipline2the employee and make sure that the employee has not suffered any retaliation, explicit or subtle, and continue to communicate and monitor the situation through contacts with the employee’s supervisor, as needed.

An ineffective and unfair disciplinary system is a breeding ground for whistleblowers to avoid internal reporting and seek justice from the government and/or in the courts.  In the end, the money spent to make a system fair and swift will avoid significant costs – both literal and reputations – from any whistleblower seeking justice from the government and/or the courts.

Topics:  Compliance, Discipline, DOJ, SEC

Published In: General Business Updates, Labor & Employment Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Group Law Firm | Attorney Advertising

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Michael Volkov
The Volkov Group Law Firm

The Volkov Group Law Firm specializes in white collar defense, corporate compliance, internal... View Profile »


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