Self-regulation duties fall on the board

As U.S. enforcement agencies crack down on crime, boards must take the lead in self-regulation

Harry Truman once famously stated “the buck stops here,” meaning that, as the President, he held ultimate responsibility for certain decisions. While buck passing might be common practice in middle management, when it comes to major issues, such as regulation and compliance, it is essential that those in power, especially the board, take responsibility for making sure everything is done correctly.

As U.S. enforcement agencies continue to get tough with corporate misconduct, companies are expected to police themselves. This provides an opportunity for these companies to discover problems on their own and deal with them, but it also means that, if they mishandle a situation, the consequences could be even larger.

According to The Wall Street Journal, the Department of Justice wants boards of directors to lead internal investigations to ensure that management does not interfere.

“Internal investigations these days are effectively an extension of government investigations,” Joe Whitley, a former acting associate attorney general and now a partner at Greenberg Traurig LLP, told the Journal. “A growing number of investigations are handled by the board once the government is involved.”

The board should spearhead investigations under many circumstances, but especially when there is suspicion of misconduct by members of senior management. While the DOJ will rarely demand the involvement of the board, it may look askance at an investigation that is conducted by senior management when members of that group are implicated.

It is a tricky situation for boards, as an independent investigation can be costly, time consuming and distracting, but the fact of the matter is, conducting such an investigation can go a long way toward proving to the DOJ that the company is doing everything in its power to get things right. After all, the board has a responsibility to demonstrate that the buck stops there. 

Managing Editor

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Rich Steeves

Richard P. Steeves is Managing Editor of InsideCounsel magazine, where he covers the intellectual property and compliance arenas. Rich earned a B.A. in English Literature...

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