The 6 ways to use incentives in your compliance program

There can’t be any question that governments, when looking at compliance programs, expect you to address incentives.  In one of many examples, the DOJ Criminal Division’s Principal Deputy Assistant Attorney General, Nicole M. Argentieri, in her September 23, 2024 speech at the SCCE CEI in Grapevine, Texas, emphasized the importance of incentives.  But in the compliance literature, seminars, podcasts and other aspects of our field, this element is almost completely ignored.  Because of this lapse in our profession, years ago I wrote a white paper for SCCE explaining in detail how to address incentives, “Using Incentives in Your Compliance and Ethics Program,”. When the SEC and DOJ issued their guide on FCPA compliance this paper was the source they cited, covering the types of possible incentive steps discussed in that paper. 

So here, for easy reference, is a list of the basic, how-to points for using incentives in your compliance program.

1. Include in personnel evaluations support for and leadership in the commitment to compliance. (The SCCE paper includes many elements to assess. A recent one I just added to my list is to help power compliance champions or ambassadors programs: how fully do the business unit managers promote and support the unit’s compliance champion.)
2. Provide for input by the compliance officer in promotion decisions. (Argentieri expands on this – who you promote shows who and what you really value).
3. Provide for input by the compliance officer in all incentive and reward systems. (There is no clearer recent example for the need for this than Wells Fargo and the “8 is great” incentive system.)
4. Provide rewards and recognition for, and celebrate those showing leadership and commitment to compliance. (The top salesperson should not be the only person being celebrated.)
5. Provide rewards and recognition for compliance and ethics staff. (Is compliance a dead end in your company, or a path to advancement? Employees watch this – it shows them what really matters.)
6. Recognize and consider for promotion those who speak up (Consider speaking up as a sign of strength. But no bounties, please!)

When the DOJ Criminal Division’s Argentieri gave her talk she provided useful, current insight into what these things mean.

She noted, for example, that each of their corporate resolutions “now requires that the company include criteria related to compliance in its compensation and bonus system.” They want “clear metrics both to reward compliance-promoting behavior and to deter misconduct.” She repeated that this “is now required in every Criminal Division resolution.” 

She pointed out that the Criminal Division has been seeing companies “incorporating into their compensation systems performance reviews that include an assessment of how employees demonstrate the company’s core values.”  She noted an example where assessment of demonstrations of core values were “factored into both compensation and promotion decisions.”  This point should not be missed:  the idea of addressing “incentives” includes decisions about promotions.  Here DOJ may have a better sense of reality than those wondering what the word “incentives” means.  Perhaps the fastest way to undermine a corporate culture is to promote those who engage in misconduct or undercut the compliance program.  People in companies watch very carefully who gets promoted and who does not. 

DOJ’s Argentieri clearly understood this, when she said:

“Companies that make compliance a critical factor in determining compensation are sending the message to employees and management that engaging in ethical behavior is critical to success in business.  These companies are fostering strong cultures of compliance and promoting leaders who demonstrate ethical values.”

This Criminal Division leader is just one in a long line of government officials who have been stating the obvious:  companies use incentives because they work.  If you want a compliance program that works – if you actually want to develop a culture that supports and promotes compliance and ethics – then you cannot simply ignore the incentive system that drives the organization’s conduct.  It must be a factor in your compliance program.

There is simply no excuse for ignoring this powerful force. The SCCE white paper on incentives contains practical examples showing how to approach each of the 6 steps.  We have also published pieces on this topic that are on Compliance and Ethics: Ideas & Answer’s website.  There are many types of steps that can be taken, including some you could start immediately today, right after you finish reading this article!