The United States Sentencing Commission (also known as the USSC) established the first organizational sentencing guidelines in 1991. The US federal sentencing guidelines set out the type of punishment and reforms federal judges are advised to implement when sentencing an organization (such as a public company) for a violation of federal law. In its new 2022 report, “The Organizational Sentencing Guidelines: Thirty Years of Innovation and Influence,” the USSC concludes that the most important impact of the federal sentencing guidelines is not the number of companies convicted, or the billions collected in fines, but rather the enormous impact that the guidelines have had on compliance by establishing universally regarded standards for effective compliance programs.
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LOCATION: US
EFFECTIVE: August 2022
The United States Sentencing Commission has drafted a new, extensive report that discusses the development and history of the US federal sentencing guidelines for organizations. The publication, “The Organizational Sentencing Guidelines: Thirty Years of Innovation and Influence,”discusses the impact of those guidelines and provides a 30-year data retrospective on the nearly 5,000 organizations that have been sentenced under the guidelines.
The United States Sentencing Commission is a bipartisan, independent agency that studies and develops sentencing policies for the federal courts to reduce disparities and promote transparency and proportionality in sentencing. Created by Congress in 1984, the USSC is located in the judicial branch of the US government and serves as a resource for Congress, the executive branch, the courts, and the public on matters relating to federal crime and sentencing.
The United States Sentencing Commission has divided the new federal sentencing guidelines report into three main sections. The first section details the history and development of the original federal sentencing guidelines starting in the 1980’s through the two significant amendments of the organizational guidelines in 2004 (in part, a response to Sarbanes Oxley) and in 2010. The report provides a lot of helpful background information on how the US Sentencing Commission’s rule-making process works, how the USSC considers public comment and synthesizes data to mold the guidelines. Because the guidelines form such a fundamental underpinning to compliance standards, it can be helpful to better understand the process that led to the development of these compliance standards.
The second section details sentencing data for the 4946 organizations that have been sentenced for federal crimes since 1991. The data can be illuminating, particularly some of the demographics of organizations who have suffered some of the most severe sanctions under US law. The vast majority of organizations are private organizations, not public companies, and have small employee populations. According to USSC data:
The danger to small and medium-sized organizations facing the most serious consequences for criminal misconduct is great. We also can see that there is a high correlation between not having a compliance and ethics program and an organization being convicted of a crime. Since 1991, 89.6% of organizations sentenced for criminal offenses under the guidelines were found not to have a compliance program in place.
Finally, it’s not just organizations that face stiff penalties—the data shows that over half the time (53.1%) at least one individual is charged along with the subject organization, and these are not always high-ranking leaders (only 25.7% were considered “high level officials” in 2021). Rank and file and lower-level management often find themselves charged with a crime right along with their company.
The third section of the report details the impact of the Organizational Sentencing Guidelines both in the United States and abroad. We all can see the DNA of the federal sentencing guidelines on guidance produced by the US Department of Justice and the Securities and Exchange Commission, but many other federal agencies have adopted compliance requirements based on the standards in the Guidelines. The Federal Acquisition Regulations (FAR) also has compliance requirements based on the Guideline standards that apply to any organization seeking to conduct business with our government. But the USSC regards the influence the Guidelines have had on corporate culture, and the compliance and ethics best practices developed by millions of organizations over the last generation, to be the most fundamental influence of the original 1991 standards.
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