In other words, does the company say, “This is the conduct we want, and this is how we will hold you accountable for it.” Does the company employ leaders who are visible role models of good conduct and fire those who are not? Are systems of compensation and promotion aligned with corporate goals and purposes? And, if there is a pattern of misconduct, are you sure that your incentive programs are based on merit? Can the heads of business lines—the people responsible for P&L— explain how it is that each part of their business makes money and manages the associated risks? If not, are they really capable of effective oversight? When misconduct comes to light, does the company assess itself and challenge assumptions with brutal honesty? Upon learning of misconduct, is the company willing to intervene in a timely fashion? If there is an emerging pattern of misconduct, how quickly is it identified and addressed? Finally, are there particular desks or teams in which everyone is quite junior? Too junior, perhaps, to have worked through a down business cycle or the financial crisis? If so, are we giving that area adequate supervision and compliance attention? Concluding thoughts I want to raise one final topic with you today, which, to my mind, is related to the question of accountability. It is the risk that control groups in large institutions can evolve to a place where they are driven by their own self-preservation or immediate concerns.
Another cause for optimism is the attention compliance now receives in law schools and other graduate programs. Two examples are NYU Law School’s Program on Corporate Compliance and Enforcement, and Fordham Law School’s LLM program in Corporate Compliance. These programs engage key leaders in the field in important public discussions, and train students who, in terms of their understanding of corporate governance, are well ahead of where many of us were when we began our careers. These programs will contribute to a bright future for the compliance profession. Compliance, enforcement, and accountability I also want to say a few words about enforcement and accountability. I believe, of course, that past misconduct should be punished. I also believe that we who play a role in bringing wrongdoers to account should also require forward-looking reforms under the mantra of “Never again.” For those forward-looking reforms to be successful, firms and enforcement attorneys need to pay attention to root causes of misconduct. There is a vigorous and important debate in academic and regulatory circles about the prosecution of individuals in cases of corporate misconduct. Virtually everyone agrees that individual prosecutions can have deterrent effect on future misconduct if people believe they will get caught. I follow the debate with great interest. Suffice it to say, I agree that individuals must be held accountable for misconduct. If the misconduct is criminal, criminal prosecution is warranted.