Compliance “moot courts” for CEOs?

The CEO of a client company once told me that he wanted to fire another corporate officer there. I asked him what basis he had for this contemplated action and he said it was that the officer had failed to take mandatory compliance training. I responded by asking if he – the CEO – had taken the training, to which he replied (without a trace of irony or shame) that he had not.

Several years ago, unrelated to my encounter with the CEO, I ran a blog post proposing that in certain circumstances “moot courts” be held to determine what, if any, accountability members of a board of directors should bear for the consequences of a compliance-related breach.  In  today’s post I ask: Should such an idea be tried with CEOs?

There is indeed precedent for this sort of exercise. My law partner Rebecca Walker and I have held compliance moot courts at an industry conference.  We are also aware of something similar being conducted elsewhere,

Of course, a C&E moot court can be seen as essentially just another form of assessment, However, the advantage of a compliance moot court is that, by its nature, it can focus the CEO’s mind (and that of other senior executives) on the need for strong C&E in a way that traditional compliance assessments might not.  And the need for such focus has never been greater.

In a speech delivered earlier this month, Assistant Attorney General Kenneth A. Polite Jr. said at the ABA Institute on White Collar Crime:

When you are asked about remedial action, and you’re asked about corporate leadership and personnel, we are doing so to ensure individual accountability. For example, even if there is not any evidence that a CEO personally committed a crime, upon discovery of a crime, a corporation should examine whether a change in leadership is necessary, not for change’s sake, but because he modeled poor ethical behavior for the workforce, or fostered a climate in which subordinates committed wrongdoing with intent to benefit the company, or permitted weak

In my view, this somewhat enhanced focus on CEOs as a source of risk calls on companies to up their game on mitigation.

All that should be covered in a CEO assessment is beyond the scope of this post, but a few of the many such topics are:

– How the CEO makes the C&E program a true strategic imperative.

– How the CEO ensures that the Program has sufficient resources, reach, autonomy and clout.

– What messaging the CEO sends to employees about C&E.

– How C&E effects compensation, promotion and related matters at the Company.

Finally note that moot courts need not involve an actual examination of the CEO. It should generally be sufficient to have the CECO “testify” about the CEOs role in the program.


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