The United States Justice Department is implementing a new policy aimed at shifting the cost of corporate crime into the pockets of executives, the latest in a series of changes implemented by President Joe Biden.
Deputy Attorney General Lisa Monaco said at a press conference on Thursday that the agency’s criminal division will reduce fines for companies seeking restitution from corporate wrongdoers. Any company that wants to resolve a US investigation must also implement a plan that includes compliance goals in compensation and bonuses.
“Our goal is simple: to shift the burden of corporate wrongdoing away from shareholders, who frequently have no role in misconduct,” Monaco said at an American Bar Association conference in Miami.
Companies frequently pay fines to US authorities to resolve investigations into wrongdoing, a practice that some argue harms shareholders while protecting corporate executives
“Clawbacks are not a new concept, but in our opinion, they have never been deployed effectively or consistently,” Marshall Miller, the principal associate deputy attorney general at the Justice Department, told Reuters on the sidelines of the conference.
According to Miller, the three-year pilot program will provide discounts based on the size of the clawback on penalties, and firms will be able to keep a portion of that money even if they are unsuccessful in clawing back compensation if they try in good faith.
“You need people to have skin in the game if you’re going to create a culture that calls out misconduct and promotes compliance,” Miller said.
Last year, the Securities and Exchange Commission dramatically expanded the scope of its clawback powers, which were established in 2002.
Monaco also detailed a plan to devote more resources to corporate crime, which has implications for national security.
More than 25 new prosecutors will be hired by the Justice Department to investigate sanctions evasion, export control violations, and other economic crimes, including a new position as chief counsel for corporate enforcement within the agency’s national security division.
