More Compliance Officers, Less Compliance

It appears these are boom times for corporate compliance officers. According to an article in Law360, a recent survey by the recruiting firm BarkerGilmore found that that “the demand for compliance talent is higher than ever because of an evolving list of new requirements like environmental, social and governance programs; enterprise risk management and new work culture brought on by post-pandemic norms.” Pay is also rising rapidly for these officers.

This is all good news for those who want to make a career of helping corporations deal with government regulations, but what does it mean for compliance itself? Does the inclination of big business to spend more on this function indicate that corporate behavior is improving?

Based on the data collected in Violation Tracker, that does not seem to be the case. Fines and settlements in the U.S. in 2022 climbed to over $69 billion, the highest annual total in seven years. Over the entire span of time covered by the database, which extends back to 2000, the only higher totals occurred in the mid-2010s, when the annual tallies reached as high as $77 billion due to giant settlements by the likes of BP in connection with the Deepwater Horizon disaster and by the major banks in connection with the mortgage and toxic securities crises.

Last year also saw a jump in the average penalty paid per case. That figure was $2.5 million, up from $2 million the year before. Aside from the $2.9 million average in 2020, last year’s amount was the highest since 2015.

Another indicator that 2022 was a banner year for penalties can be seen in the number of individual parent companies which paid a massive amount–$100 million or more–in fines and settlements. Sixty-three parents gained that dubious distinction, the highest number since 2015.

Included in that group were eleven companies with penalties of $1 billion or more: Allianz, Walgreens Boots Alliance, CVS Health, Teva Pharmaceutical Industries, Wells Fargo, Walmart, AbbVie, Danske Bank, Navient, Bayer and Glencore.

What does it say that penalties are accelerating at the same time that corporations are purportedly putting more resources into compliance? One possibility is that the increasing use of compliance officers is merely window dressing, a gesture meant to satisfy investors concerned about social responsibility. These officers may have little power and influence. They can warn managers about regulatory risks but may have little ability to change behavior that is illicit but profitable.

A more charitable interpretation would be that compliance officers are bringing more violations to light by encouraging companies to self-report infractions. This, in turn, could contribute to increases in overall penalty levels.

This would be a hopeful sign if it meant that companies were at the same time cleaning up their behavior. The problem is that recidivism shows no signs of receding. Year after year, most large companies go on breaking the rules and treating penalties as an affordable cost of doing business as usual.

If compliance officers could do something about that, they would truly be earning their rising pay.