Todd Haugh, ‘Understanding the Role of Power Distributions in Compliance’

ABSTRACT
Corporate compliance in most companies is carried out under the assumption that unethical and illegal employee conduct occurs in a more or less predictable fashion. Although compliance officers may not know exactly when or how compliance failures will occur, they act under the assumption that wrongdoing will be independently sprinkled throughout the company. This assumption underlies many of the common tools of compliance. But compliance failures do not necessarily conform to this baseline assumption. Instead, unethical and illegal acts in business often follow a skewed distribution that makes extreme outcomes more likely. This volatility, exhibited both in the frequency of compliance lapses and the intensity of their harm, is a function of how individual decision making interacts with the complex networks within corporations. By failing to recognize this phenomenon, the compliance community has mistargeted its efforts, failing to pay enough attention to the ‘power few’ – those influential individuals within companies that may foster outsized, interconnected compliance risk. Implications for how compliance should be reconceptualized, measured, and managed follow.

Haugh, Todd, Understanding the Role of Power Distributions in Compliance (February 1, 2021) in The Cambridge Handbook Of Measuring Compliance (eds, Benjamin van Rooij and Melissa Rorie, 2021).

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