The compliance industry is in a justifiable uproar, and that’s something to which the board, and its audit committee, should pay close attention. The Wall Street Journal is the latest and most prominent media outlet to chronicle the rising concerns of compliance officers—across industry lines—about personal liability. These concerns are grounded in recent enforcement actions of the Securities and Exchange Commission, comments from senior SEC officials and other regulatory initiatives.
While the actual risk of personal exposure appears very low, the risk of harm to compliance program integrity is not. The governing board’s obligations under the seminal Caremark decision to create and maintain a corporate reporting/compliance program should prompt directors to be sensitive to, and take steps to address, legitimate compliance officer anxieties. But those steps should be measured and balanced, and reflective of the increasing legal exposure of all members of the management team.
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