From a purely business point of view, a commitment to compliance has primarily strategic motivations: Just like normal citizens, companies that are so-called legal entities must comply with existing national and international laws. In October 2006, the U.S. Small Business Administration re-launched Business.USA.gov, which provides a single point of access to government services and information to help companies adhere to government regulations.
If efforts are not made to comply with these regulations, those involved run the risk of being punished with sanctions such as fines, profit skimming, or even imprisonment. In addition, there are internal and external consequences and costs that may be incurred by the offending company, such as personnel consequences or claims for damages by customers and business partners. However, these sanctions are not limited to a single company, but can affect the entire parent company of the group. In cases like this, insurance does not offer any protection.
The main objective of compliance is therefore to avoid or quickly identify criminal behavior and to react appropriately to it in order to minimize any economic risk that might result. Although deliberate breaches of rules cannot be prevented in this way, the existence of compliance measures can, however, lead to a reduction in the liability of managers. However, whether an internal control system is taken into account to reduce penalties always depends on the individual case.
A well-known example of a compliance violation is the emissions scandal that has preoccupied the media, industry and politics since September 2015: Volkswagen admitted that it had been using an illegal shutdown system in its diesel vehicles to manipulate nitrogen oxide levels and thus circumvent applicable emission standards - a deliberate breach of the law ordered by management. This programming software was used in about eleven million cars worldwide, 600,000 of which were in the United States. Since then, the company has been the focus of continuous public attention: company CEO Martin Winterkorn resigned from his position, possibly facing 25 years of incarceration. Politicians are focusing more on vehicle manufacturers; the automotive industry consequently sees itself in a serious crisis; numerous criminal and civil investigations are underway.
Volkswagen announced plans in April 2016 to spend around $18 billion rectifying the emissions issues as well as refitting all the affected vehicles after they’d been recalled. In total the whole scandal cost the company around $29 billion.