The Federal Sentencing Commission sets standards for sentencing for federal crimes. Because companies can also break the law, the Commission also developed guidelines for how to sentence organizations: the Federal Sentencing Guidelines for Organizations (FSGO).

Companies can face penalties from fines to operational requirements. But the most talked-about portion of the FSGO is what it says about compliance programs. If an organization has an effective compliance program, then it will face reduced consequences in an enforcement action.

What’s an effective compliance program? The FSGO outlines what you need.

1. Your company should have standards and procedures in place, such as a code of conduct, to prevent and discourage wrongdoing.
2. A top-level executive should take on oversight of the program.
3. You should avoid unreliable people or those with a history of unethical actions in positions of responsibility.
4. Your company should establish communication and training programs to promote compliance
5. Put monitoring and auditing systems into place in order to catch unusual activity — and include a way for employees to report problems.
6. Enforcement and discipline should be consistent and fairly administered.
7. When an incident occurs, respond appropriately, and then update your compliance program as necessary to avoid a similar issue.

With this formula, a business of any size can tailor a compliance program to its needs, creating an ethical culture and reducing its risks.

Stacey Supina, Center for Ethics in Practice, University of St. Thomas