Rethinking the Compliance Curriculum

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Compliance classes should differ depending on students’ career paths and types of risks the class addresses.

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One current trend in the legal academy is to add a “compliance” course to law school curricula. Yet, seldom do legal academics give enough thought to the design of such courses, which would require thinking harder about what market these courses serve (law firm vs. in-house) and how to frame such courses.

The place to start is to recognize that compliance is about risk. Compliance training and practice should focus on risk definition, assessment, and the management of risk, which requires the identification of risk and ex ante preventative action.

Compliance is also a significant driver of corporate behavior. Corporate behavior is a function of a number of factors, including responses to compliance related scandals, increased government enforcement, and greater awareness of how compliance affects business performance in both day-to-day operations and as a consequence of mergers and acquisitions in an increasingly complex global regulatory system.

Law school courses on compliance should address these types of risks – and they can do so through different framing, depending on the instructor’s substantive focus. For example, if the instructor focuses on the regulatory state, then compliance will assume an administrative law framing. However, a compliance class may also—or instead—involve changes within a particular field such as corporate law, health care law, financial institutions, employment law, or other areas that may have multiple types of general and specific regulation.

Firms are not monolithic, and neither is compliance. The type of compliance called for within any organization may differ at various levels. For some, compliance relates only to board-level issues. For others, it relates to senior managers, mid-level managers, or employees.

There is a good casebook on compliance, The Law of Governance, Risk Management, and Compliance, but it takes a traditional approach and uses cases to teach financial institutions and corporate-board level compliance, which one might encounter as a senior associate or junior partner at a major New York law firm. If an instructor seeks to prepare students solely for careers at large New York law firms, there is a lot of value to this traditional compliance approach.

However, I organize my class differently by focusing more on Main Street instead of Wall Street firms and by providing students a skill-set for employment at graduation, or one to three years afterwards, in an in-house legal or compliance setting.

I use business school case studies and other readings to focus on both the theory and practice of compliance. I also require financial literacy. Most compliance functions within any organization will require some basic understanding of accounting, finance, and economics. Unless there are a series of prerequisites before students can enroll in a compliance class, that class itself needs to provide an understanding of these core concepts and integrate them into each subsequent class’s discussion.

My focus on compliance includes three main points: incentives, organizational design, and ensuring that any compliance program has the right elements (risk analysis and mitigation). Each of these themes can be adapted to sector specific compliance regulatory courses or can be incorporated into a general compliance class.

D. Daniel Sokol

The University of Florida Research Foundation Professor at the University of Florida Fredric G. Levin College of Law and Senior Of Counsel at Wilson Sonsini Goodrich & Rosati, Professor D. Daniel Sokol focuses on complicated business issues, including compliance, corporate governance, pricing strategies, mergers and acquisitions, collusion, and disparate business regulation around the world. His forthcoming article, “Teaching Compliance,” will appear in the Cincinnati Law Review.  

This essay is part of The Regulatory Review’s five-part series, Innovations in Teaching Regulatory Law.