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External spend data where a company has suffered reputation damage

In a 2005 survey, the Open Compliance & Ethics Group (OECG) collected extensive data on how 79 companies structured and funded their compliance and ethics programs. The OECG report shows total average costs of compliance and ethics processes over the period 2000 to 2004, broken into six categories. “Legal-External” and “Legal-Internal” were in the six categories, along with “Compliance & Ethics,” “Audit-internal,” ”Audit-External,” and “Non-Audit Services.”

Taking a further quantitative step, the report broke the respondents into companies who suffered “Reputation Damage” during the period and those who did not.

Of these total costs of compliance and ethics, external legal costs amounted to 28 percent for the no-damage group and 39 percent for the damage group. Internal legal costs amounted to 39 percent for the no-damage group and 20 percent for the damage group. All in all, the data supports and quantifies the logical assumption that companies pay outside counsel much more when they have to respond to events that damage their reputation.