Commentary

Elsen comments on articles by Deborah DeMott and James Cox. He agrees with them that the rules governing conduct are often different from the rules written in compliance programs and as part of codes of conduct

\u3cem\u3eCaremark\u3c/em\u3e and Compliance: A Twenty Year Lookback

The Delaware Chancery Court’s decision in In re Caremark was and is a landmark decision. This brief Commentary takes a look back at Caremark on three issues that pertain to its contemporary relevance inside the corporate boardroom: (1) framing the cost-benefit assessment on the question of how much to spend on compliance; (2) how and when to force certain compliance matters to real-time board-level attention; and (3) using selection, promotion, and compensation decisions to influence the culture and risk-taking “temperature” of the firm

The Responsibility Gap in Corporate Crime

In many cases of criminality within large corporations, senior management does not commit the operative offense — or conspire or assist in it — but nonetheless bears serious responsibility for the crime. That responsibility can derive from, among other things, management’s role in cultivating corporate culture, in failing to police effectively within the firm, and in accepting lavish compensation for taking the firm’s reins. Criminal law does not include any doctrinal means for transposing that form of responsibility into punishment. Arguments for expanding doctrine — including broadening of the presently narrow “responsible corporate officer” doctrine — so as to authorize such punishment do not fare well under the justificatory demands of criminal law theory. The principle obstacle to such arguments is the large industrial corporation itself, which necessarily entails kinds and degrees of delegation and risk-taking that do not fit well with settled concepts about mens rea and omission liability. Even the most egregious and harmful management failures must be addressed through design and regulation of the corporation rather than imposition of individual criminal liability

Liability and Admission of Wrongdoing in Public Enforcement of Law

Some judges and scholars have questioned the social value of the standard form in which the Securities and Exchange Commission settles its corporate enforcement actions, including the agency’s use of essentially unreviewed consent decrees that include no admission of liability or wrongdoing. This essay for a symposium on SEC enforcement provides an analysis of the deterrent effects of the three main components of settlements in public enforcement of law: liability, admission, and remedy. The conclusions are the following. All three components have beneficial deterrent effects. Cost considerations nonetheless justify some settlements that dispense with liability or admission, or even both. But a practice like the SEC’s of uniformly institutionalizing settlements without admissions, such that the deterrent effects of admissions are never realized, even for bargaining leverage, is not justified. Further, there is reason to believe that some form of judicial review of enforcement settlements would contribute to deterrence. To put the argument another way, the SEC and other agencies engaged in public civil enforcement could learn something from contemplating why the federal criminal justice system strongly disfavors nolo contendere pleas and why a plea bargaining system dominated by nolo pleas would be so undesirable as to be unthinkable

Visions of the Republic Symposium: Facts and Fictions of Corporate Executive Accountability

U.S. Senator and former Democratic presidential contender Elizabeth Warren recently proposed the Corporate Executive Accountability Act, a bill that lowers the level of mental state required to prosecute executives for any corporate crime. A nationwide debate has been raging over this Act, but most arguments have focused on the appropriateness of the relaxed requirement, and the whole picture of executive accountability is vague. This Essay reveals what the facts and fictions of corporate executive accountability are, focusing on the degree of punishment of criminal executives. The author presents the estimates of expected direct and indirect punishments of executives and considers other options to deter corporate crimes, options that could be used with or without the proposed Act

Back to the 1930s? The Shaky Case for Exempting Dividends

This article is based in part on the author’s U.S. Branch Report for Subject I of the 2003 Annual Congress of the International Fiscal Association, to be held next year in Sydney, Australia (forthcoming in Cahiers de droit fiscal international, 2003). He would like to thank Emil Sunley for his helpful comments on that earlier version, and Steve Bank, Michael Barr, David Bradford, Michael Graetz, and David Hasen for comments on this version. Special thanks are due to Yoram Keinan for his meticulous work on the EU regimes (see Appendix). All errors are the author’s. In this report, Prof. Avi-Yonah critiques the proposal to exempt dividends, either as a way to revive the economy or the stock market or as a way of achieving corporate-shareholder tax integration. Any efficiency gains from such integration may be more than offset by efficiency losses when the international aspects of the proposal are considered

On Maximizing Deterrence Per Dollar: Thoughts Inspired by Peter Reilly

Professor Peter Reilly addresses concerns that practitioners in this space have privately and publicly debated for years. What exactly is cooperation credit? Can we quantify it? The government promises that self-reporting is in our self-interest, but the government’s interest in saying so is obvious enough. What evidence can the government provide? The difficulty of measuring this credit is somewhat ironic, given the government’s dependence on cooperation. As this essay will show, our modern enforcement regime, which has four components—the internal or independent investigation, voluntary disclosure, cooperation credit, and a negotiated settlement—is the government’s method of maximizing general deterrence with finite resources. Ensuring that defendant companies see sufficient incentive to self-report is therefore critical to advancing the policy goals that inhere in anti-bribery enforcement. Hence the value of Professor Reilly’s critique. He argues that the government “must provide greater transparency regarding specific and calculable benefits that can be achieved through self-reporting and cooperation” in FCPA settlements. And indeed, it may be powerful evidence of his argument’s force that very recently, the government has taken measures to do that very thing. Put another way, Professor Reilly’s is an idea whose time has come. This Essay provides both background and foreground to Professor Reilly’s article. It first explains the role of self-reporting and cooperation in anti-bribery enforcement, suggesting that the government is essentially seeking to adjust both the numerator and denominator of a ratio that might be called Deterrence Per Dollar. This Essay will then describe and endorse Professor Reilly’s critique of FCPA enforcement, and show how the government seems to have recently responded to that critique with a flurry of important reforms. Finally, I briefly discuss the prospects of adopting additional reforms, and conclude by sounding a hopeful note that these would likewise command Professor Reilly’s support

Back to the 1930s? The Shaky Case for Exempting Dividends

This article is based in part on the author’s U.S. Branch Report for Subject I of the 2003 Annual Congress of the International Fiscal Association, to be held next year in Sydney, Australia (forthcoming in Cahiers de droit fiscal international, 2003). He would like to thank Emil Sunley for his helpful comments on that earlier version, and Steve Bank, Michael Barr, David Bradford, Michael Graetz, and David Hasen for comments on this version. Special thanks are due to Yoram Keinan for his meticulous work on the EU regimes (see Appendix). All errors are the author’s. In this report, Prof. Avi-Yonah critiques the proposal to exempt dividends, either as a way to revive the economy or the stock market or as a way of achieving corporate-shareholder tax integration. Any efficiency gains from such integration may be more than offset by efficiency losses when the international aspects of the proposal are considered

Readability, Contracts of Recurring Use, nd the Problem of Ex Post Judicial Governance of Health Insurance Policies

While the rhetoric surrounding the passage of the Patient Protection and Affordable Care Act focused on core issues such as cost, quality, and access to care, the dialog rarely acknowledged a key problem-the fact that most Americans do not understand their health insurance. Simply put, consumers do not fully grasp their health insurance coverage because the jargon found in many health insurance contracts is impenetrable to most Americans. This is disconcerting because consumer-oriented information is central to our increasingly consumer-directed health care system. Consumers are expected to make cost-effective choices among the array of health insurance plans that may be available to them, utilize health care services in a cost-effective manner, navigate provider networks, minimize their out-of-pocket expenses, and effectively appeal denials of coverage. Furthermore, unlike other types of insurance agreements, health insurance policies are contracts of recurring use. That is, health insurance policies are routinely and repeatedly invoked by consumers to finance their health care. Yet, such contracts are written at a level that is beyond the reading skills of most Americans. As such, insureds not only have difficultly understanding the details of their coverage, they do not fully comprehend the benefits and rights afforded by the policy. Consequently, the traditional approach of ex post judicial governance of insurance agreements (as adhesion contracts) by interpreting ambiguities in favor of insureds provides inadequate protection for health insurance consumers. If consumers do not understand their coverage rights and benefits, they cannot reasonably be expected to know when those benefits have been wrongly denied. The better, ex ante solution is to make health insurance contracts readable in the first instance by requiring that health insurance contracts meet an eighth grade readability standard as a condition of state approval