How Directors’ Oversight Duties and Liability under Caremark Are Evolving

Corporate law prohibits companies from pursuing profits through criminal misconduct. It uses the fiduciary duties imposed on boards under the Caremark doctrine,[1] and the threat of personal liability of directors for deliberate breach, to help motivate directors to make sure their companies comply with the law. Yet Caremark has largely failed: Most boards have neither adopted effective systems to deter corporate crime nor asserted effective oversight over investigations. Caremark did not require directors to obtain information about material compliance failures or detected misconduct, information essential to effective oversight. To induce directors to deter misconduct – even when it is … Read more

Corporate Criminal Enforcement as a Defense to Companies’ Political Influence

Countries around the world are reforming their laws governing corporate criminal liability. Jurisdictions and scholars arguing against broad corporate liability, often rely on the claim that corporate civil liability should be as effective because it can impose equally large sanctions on companies. Yet corporate liability is only effective when enforcement officials have the resources and political will to pursue large politically-influential corporations. At the federal level in the U.S., companies need to be subject to both criminal and civil liability for their misconduct. Federal civil enforcement is less effective than criminal enforcement because large companies can more easily leverage their … Read more

The Fuel that Runs the Corporate Investigation Machine

The United States pursues more successful corporate criminal enforcement actions against large multi-national firms than any other country, collecting enormous penalties and occupying center stage in the global enforcement arena. U.S. dominance draws its horsepower and its torque from two sources.  The first, of course, is an extremely broad and easy to apply corporate liability rule: respondeat superior.  Under this rule, corporations are liable for all crimes committed by their employees in the scope of employment with some intent to benefit the firm. The second is the power granted to prosecutors to negotiate and settle cases, most often through … Read more