Corporate Monitorships and New Governance Regulation: In Theory, in Practice, and in Context

Abstract

This paper was prepared for a conference on "New Governance and the Business Organization" at the University of British Columbia in May 2009. It considers government agencies' increasingly common strategy of resolving corporate criminal law and securities regulations violations by way of settlement agreements that require corporations to improve their compliance programs and hire independent monitors to oversee the changes. Based on our interviews with corporate monitors, regulators, and others in the United States and Canada, we identify the ways in which these monitorships in practice fall substantially short of the ideal new governance model we describe. These failings are not necessarily due to the adversarial nature of the enforcement context, which some argue makes this context inhospitable to new governance reform efforts. Instead, we identify a set of micro-sociological characteristics inherent in the prosecutorial and monitorship environment that can push many monitorships to favor the status quo and to be under-ambitious. We close with some broader observations about the usefulness of an expertise-driven process, the effect of an enforcement-based one, and the possibilities for a more participatory approach to the oversight of monitorships than we have yet seen.

Keywords: new governance, corporations, monitorships, deferred prosecution agreements, securities regulation, corporate criminal law, enforcement, regulatory theory