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Modern-Day Monitorships

57 Pages Posted: 22 Mar 2015 Last revised: 8 Apr 2016

Veronica Root

Notre Dame Law School

Date Written: March 20, 2015

Abstract

When a sexual abuse scandal rocked Penn State, when Apple was found to have engaged in anticompetitive behavior, and when servicers like Bank of America improperly foreclosed upon hundreds of thousands of homeowners, each organization entered into a “Modern-Day Monitorship.” Modern-day monitorships are utilized in an array of contexts to assist in widely varying remediation efforts. This is because they provide outsiders with a unique source of information about the efficacy of the tarnished organization’s efforts to resolve misconduct. Yet, despite their use in high profile and serious matters of organizational wrongdoing, they are not an outgrowth of careful study and deliberate planning. Instead, modern-day monitorships have been employed in an ad-hoc and reactionary manner, which has resulted in repeated instances of controversy and calls for reform. Underlying these calls for reform has been an implicit assumption that broad-based rules can effectively regulate all monitorships.

Yet, when tested, this assumption is found lacking. This Article traces the rise of the modern-day monitorship and, for the first time, analyzes the use of monitorships in five different contexts. The analysis demonstrates that modern-day monitorships have experienced a rapid evolution with important consequences. First, as the Apple monitorship demonstrates, this evolution has changed the manner in which courts and lawyers conceive of the appropriate boundaries and norms for court-ordered monitorships. Second, as the Penn State scandal reveals, private organizations are co-opting the use of monitorships, which may transform the nature of monitorships from a quasi-governmental enforcement mechanism to a privatized reputation remediation tool. Third, monitorships fall into different categories based on the type of remediation effort the monitorship is meant to achieve. Because these different categories necessitate different monitorship structures to achieve the goals of each monitorship, attempts to adopt universal rules governing monitorships may be misguided. In short, differences matter when evaluating monitorships.

Keywords: monitor, corporate monitor, corporate compliance, compliance, enforcement, corporate governance, business law, corporations, ethics, professional ethics, legal ethics, behavioral ethics, misconduct

JEL Classification: K10, K14, K19, K20, K22, K23, K40, K42

Suggested Citation

Root, Veronica, Modern-Day Monitorships (March 20, 2015). 33 Yale Journal on Regulation 109-164 (2016); Notre Dame Legal Studies Paper No. 1505. Available at SSRN: https://ssrn.com/abstract=2581700 or http://dx.doi.org/10.2139/ssrn.2581700

Veronica Root (Contact Author)

Notre Dame Law School ( email )

PO Box 780
Notre Dame, IN 46556-5646
United States

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