A Very Special Regulatory Milestone

20 Univ. Pa. J. Bus. Law 391 (2018)

37 Pages Posted: 12 Sep 2017 Last revised: 16 Jun 2018

See all articles by William S. Laufer

William S. Laufer

University of Pennsylvania - Legal Studies Department

Date Written: June 8, 2018


Expenditures underwriting corporate compliance in the United States are approaching a very special regulatory milestone. Compliance costs are nearing municipal policing costs. The trajectory of compliance expenditures over the past several decades may be traced to a good corporate citizenship movement in the mid-1990s where the government proposed a public-private sector partnership to combat corporate crime. In this Essay, it is argued that this “partnership” was never really about a fair sharing the enforcement responsibilities. The government hoped to overcome the near insurmountable challenge of getting evidence of corporate wrongdoing, while shifting as much of the burden and costs of policing to the regulated. Companies continue to justify making compliance expenditures in reasonably defensive ways to levels that are now unprecedented.

The Essay highlights that those who rail against over-criminalization or corporate criminal liability, more generally, miss speaking out against a one-sided regulatory strategy of compliance cost shifting that brings us to this historic milestone. Moreover, the threat of unfair and burdensome costs was never with the very rare event of corporate criminal liability. Rather, the threat came from firms taking the government’s bait that they needed to spend, and spend, and spend more. This boundless spending, it is concluded, may be seen as imposition of a preemptive penalty on firms. This is a way for regulators to ensure that firms pay a fair share for their wrongdoing for the “dark figure” of corporate culpability.

In this Essay, some of the most significant questions about the private and public administration of justice are asked on the precipice of a gradual retreat from this very special regulatory milestone. This retreat will come from efficiencies brought about by the digitalization of compliance and a convergence in compliance technology, evaluation science, international standards, and investments in sophisticated enterprise-wide risk management systems. The resulting reduction in compliance expenditures will bring about a corresponding decline in preemptive penalties. The hope is that this will motivate government functionaries to join firms as an active partner in forging new and innovative paths to regulation.

Keywords: regulation, compliance, corporate criminal law, corporate crime

JEL Classification: K2, K14, K20, K23, K42

Suggested Citation

Laufer, William S., A Very Special Regulatory Milestone (June 8, 2018). 20 Univ. Pa. J. Bus. Law 391 (2018), Available at SSRN: https://ssrn.com/abstract=3034699 or http://dx.doi.org/10.2139/ssrn.3034699

William S. Laufer (Contact Author)

University of Pennsylvania - Legal Studies Department ( email )

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