Legal Personhood and Liability for Flawed Corporate Cultures

30 Pages Posted: 3 Jan 2019 Last revised: 7 Mar 2019

See all articles by Jennifer G. Hill

Jennifer G. Hill

Monash University Faculty of Law; European Corporate Governance Institute (ECGI)

Date Written: February 2019

Abstract

A number of recent corporate law scandals (including the Wells Fargo fraudulent accounts scandal, the Volkswagen emissions scandal, sexual harassment claims at Fox News and CBS, and various banking scandals currently under investigation in a high profile Australian Royal Commission) epitomize the danger posed by flawed corporate cultures. These scandals demonstrate that such organizational cultures can inflict damage on stakeholders, communities and society as a whole. The aim of this study is to explore, from a theoretical and comparative perspective, the issue of accountability for misconduct arising from flawed corporate cultures. This situation raises unique questions as to whom the law should target for misconduct in these circumstances. The research paper examines two specific types of liability which may be relevant in the context of misconduct arising from defective corporate cultures – (i) entity criminal liability and (ii) personal liability of directors and officers for breach of duty to their company. The study compares these forms of liability in the United States, the United Kingdom and Australia, to assess the extent to which they are well-suited to providing accountability for misconduct arising from flawed corporate cultures. As this comparative analysis shows, there are significant jurisdictional differences in these areas of law, which, in some cases, make such forms of liability ill-suited to achieve such accountability.

Keywords: corporate culture, corporate scandals, Wells Fargo, Australian Banking Royal Commission, stakeholders, liability, corporate crime, entity criminal liability, directors’ duties, duty of oversight enforcement

JEL Classification: D23, D70, G30, G34, G38, J33, K10, K14, K19, K22, K32, K39, K40, K41, K42, M14, N20

Suggested Citation

Hill, Jennifer G., Legal Personhood and Liability for Flawed Corporate Cultures (February 2019). European Corporate Governance Institute (ECGI) - Law Working Paper No. 431/2018; Sydney Law School Research Paper No. 19/03. Available at SSRN: https://ssrn.com/abstract=3309697 or http://dx.doi.org/10.2139/ssrn.3309697

Jennifer G. Hill (Contact Author)

Monash University Faculty of Law ( email )

Building 15
Clayton Campus
Melbourne, NSW 3800
Australia
+61 3 99053838 (Phone)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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