Compliance, Compensation and Corporate Wrongdoing

Conclusions from a Roundtable at Harvard Law School of May 18, 2018

23 Pages Posted: 17 May 2019 Last revised: 24 May 2019

See all articles by Karl Hofstetter

Karl Hofstetter

University of Zurich - Rechtswissenschaftliches Institut (School of Law)

Eugene F. Soltes

Harvard Business School

Reinier Kraakman

Harvard Law School; European Corporate Governance Institute

Date Written: May 1, 2018

Abstract

Numerous high profile cases across industries and jurisdictions, including Wells Fargo, Siemens, Volkswagen, BP or Google, indicate that legal compliance remains a significant corporate governance challenge around the world. Ever increasing fines have become the standard response to all types of misconduct by corporations and their agents. Are they the appropriate answer to the compliance challenge? Are there superiour ways to rein in corporations? What can academic research contribute to this debate? An international Roundtable among academics, regulators and practitioners, which was organized at Harvard Law School in May 2018, discussed these and several related questions. The conclusions from this debate suggest a three-pronged way forward: (i) Companies need to keep finetuning their compliance organizations and toolkits by, e.g., systematically measuring the effectiveness of compliance efforts and specifically linking compensation policies to compliance; (ii) regulators and prosecutors need to give more weight to incentivizing corporate compliance around the world by, e.g., adding a properly-designed compliance defense to their fining policies; and (iii) academics need to put compliance as a serious topic on their research agendas with a view to developing meaningful guidance to companies and governments, as they have been doing for some time in other corporate governance areas.

Keywords: Compliance, Corporate Governance, Compensation

JEL Classification: L

Suggested Citation

Hofstetter, Karl and Soltes, Eugene F. and Kraakman, Reinier H., Compliance, Compensation and Corporate Wrongdoing (May 1, 2018). Conclusions from a Roundtable at Harvard Law School of May 18, 2018. Available at SSRN: https://ssrn.com/abstract=3373718 or http://dx.doi.org/10.2139/ssrn.3373718

Karl Hofstetter (Contact Author)

University of Zurich - Rechtswissenschaftliches Institut (School of Law) ( email )

Raemistrasse 72
Zurich, ZH 8001
Switzerland

Eugene F. Soltes

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Reinier H. Kraakman

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States
617-496-3586 (Phone)
617-496-6118 (Fax)

European Corporate Governance Institute ( email )

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

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