Remaking Monitorships: A First Principles Approach to Monitor Effectiveness

Abstract

This Article offers a first principles approach to reimagining and remaking corporate monitorships—agreements between regulators and companies in which a third-party monitor oversees a company’s remediation efforts after wrongdoing is committed. Despite their long history, monitorships have been under continual criticism as to their purpose, function, and operation. Every-one from legal scholars and lawmakers to regulators and monitored companies have grappled with the fundamental question of how monitors can be reliably selected and empowered to perform their critical role of mitigating corporate wrongdoing long-term. This question persists as monitorships proliferate; more and more corporate ills are addressed through pretrial diversion agreements in which monitors are a central feature. We address this fundamental question by first exploring the history and evolution of monitors and monitorships, providing a comprehensive typology. This leads to a discussion of the real-world operation of corporate monitorships, as well as a review of the monitorship literature, which highlights the weaknesses in current policies and the oftentimes myopic view of scholarly research in this area. We then provide a new lens from which to consider monitor effectiveness—whether a monitor can demonstrate measurable behavioral change within the monitored organization, thereby indicating that long-term remediation of wrongdoing is likely. Our approach, and the specific policy and operational changes we outline to facilitate it, which includes the formation of a new Office of Monitorships, provides a comprehensive reimagining of the incentive structures around monitorships and the entrenched corporate, regulator, and law firm interests driving them. In sum, we offer a deep analysis of what is broken with monitorships and how best to fix them.

Keywords: Deferred prosecution agreements (DPAs), Non-prosecution agreements (NPAs), Corporate compliance, Monitor selection process, Monitor compensation structure, Office of Monitorships, Corporate wrongdoing, DOJ monitor policies, Structural reform litigation, Monitorship, monitors