JENNIFER ARLEN, New York University School of Law, European Corporate Governance Institute (ECGI)
Email: Jennifer.Arlen@nyu.edu
LEWIS A. KORNHAUSER, New York University School of Law
Email: lewis.kornhauser@nyu.edu

In this article, we undertake the first analysis of optimal individual and corporate liability for organizational misconduct that incorporates crucial insights from psychology about people’s motivations, their decision-making processes, and how laws and organizations affect people’s behavior. Specifically, we develop an evidence-based deterrence theory predicated on empirical evidence from psychology that people have other-regarding preferences, the law can deter by expressing social condemnation as well as through sanctions, people rely on intuitive decision-making processes to make most decisions, and organizations influence deterrence by shaping employees’ decision-making environment. Employing this framework, we show that the law cannot deter organizational misconduct through expressive channels or otherwise unless corporations are held liable for all their employees’ misconduct, and subject to sanctions that eliminate their expected profit from misconduct. Corporate liability also must induce companies to self-report and fully cooperate. We also show that deterrence through expressive law requires that individual wrongdoers face a substantial risk of conviction, contrary to claims of prior scholars who have considered deterrence through expressive law without recognizing the importance of intuitive decision-making and the factors that influence it. Our framework has implications beyond liability for organizational misconduct.

GEEYOUNG MIN, Michigan State University College of Law
Email: geeyoung.min@gmail.com
ALEXANDER M. KRISCHIK, Richards, Layton & Finger, P.A.
Email: akrischik@gmail.com

Access to corporate information plays a pivotal role in stockholder litigation. One key to that access is stockholders’ statutory right to inspect a corporation’s books and records prior to filing litigation, enshrined in the Delaware General Corporation Law’s Section 220. In the context of derivative actions brought by a stockholder on behalf of a company, Section 220 takes on an even greater importance. For years, Delaware courts have urged stockholder plaintiffs to use all the “tools at hand” to gather information before filing a derivative complaint to strengthen their allegations. One of those tools, Section 220’s inspection rights, has become all but a requirement for most successful derivative actions. Yet two recent shifts in the case law present unique challenges for both corporate defendants and stockholder plaintiffs involving statutory inspection rights.

First, Delaware courts have liberalized the scope of books and records available under Section 220 to include emails, text messages, and other electronically stored information that otherwise would not have been accessible to prospective plaintiffs until the plenary discovery process. The blurred distinction between pre-suit Section 220 inspections and post-pleadings discovery can put corporate defendants in a tough spot to comply with wid