Corporate Compliance
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Corporate Compliance

New Approaches to Regulatory Enforcement

Sharon Oded

This book considers how a regulatory enforcement policy should be designed to efficiently induce proactive corporate compliance. It first explores two major schools of thought regarding law enforcement, both the deterrence and cooperative approaches, and shows that neither of these represents an optimal regulatory enforcement paradigm from a social welfare perspective. It provides a critical analysis of recent developments in US Federal corporate liability regimes, and proposes a generic framework that better tailors sanction schemes and monitoring systems to regulatee performance. The proposed framework efficiently induces corporate proactive compliance, while maintaining an optimal level of deterrence.
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Chapter 5: Corporate liability and compliance management systems

New Approaches to Regulatory Enforcement

Sharon Oded


Corporations are often held liable for their employees’ misbehavior undertaken within the scope of their employment. In this chapter, I provide an overview of the major structures of corporate liability regimes adopted by U.S. law, along with some comparative insights from other major legal systems that may shed some light on contemporary legal tendencies. The overview provided here is neither intended to present a comprehensive portrayal of corporate liability regimes, nor to capture all disparities between civil and criminal liability frameworks. Such overviews are documented elsewhere. Instead, this chapter seeks to provide the reader with the necessary background for understanding alternative incentive schemes produced by different corporate liability regimes and their aptitude for inducing corporate proactive compliance. This chapter is organized as follows: Section 5.2 presents the traditional “vicarious liability” framework and its expansion from the civil to the criminal arena. Section 5.3 describes the contours of the transformation in perceptions that has appeared in U.S. law in recent decades. Traditional strict liability regimes have been replaced in the U.S. by somewhat softer regimes, collectively referred to as “duty-based regimes.” Such a transformation has appeared in both civil and criminal contexts. Hence, Sections 5.4 and 5.5 present two major avenues of the perception transformation which occurred in the context of civil liability, and Sections 5.6 and 5.7 present two parallel avenues of perception transformation which occurred in the context of criminal liability.

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