Abstract
This article highlights the fact that the positive and negative consequences of corporate compliance are not limited to those consequences which are connected directly to the application of such a discipline. Close consideration of the effects related to the implementation of corporate compliance is therefore necessary to better understand the real effects of this corporate function.
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Notes
- 1.
The roots of the agency are in the Pure Food and Drug Act of 1906 and in the preexisting Bureau of Chemistry.
- 2.
Founded by the Federal Reserve Act, it remains to this day a federation of regional reserve banks, covering 12 districts and coordinated by a central committee, the Federal Reserve board (now the Board of the Governors after the amendment of the Banking Act of 1935, which also introduced the Federal Open Market Committee).
- 3.
Federal Trade Commission Act, §41.
- 4.
Securities Exchange Act, Sect. 4.
- 5.
From a European perspective, the referment goes back to the Convention on the Protection of the European Communities’ Financial Interests of 26 July 1995, the Convention on the Fight against Corruption Involving Officials of the European Communities or Officials of Member States of the European Union of 26 May 1997, and the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions of 17 December 1997.
- 6.
US prosecutors often impose Deferred or Non-Prosecution Agreements (DPA, NPA) upon firms in place of the application of penalties: “Prosecutors can impose specific duties on a subset of firms with alleged wrongdoing, and they enforce compliance with these duties through sanctions for a mere failure to comply with the duties, even if no substantive crime occurs” (Arlen and Kahan 2016, p. 327; see also Khanna and Dickinson 2007, pp. 1718–20, and Haugh 2017, p. 1239, who underlines the fact that “most agreements contain provisions aimed at refining corporate policies and procedures, and improving employee training and monitoring”). This ex post response seems to undermine the effectiveness of compliance as an ex ante remedy by permitting bargaining among prosecutors and managers about the consequences of the violations of criminal law: see Henning 2007; Garrett 2014, pp. 78–80; see chapter “Cognitive Dynamics of Compliance and Models of Self-regulation: In Search of Effectiveness in Strategies of Crime Prevention” and chapter “From a Voluntary to a “Coerced” Dimension: The Remedial Function of Compliance from a Criminal Law Perspective” in this volume; see also chapter “Exploring Voluntary And Mandatory Compliance Programmes In The Field Of Anti-corruption” in this volume for an analysis of British cases about the application of the UK Bribery Act (2010).
- 7.
See Ponemon Institute 2011, p. 3: “The extrapolated average cost of compliance for 46 organizations in our study is more than $3.5 million, with a range of $446,000 to over $16 million. Adjusting total cost by organizational headcount (size) yields a per capita compliance cost of $222 per employee. The extrapolated average cost of non-compliance for 46 organizations is nearly $9.4 million, with a range of $1.4 million to nearly $28 million. Adjusting total cost by organizational headcount (size) yields a per capita non-compliance cost of $820 per employee.”
- 8.
This is the position assumed by the court in In re Caremark International Inc. Derivative Litigation, 698 A.2d 970–971 (Del. Ch. 1996): see Miller 2017a, pp. 63–64. For that reason the business judgment rule shouldn’t be considered generally applicable to that form of directors’ obligation but only to determine the level of detail of the compliance model. See Brown 2001, pp. 7–32, and Langevoort 2017, p. 941, who denounces the way in which “Caremark’s “just do something” message invited a check-the-box mentality.” See also Miller 2017a, pp. 66–67; Langevoort 2018b, p. 730; McGreal 2018, pp. 673–77; Gadinis and Miazad 2019, pp. 2157–63, for an analysis of the role of bad faith in Stone ex rel. AmSouth Bancorporation v. Ritter, 911 A.2d 362–364 (Del. Ch. 2006). See also Bird and Park 2016, pp. 228–29 for analysis of the specific responsibility of Chief Legal Officers.
- 9.
Civil remedies are provided also on the basis of international agreements; for example, the Civil Law Convention on Corruption (1999) obliges the adherent states to provide for the possibility of victims of corruption obtaining a judicial restoration: see Manacorda 2014, p. 14.
- 10.
See the data collected by Garrett 2014, pp. 137–40: “There is no official information about how many companies face parallel civil litigation while being prosecuted. I collected data on the 255 companies that received deferred prosecution or non-prosecution agreements from 2001 to 2012 and whether they faced civil suits, finding such suits against 36 percent or 93 of the 255 companies. While not all civil settlements may be public, I identified $6.1 billion in civil settlements in those cases, far more than the 4 billion in criminal fines imposed by federal prosecutors. […] Some of the biggest civil suits filed against companies facing prosecution were class action suits. At least 35 of the 255 deferred prosecution agreements studied had parallel class actions.”
- 11.
- 12.
According to the Stanford Law School Securities Class Action Clearinghouse, of 5,838 filings from 1996 to the present day in the United States, 2,555 were settled, for an amount of more than $104 billion. It is interesting to note that there has been a resurgence in securities class action filings during the last 3 years, with more than 400 a year.
- 13.
The Ponemon Institute 2011, p. 3, highlights that “Business disruption and productivity losses are the most expensive consequences of non-compliance. The least expensive consequences are fines, penalties and other settlement costs.”
- 14.
The Volkswagen case has become famous also because the company has admitted that one of its in-house counsels gave advice to employees to delete relevant documents; the company was forced to pay $2.8 billion in fines for the failed litigation as a part of the plea bargain: see Gadinis and Miazad 2019, pp. 2142, 2189.
- 15.
As reported by Tombari 2017, pp. 268–70, in contrast to other European states, German legal doctrine was sensitive to the importance of compliance, as many scandals in recent years had involved large corporations (e.g., Siemens, MAN, Deutsche Telekom, Daimler, Linde Ferrostaal, and HSH Nordbank).
- 16.
See the EU Parliament resolutions of 6 February 2013, on Corporate Social Responsibility: Accountable, Transparent and Responsible Business Behaviour and Sustainable Growth and Corporate Social Responsibility: Promoting Society’s Interests and a Route to Sustainable and Inclusive Recovery, where the European Parliament acknowledged the importance of business divulging information on sustainability such as social and environmental factors, with a view to identifying sustainability risks and increasing investor and consumer trust.
- 17.
- 18.
See the data reported in Walsh 2016, p. 540, about the use in the 1970s of automated data processing to monitor firms’ activities, as reported by the advisory committee sponsored by the SEC.
- 19.
This aspect is also underlined in Office of Management & Budget 2015, p. 7: “Some regulations have significant non-quantified or non-monetized benefits (such as protection of privacy, human dignity, and equity) and costs (such as opportunity costs associated with reduction in product choices or product bans) that are relevant under governing statutes and that may serve as a key factor in an agency’s decision to promulgate a particular rule.”
- 20.
A prominent example of an application of the discipline is the recent Del Vecchio-Mediobanca case. The request of 29 May 2020 of Mr. Del Vecchio, the main shareholder of Mediobanca S.p.a., to increase its stake to 20% via its Luxembourger holding company, Delfin S.a.r.l., and so become the most influential investor of the company, has led to quite an unusual authorization by the European Central Bank. The increase in Mr. Del Vecchio’s participation in Mediobanca, one of the main Italian business banks, with important investments in other banking and insurance companies, didn’t worry the Authority because of Mr. Del Vecchio’s financial strength but because of his ability to maintain good governance of the institution as an active shareholder. For this reason the authorization has been given (although not required) not in order to let Mr. Del Vecchio exercise control over Mediobanca, nor de facto, but only as a simple investment.
- 21.
As pointed out in ECB 2020a, “The collapse in activity is initially the strongest for services, particularly those related to travel and recreational activities. This has already been indicated by some of the available survey evidence. However, the lockdown measures and the ensuing supply bottlenecks reduce production dramatically, also across large segments of the industry. Overall, the containment measures are assumed to cause a relatively larger loss of value added in retail trade, transport, accommodation and food service activities compared to manufacturing, construction and other sectors.”
- 22.
See COVID-19 Consumer Law Research Group 2020 for a comparative analysis of legal solutions adopted to grant moratoria and facilitate the resolution of refunds and vouchers.
- 23.
See ISTAT 2020, p. 3: “Micro-enterprises (3–9 employees) are those most involved in the suspension of activities: 48.7% against 32.7% of small businesses (10–49 employees), 19.2% of medium-sized companies (50–250 employees) and 14.5% of large companies (250 employees and over), for a total share of 69.4%, also considering the smaller companies initially ‘suspended’ which then reopened” (translated from the original Italian text).
- 24.
See ECB 2020b.
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Palmieri, M. (2022). The Direct and Indirect Effects of Corporate Compliance. In: Manacorda, S., Centonze, F. (eds) Corporate Compliance on a Global Scale. Springer, Cham. https://doi.org/10.1007/978-3-030-81655-1_9
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