Appeal to CCEG Advisory Board (updated)

From: RDShatt@aol.com
To: lzicklin@stern.nyu.edu
CC: pat@ethics.org
Sent: 4/7/2012 11:00:05 A.M. Central Daylight Time
Subj: Appeal to CCEG Advisory Board

Dear Professor Zicklin,

I have submitted this email to Mr. Greenberg and Mr. Mr. Dertouzos.

It seems to me that the subject of entity level liability versus officer and employee individual liability as a means to deter corporate wrongdoing is a topic that is deserving of the CCEG's "systems perspective." (Per CCEG website: "We will take a broad view of the social, legal, and economic environment that influences corporate ethics. Such an approach allows for analysis of the interplay among forces—regulation, litigation, markets, and corporate culture—largely absent from academic research.")

Also, the website says, "We will explore new techniques for analyzing elusive subjects, such as corporate culture, that are difficult to approach empirically." That too seems applicable to my subject.

I have spent several years trying to get attention to this and cannot find much interest (as discussed in my above email).

I have importuned the Ethics Resource Center several times.

The ERC seems to have a preference for "self-policing" by corporations, which may limit its ability to "take a broad view of the social, legal, and economic environment that influences corporate ethics . . .[that] allows for analysis of the interplay among forces—regulation, litigation, markets, and corporate culture—largely absent from academic research."

This "self-policing" preference of the ERC seems evident in its 20th anniversary review of the Federal Sentencing Guidelines for Organizations. The discussion draft report touts the "sea change" in corporate ethics and compliance that has taken place, saying that "the most important story that emerges from the FSGO’s 20- year history is that the USSC’s carrot and stick approach has catalyzed vigorous efforts by companies to promote ethical performance and reduce organizational misconduct" The ERC has expended substantial resources* in conducting its 20th anniversary review of the Guidelines in order to register a chief complaint that insufficient credit is being given for effective corporate programs, because criminal cases are, by means of "settlements," being "detoured around the judges for whom the Guidelines were intended." (One of the things I have been trying to beat the drum about is how settlements of class action and other litigation deprive society of guidance about what is wrongful and what is not wrongful, and this results in a baneful muddle for corporate actors, including ethics and compliance officers; but I do not find any indication that the ERC is bothered by that potential business ethics impact of these settlements, which are much more widespread than the settlements the ERC is bothered by.)

I commented to the ERC that the FSGO deal with entity level liability and that the 20th anniversary review ought to include a review of what new learning, if any, has been acquired about the uses, effectiveness, and appropriateness of entity level liability versus officer and employee individual liability for purposes of deterring corporate wrongdoing. This is on the theory that the FSGO leverage corporate level liability to try to prevent corporate wrongdoing, and the Guidelines by themselves are not complete without a view in a some form about what role, if any, there is to be in the law for officer and employee individual liability.

If the ERC believes there is nothing to discuss, debate or investigate about entity level liability versus officer and employee individual liability as a means to deter corporate wrongdoing, that is their prerogative. If that is their belief, I strongly disagree.

It can be complicated, messy and frustrating to go outside corporate self-policing and deal with forces (like the law) and actors outside the corporation (like lawmakers, judges, plaintiffs lawyers, regulators, state attorneys general, and prosecutors). I hope that will not be a deterrent for the CCEG and that my submission will receive a fair and full consideration on its merits by the CCEG.

I look forward to receiving a reply from Mr. Greenberg, whatever that reply turns out to be.

Thank you very much.

Sincerely,
Rob Shattuck

* The ERC's draft report reveals these very substantial activities and efforts that were undertaken:

Presentation and discussion of the reporting outline with 500 compliance/ethics professionals attending a plenary session an industry conference3;
An online survey distributed to over 10,000 compliance/ethics professionals to gather input on the specific language of FSGO and areas that are in need of clarification4;
Research study involving outreach to 25 federal agencies with enforcement responsibility, requesting interviews and policy statements regarding credit given for compliance/ethics programs;
Meetings with staff of Congressional Oversight Committees5; and
Solicitation of public comment on the initial draft of this report before review by the Advisory Group

Needless to say, I wish the ERC would expend more resources outside the "self-policing" arena.

[update]
From: RDShatt@aol.com
To: lzicklin@stern.nyu.edu
CC: pat@ethics.org
Sent: 4/8/2012 4:39:51 A.M. Central Daylight Time
Subj: A little follow up

Dear Professor Zicklin,

In reviewing, I would like to call your attention to the Ethics Resource Center 2010 white paper Too Big To Regulate: Preventing Misconduct in the Private Sector and this email I sent to Dr. Harned concerning the same. Also, I tried to contact the government officials who made presentations to the ERC in connection with the white paper. See this email.

Preventing misconduct in the private sector is hugely daunting, and many parties are hard at work trying.

It seems to me indisuputable that better progress is going to be made, the more there is interface and communication among the interested parties consisting of lawmakers, judges, regulators, prosecutors, state attorneys general, plaintiffs' lawyers, ethics officers and organizations, academics, and corporate management.

I hope the ERC is doing follow up work in that vein related to its white paper.. I hope the Rand CCEG and ICJ also have growing interface and communication with other interested parties.

I am trying to participate in the ethics mission and would like to have more involvement with organizations like Rand and the ERC, which have resources, credentials and institutional standing that I lack.

Thank you.

Sincerely,
Rob Shattuck