Session 5: Corporate Misconduct and the Law

 

This session confronts the legal and institutional failures that allow corporate misconduct to persist, even in systems designed to prevent it. From loophole-riddled laws and toothless enforcement to compliance theater and selective prosecution, the discussion reveals how both structure and incentives often protect power rather than challenge it. Panelists dissect why serious harm rarely results in serious consequences, and what it would take to shift accountability from symbolic gestures to real deterrence.

Moderator:  Anat Admati, Stanford Graduate School of Business    

Panelists:

  • Ellen S. Podgor, Stetson University College of Law
  • Elizabeth Pollman, University of Pennsylvania Carey Law School
  • Fabio De Pasquale, Public Prosecutor's Office, Milan, Italy

Discussant: Jennifer Taub, Wayne State University Law School

 

Key Takeaways:

Corporations Are Legal Fictions With Real Power: Anat Admati emphasized that corporations are powerful legal entities created and governed by human-designed laws. She underscored the need for robust enforcement, noting that rules alone are insufficient if those writing and enforcing them lack accountability.

Corporate Law Is a Weak Tool for Accountability: Elizabeth Pollman explained that corporate law is largely ineffective for addressing misconduct. Most enforcement happens outside corporate law, through regulations or litigation involving securities fraud.

Delaware Law Favors Flexibility Over Accountability: Pollman explained that Delaware’s corporate framework prioritizes managerial discretion, limiting oversight through exculpation clauses and procedural barriers. While recent reforms have modestly expanded fiduciary scrutiny, structural incentives still deter meaningful accountability.

Weak Laws and Risk Aversion Undermine Corporate Accountability: Ellen Podgor noted that vague statutes and narrow court interpretations have weakened white-collar enforcement, while fear of collapse deters prosecutors from taking corporations to trial. Instead, they often settle, avoiding risk but sacrificing deterrence.

Shortcut Prosecutions and Internal Pressures Undercut Justice: Podgor argued that prosecutors often avoid complex fraud cases by relying on easier charges like obstruction, while DOJ policies push corporations to turn on employees. This undermines deterrence, fosters mistrust, and hinders meaningful internal reform.

Global Anti-Corruption Cases Face Systemic Sabotage: Fabio De Pasquale shared his experience prosecuting the OPL-245 case involving Shell and Eni, describing how courts, politicians, and corporations coordinated to undermine the case. Despite overwhelming evidence, all defendants were acquitted due to high evidentiary burdens and political resistance.

Prosecutors Face Intimidation and Retaliation: De Pasquale revealed that after his office pursued high-level executives, he and his colleague were themselves prosecuted, underscoring the personal and professional risks of challenging corporate power.

Law Misfires in Targeting Corporate Misconduct: Jennifer Taub outlined three types of offenders: criminal-to-the-core firms, opportunistic violators, and one-off actors. She argued the legal system perversely targets the weakest group while letting systemic offenders evade real consequences.

Regulators Enable Misconduct Through Inaction and Capture: Anat Admati pointed to Purdue Pharma and Boeing as examples where agencies like the FDA and FAA enabled harm through lax oversight and deference to corporate influence. Failures to act early allowed catastrophic outcomes.

Slide Decks from This Session: