REG522 Economic Analysis of corporate misconduct
The course provides an introduction for Ph.D. students in economics of economic analysis of the use of liability to deter corporate misconduct. The course will begin with the foundational models of how liability should be structured to optimally deter wrongdoing by individuals. We will then explore the additional issues that arise when the individuals committing misconduct do so in the course of employment for a large organization. The course will focus on corporate crime and securities fraud, but also will introduce students to models of corporate liability for medical malpractice. We will use these frameworks to explore economic models of incomplete contracts; specifically, the effect on agency relationships and optimal liability of moral hazard, adverse selection, authority, collective goods, and renegotiation. The course also will introduce students to US law and policy governing key areas of law: corporate criminal enforcement, insider trading, securities fraud, and foreign corruption. The issues covered are relevant well beyond corporate crime and apply to any situation where one is seeking to determine optimal liability when the relevant actors are in a principle-agent relationship (such as corporate governance and medical malpractice).
Students participating in this course can expect to learn about:
- the economics of crime and deterrent effects of law enforcement strategies at the individual level and vis-à-vis organizations
- economic reasoning around how to place liability on individuals versus corporations in cases of corporate misconduct
- strategies to prevent specific forms of business-related crime, such as insider trading and securities fraud
- the role of compliance systems /various degrees of negligence for the determination of liability
- plea bargaining/negotiated settlements in cases of corporate crime (i.e. non-prosecution agreements)
- economic perspectives on the role and liability of those supposed to monitor the performance of large organizations, such as external accountants
the value of combining economic reasoning with legal studies for the sake of developing efficient strategies against business-related crime and other offences
The course will be organized with around ten 2x45 min lectures held over a period of four days (15-19 May, 2017; with no lectures on 17 May).
Preliminary title of the lectures:
Lecture 1: Individual Liability for Intentional and Accidental Misconduct
Lecture 2: Role of Markets: Analysis of Optimal Liability for Injuries to Counter-parties
Lecture 3: Corporate versus Individual Liability for Corporate Misconduct: the Neutrality Result
Lecture 4: Corporate Liability When Firms Deter Misconduct Through Monitoring and Reporting to the Government and Analysis of US Enforcement Policy
Lecture 5: Must Corporate Liability Be Imposed by Law or Will Parties Optimally Contract Into Liability
Lecture 6: Economic Analysis of Mandates Imposed Through Pleas and Deferred and Non-Prosecution Agreements and Assessment of US Enforcement Practice
Lecture 7: Reputational Sanction for Corporate Crime: When Do Convictions Product Reputational Damage and Does the Choice between Plea and DPA Matter?
Lecture 8: Alternatives and Supplements to Corporate Liability: Gatekeeper Liability, Managerial Liability (including Responsible Corporate Officer Doctrine) and Bounties
Lecture 9: Economic Analysis of Securities Fraud
Lecture 10: Economic Analysis of Insider Trading
Requirements for course approval
Students will be evaluated on the basis of a term paper with a 4000 word limit. The topic and a one page outline and bibliography will be due the Friday after the course ends. The paper must be submitted one month after the course ends.
Grading: Pass / fail
- ECTS Credits
- Teaching language
Tina Søreide, IRRR
Lecturer: Jennifer Arlen.
Jennifer Arlen is Norma Z. Paige Professor of Law at New York University and Co-Director at the comprehensive Program on Corporate Compliance and Enforcement. She is one of the United States' leading scholars on corporate liability, medical malpractice, and experimental law and economics. She has published in the best journals and written several books.