REG522 Economic Analysis of corporate misconduct

• Topics

  Topics

  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).

• Learning outcome

  Learning outcome

  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

• Teaching

  Teaching

  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

• Required prerequisites

  Required prerequisites

  PhD status

• Requirements for course approval

  Requirements for course approval

  None

• Assessment

  Assessment

  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.

  Pass/Fail

• Grading Scale

  Grading Scale

  Grading: Pass / fail

• Semester

  Semester

  Spring 2017

• Literature

  Literature

  TBA