Question

Three decades ago, corporations and corporate directors were rarely prosecuted for crimes, and penalties for corporate crimes were relatively light. Today, this is no longer true. Under the corporate sentencing guidelines and the Sarbanes-Oxley Act, corporate wrongdoers can receive substantial penalties. Do these developments mean that corporations are committing more crimes today than in the past? Will stricter laws be effective in curbing corporate criminal activity? How can a company avoid liability for crimes committed by its employees?

2. Do you agree that when a corporation is approaching insolvency, the directors’ fi duciary obligations should extend to the corporation’s creditors as well as to the shareholders?

3. When a company’s executives offer opinions about the fi rm’s fi nancial status and future business prospects through blogs, Twitter, and other Internet forums, the SEC can hold the company liable for violating securities laws. Is this fair to investors who want to hear the straight scoop from the fi rm’s executives? What arguments can you make in favor of this restriction? What arguments can you make against it?

4. Should corporate lawyers who become aware that someone at the client corporation may have violated securities laws report their suspicions only to persons within the corporation, or should they report their concerns to the SEC? Explain

Answer 1

1 It is very important for any country to have strict Corporate Governance policies for smooth functioning of the corporate sector and for positive economic growth. Corporate sentencing guidelies and the Sarbanes-Oxley Act are corporate Governance guidelines and policies which are to be followed by the corporates. Strict laws will help in curbing the corporate criminal activities to a greater extent. It does not mean that corporates are commiting more crimes today than the past. Now that the possibilities of such fraud is determined as is addressed with proper rules and regulaions.  

Company can avoid  liability for crimes committed by its employees by :

a. Proper internal control system.

b. Effective Human resource management policies.

c. Well planned organisation structure

d. Proper communication of rules and responsibilities to the emplyees through effective training programmes.

2. It is always the duty of the directors to consider the interest of all the groups. When the corporation is approaching insolvency the directors fiduciary obligation remain with the corporation untill it is certain about the insolvency.

3. Yes it is fair for to investors who want to hear the straight scoop from the fi rm’s executives because investors who are not in social platforms will suffer if this is not restricted. And also at times the information given in the social platforms will not turn out to be completely true.

Argument in favour of restriction: Many a times information in the social platforms turns out to be unofficial and will mislead the users. So it is better to restrict such posts to some extent.

Argument against the restriction: With the developing economy social media has gained a lot of importance. Communication becomes easier and fast. It also helps in reaching large crowd within few seconds.

4. Corporate lawyers are required to report material violation of security laws to the corporation's top authority (As per Sarbanes-Oxley Act ). In certain specific circumstances corporate lawyers are permitted to disclose confidential information to SEC without their Corporate client's consent.