Professor Vincent Di Lorenzo’s article, “Corporate Wrongdoing: Interactions of Legal Mandates and Corporate Culture”, will be published in the fall 2016 issue of the Review of Banking & Financial Law. The Review is prepared under the auspices of the Graduate Program in Banking and Financial Law of Boston University School of Law. The following is an abstract of the article:
In recent years enforcement officials have imposed billions of dollars in sanctions on all major U.S. financial institutions and many major financial institutions abroad. Similar sanctions have been imposed on nonfinancial institutions. The sanctions are the result of findings of recurrent violations of law as well as recidivism. Why have existing regulatory standards and enforcement policies led to repeated violations of law? Will the recent billion dollar sanctions deter future wrongdoing? This article explores these issues by examining the philosophy motivating regulatory policy and action in the U.S. and U.K. Financial regulators provide a case study. This article explores the interaction of two institutions that influence corporate actors: government and corporate culture. That interaction is examined through the lens of behavioral decision and complexity theory. The conclusions drawn are that regulators in the U.S. continue to be blind to cognitive influences on corporate behavior. By contrast, regulators in the U.K., have begun to recognize cognitive influences. Enforcement policy in the U.S. has similarly ignored the multiple influences on corporate behavior that interact and lead to nonlinear outcomes. The change, if any, in U.S. enforcement strategy is a greater emphasis on large penalties to deter future misconduct. This continues to reflect a linear, reductionist view of corporate behavior. In contrast, regulatory authorities in the U.K. are rethinking their enforcement strategy based, in part, on recognition of multiple influences on corporate decision making. In the U.S. this regulatory blindness seems likely to lead recurring issues of noncompliance.