Why Donnt General Counsels Stop Corporate Crime?

Sureyya Burcu Avci, H. Nejat Seyhun
2016 Social Science Research Network  
Corporate fraud is costly, involving hundreds of billions of dollars in lost reputational and out-of-pocket costs for stakeholders and hundreds of thousands of job losses for employees, suppliers, and customers. To prevent fraud, general counsels are charged with the responsibility of gatekeeping in the corporation. They understand the law and they are expected to use their legal expertise to advise on, intervene in, and report suspicions of fraud. In spite of their legally-mandated central
more » ... andated central role, corporate counsels typically do not appear to discover any corporate wrongdoing, at least they are not the ones reporting it. In this paper, we analyze the potential reasons why corporate counsels keep silent in the face of potential wrongdoing in their own firms and propose policy recommendations to better protect shareholders' interests against selfdealing by top management.
doi:10.2139/ssrn.2804352 fatcat:dgfmfqosuffmpkjnejpjotfbv4