This chapter reviews the empirical literature on the factors related to the likelihood and detection of corporate wrongdoing, which increasingly focuses on internal governance, and examines calls to split the traditional tasks of the General Counsel (GC) between the GC and a Chief Compliance Officer (CCO) who reports directly to the Board. The reason for this is to have more independence and expertise in compliance matters than the GC’s office traditionally provides. This chapter argues that although independence is often valuable in reducing wrongdoing, in this context, it is likely to come with additional costs that may make gathering information on wrongdoing more difficult. In particular, some employees may be more reluctant to provide information as easily to a CCO than to the GC and this might sometimes result in increased wrongdoing and weaker operating performance. These deleterious effects, however, might be somewhat ameliorated by institutional and governance design adjustments. This chapter examines what factors may drive likely outcomes and finds that further empirical inquiry would be valuable and suggests some ways in which future research might engage in this inquiry.

Khanna, Vikramaditya S., An Analysis of Internal Governance and the Role of the General Counsel in Reducing Corporate Crime (2018). Forthcoming, Research Handbook on Corporate Crime and Financial Misdealing 2018 (Jennifer H. Arlen ed., Edward Elgar). Available at SSRN: https://ssrn.com/abstract=3324838 or http://dx.doi.org/10.2139/ssrn.3324838

Vikramaditya S. Khanna

University of Michigan Law School

Vikramaditya S. Khanna is the William W. Cook Professor of Law at Michigan Law and the faculty director of the Directors’ College for Global Business and Law and codirector of the Joint Centre for Global Corporate and Financial Law & Policy, a collaboration between Michigan Law and India’s Jindal Global Law School. He earned his SJD at Harvard Law School, where he has been a visiting faculty member. He served as a senior research fellow at Columbia and Yale law schools, and as a visiting scholar at Stanford Law School. He was a recipient of the John M. Olin Faculty Fellowship in 2002–2003. His interest areas include corporate and securities law, corporate crime, law in India, corporate governance in emerging markets, and law and economics.


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