Cooperation with the government is good for companies, investors, and the economy.

• Position: Symposium: Corporate Criminality: Legal, Ethical, and Managerial Implications - Speech

On March 15, 2007, the Georgetown University Law Center hosted a Symposium on "Corporate Criminality: Legal, Ethical, and Managerial Implications." (1) The following transcribed remarks are excerpted from the daylong event.

INTRODUCTION

Thank you for the opportunity to be here today. I am very glad to have ninety minutes to think of something other than what is going on at the Department of Justice these days, and to talk about something else, something that is critical to our country's economy and our public markets.

I want to start with the premise that fraud is bad for business, and cooperation promotes investor trust. If I were to sum up the Department of Justice's reasons for changing the Thompson memorandum to the McNulty memorandum, it would be that we want to continue to promote cooperation because it promotes investor trust in the markets, and investor trust in the markets promotes the nation's economy. The Department of Justice plays a role, it certainly is not a primary role, but we play a role in how our country moves forward economically.

GOVERNMENT'S AND CORPORATIONS' INTERESTS

One of the reasons cooperation has become such an important issue and is being discussed at panels like this or any number of bar events is that the interests of the government and corporations, because of all the outside factors that [Professor O'Sullivan] discussed, have become much more aligned. Whether you look at it as corporations becoming state actors, or you look at it as a natural function of the law as it exists today, the interests of corporations and the government have become aligned. The reason for this convergence is that the government's duty is to enforce the law, to foster public confidence in the markets, and to foster integrity in the markets. Directors and officers of a corporation likewise have a duty to the owners of the corporation, the shareholders, to comply with the law. If you are a shareholder, obviously you do not have any direct control over the corporation, but you want your company to act with integrity, you want your company to avoid violations of criminal laws. Why? Because--as I said before fraud is bad for business. Ultimately, criminal activity within the corporation harms the corporation, harms the value of the stock, and harms the shareholder. So, the corporation's interest, as opposed the interest of any individuals that engaged in illegal conduct, is largely aligned with the government's interests. The corporation has a responsibility to be honest and forthright in their regulatory filings and statements, and when there is some wrongdoing, they have a duty to do an internal investigation to uncover and address any wrongdoing that has occurred.

An overlooked point is that corporations also have a duty to address the criminal issues it is facing as quickly as possible. As long as the...