CrimProf Blog

Editor: Kevin Cole
Univ. of San Diego School of Law

Wednesday, January 31, 2018

McGreal on The Sentencing Guidelines' Effect on Fiduciary Duties

Paul E. McGreal (Creighton University) has posted Caremark in the Arc of Compliance History: Evolution of a Corporate Director's Fiduciary Duty to Oversee Compliance with the Law (Temple Law Review, Vol. 90, No. 1, 2018) on SSRN. Here is the abstract:
In the compliance and ethics field, In re Caremark International Incorporated Derivative Litigation is one of the few judicial decisions that professionals will know by name. In 1996, the Delaware Chancery Court’s Caremark decision was the first to recognize a director’s fiduciary duty to oversee a corporation’s compliance and ethics program, which instantly raised the visibility and urgency of compliance and ethics in the boardroom. And even though this duty was later confirmed by the Delaware Supreme Court in a case by another name, the compliance and ethics community still refers to the “Caremark duty” due to the original decision’s path-breaking analysis and impact. 

Two decades later, we can ask where Caremark falls within the ongoing history of compliance and ethics. This article does so by describing the parallel evolutions of the Caremark duty and another compliance and ethics landmark – the 1991 United States Sentencing Guidelines for organizations that provided sentencing leniency for organizations with an effective compliance and ethics program.
These two histories converge at an important point that gives us the Caremark decision. That is, the 1991 Sentencing Guidelines influenced the 1996 Chancery Court decision to recognize the Caremark duty. Over the following twenty years, the histories then diverge: subsequent amendments to the Sentencing Guidelines develop a robust account of director responsibilities, while Delaware case law stalls, leaving the Caremark duty as largely symbolic.

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