Justin O'Brien

Ethics and corporate governance: banking on scandal

The forced introduction of compliance programmes has become an integral component of regulatory enforcement strategies in the United States. They are designed to limit corporate malfeasance and misfeasance. Their use has been extended far beyond generic codes of conduct introduced to minimise corporate liability from punitive federal sentencing guidelines. It is now a federal requirement for publicly listed corporations to have a code of ethics. Any derogation must be reported to the Securities and Exchange Commission. This paper suggests that the institutionalisation of compliance in itself represents a major problem. This is because it privileges a transactional approach to ethics in which form replaces substance. The argument is developed by examining the ethical problems facing Citigroup, one of the largest financial conglomerates in the world. Despite having a code that far exceeds the industry standard, it has failed to protect the corporation from major ethical failures.

Beyond compliance: testing the limits of reforming the governance of Wall Street

The malfeasance and misfeasance crises within corporate America have prompted a tripartite response from policymakers. Stringent legislation targeting somnambulant boards has been introduced; enforcement departments have been strengthened at the federal, state and self-regulatory bodies charged with overseeing the markets; the Department of Justice and the New York District Attorneys Office have taken notably aggressive stances in the criminal prosecution of individual malefaction. This paper critically assesses the implications of the changes to the legislative, regulatory and criminal justice frameworks on the governance of Wall Street. Specifically, I deconstruct the rationale governing a plea-agreement entered into by Merrill Lynch in return for the temporary abeyance of criminal charges. The paper argues that this intervention, if implemented, has far-reaching consequences, effectively criminalising standard Wall Street practice.