July 20, 2017
McGuireWoods partner Alex Brackett and associate Katherine Mims Crocker penned an article titled “The Past, Present, and Uncertain Potential of Corporate Monitors” for the Washington Legal Foundation’s July 2017 Working Paper Series.
In the article, the authors discussed the rise of corporate monitoring as a mechanism for enhancing corporate compliance in the aftermath of epic scandals, including the collapse of Enron and Worldcom. The authors examined opportunities and risks of the monitorship model, in which a court-appointed monitor oversees an organization’s compliance with a settlement or plea agreement with government agencies.
While monitorships emerged nearly two decades ago as a “valuable tool for reprimanding and correcting bad behavior without putting large companies out of business and blameless employees out of work,” the authors noted that under today’s model, “monitors wield immense power over corporations” with few checks and balances.
The authors further analyzed benefits of reforming the current model, cautioning that “unless monitorships can proceed in an environment where exchanges between the monitor, the corporation, and the government remain free from outside interference by third parties, the model will soon become untenable for companies weighing the possibility of settling enforcement actions.”