Corporate Liability Strategies and the Costs of Legal Controls

Debate continues over how best to tap the private interests of enterprise participants to serve the public interest.In large part, proponents and critics of structural reform in corporate governance remain divided over whether participants within the enterprise or external institutions should define and police "responsible" corporate activity. 1Yet, questions concerning the self-regulatory potential of the enterprise are not limited to the corporate governance debate: They also surface in modest guise even within the existing framework of corporate regulation, a framework that relies primarily on corporate profit seeking under external legal constraints.In this more limited context, the question becomes how external controls ought to be crafted and enforced, and whom they ought to target.When, for example, can we rely on liability rules directed solely at the corporation to assure compliance with legal norms?When should we impose absolute legal duties and sanctions on individual participants in the firm as well?To analyze these narrower questions of self-regulatory capacity, we must go beyond a simple description of the formal duties that the law imposes on corporate participants.We must also ask how existing legal duties affect the actual incentives of corporate participants, and whether they do so in ways that yield the "right" amount of compliance