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Inducing corporate compliance: A compound corporate liability regime

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  • Oded, Sharon

Abstract

Corporate liability regimes have two major social goals: (i) inducing corporations to internalize all social ramifications of their activity; and (ii) inducing corporations to prevent, deter, and report their employee misconduct. The scholarly polemic has shown that none of the liability regimes recognized thus far in the literature efficiently satisfies both social goals. Following a Law and Economics approach, this paper develops an innovative regime that may comprise an optimal corporate liability framework in most settings. The Compound Corporate Liability Regime developed in this paper is a two-layer strict liability regime. Under this regime, corporations that self-report their employee misconduct incur a sanction that is reduced by the variable enforcement costs saved due to their self-reporting. Such a liability framework aligns social and corporations’ interests, and thereby satisfies both social goals of corporate liability regimes.

Suggested Citation

  • Oded, Sharon, 2011. "Inducing corporate compliance: A compound corporate liability regime," International Review of Law and Economics, Elsevier, vol. 31(4), pages 272-283.
    • Handle: RePEc:eee:irlaec:v:31:y:2011:i:4:p:272-283
    DOI: 10.1016/j.irle.2011.08.001
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    Cited by:

    1. Anita Boros & Csaba Fogarassy, 2019. "Relationship between Corporate Sustainability and Compliance with State-Owned Enterprises in Central-Europe: A Case Study from Hungary," Sustainability, MDPI, vol. 11(20), pages 1-23, October.

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    More about this item

    Keywords

    Law enforcement; Self-enforcement; Self-policing; Self-reporting; Corporate liability; Deterrence; Compliance;
    All these keywords.

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K14 - Law and Economics - - Basic Areas of Law - - - Criminal Law
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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