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Philosophy 2074F/G
Michael Herbert

INDIVIDUAL RESPONSIBILITY, SARBANESOXLEY STRIKE – BOATRIGHT  The resulting public outright reflects a deep sense of injustice at the possibility that top executives could inflict such great losses on investors and employees without suffering greater personal consequences  Sarbanes Oxley Act that addresses individual responsibility, in signing this legislation George W Bush claimed that ti ushers in a new ethical of personal responsibility in business communities  I argue that the American corporate system requires a certain separation of individual responsibility from an executive’s corporate role and that for this reason, we should be cautious about efforts to hold executives more accountable or liable personally for their actions  The Sarbanes Oxley Act contains four provisions that bear on individual responsibility. Section 302, the certification provision, requires that the CEO and CFO of companies subject to Securities and Exchange commission  Specifically the signing officer is required to certify that he or she has reviewed the report  S 304, the forfeiture provision, mandates that in the event the corporation is forced to restate its earnings due to misconduct with regard for financial reporting requirements, the CEO and CFO shall return to the company any bonus or incentive compensation and any profits from the sale of securities in the 12 month period following the issuance or filing of the report that contains misreported earnings  S 404, which requires management to assume responsibility for establishing and maintaining an adequate system of internal control and assessing the effectiveness of this system annually  White Collar Crime Penalty Enhancement Act of 2002 significantly increases the fines and sentences of a number of offences including fraud and conspiracy  CEOs and CFOs are already liable under the Securities Exchange Act for documents filed by their companies if they are aware of material discrepancies even if they do not sign them  The forfeiture provision is innovative inasmuch as it allows a prosecutor to enforce restitution to the corporation but such restitution can already be sought by the corporation through suits for fraud  Prosecutors already have the power to force an executive to give up ill-gotten gains as part of a legal settlement of criminal charges  The fact that maximum penalties have seldom been imposed in the past gives scant assurance that the increased penalties will provide much deterrent effect  For example, attempts to hold executives more liable as a matter of justice might make corporations less efficient and productive and thus be undesirable as a matter of public policy  Thus errant executives may suffer loss of compensation and reputation when they are dismissed for misconduct  The law and the market represent, respectively the public and private realms in which corporations operate  The modern corporation creates a number of different problems with holding individuals responsible in the sense of being answerable or accountable  Although corporations can act only through persons, the fragmentation of decision making and action and the diffusion of knowledge in organizations often makes it difficult to place responsibility on any given individual or group of individuals  An enduring principle of law is that no one an evade responsibility for a crime merely by acting as an agent or a member of a corporation  However, in cases of less serious conduct, such a reckless harm, the legal principle of respondeat superior has been applied whereby the principle is responsible for the actions of an agent provided that the agent is acting within the scope of his or her authority  Three objectives may be summarized as deterrence, compensation and retribution – these three together objectives of the law are often pursued together  Criminal prosecution is appropriate only for actions that are regarded as morally wrong  Second, we need to separate what justice requires from what is socia
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