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August 25, 2005
Less shelter
Forbes.com is running an article that notes US prosecutors are increasingly implementing "deferred prosecution" against companies who break laws involving money. However:
The obvious losers in all this are individual executives. "The company is in essence working with the government to build a case against the officer or the director. In the old days, you were protected by the company," observes former Assistant United States Attorney Michael R. Sklaire, now with the Washington office of Womble Carlyle. Companies, he notes, need to ask, "What kind of environment are you creating among your employees?"
And a natural answer is, "We're creating the kind of environment that is good for investors." "Deferred prosecution" protects investors from executives who went a bit over the top in zeal to make their numbers. Protecting the errant executive would be protecting the employee at the employer's expense.
As an investor, would you protect the rank and file at your expense, especially if they'd broken the law? What sort of signal would you be sending to the rank and file (and everyone else), if you protect executives who break the law, especially since the executive's primary responsibility is to serve the interests of investors?
Posted by Mark at August 25, 2005 07:49 AM