My friend and UCLA colleague James Park has posted a very interesting new article, Shareholder Wealth Maximization and Securities Fraud (September 27, 2023). DePaul Law Review, Vol. 72, No. 10, 2023, UCLA School of Law, Law-Econ Research Paper No. 23-07, Available at SSRN: https://ssrn.com/abstract=4586004:
Government enforcers are often criticized for failing to identify and prosecute individual executives responsible for corporate misconduct.
N.B.: I used to be of the critics. But Jim's article is very persuasive.
This essay contends that the failure to prosecute individuals can be partly explained by the difficulty of disentangling individual and corporate incentives for wrongful corporate acts. For example, in securities fraud cases, it can be difficult to determine whether corporate managers issued a materially misleading disclosure to further shareholder wealth or to enrich themselves. It is more difficult to justify prosecuting individuals in the absence of a clear agency costs story.
Recommended reading.
