External Controls: Fining, Stock Dilution, Changing Internal Governance, Court Ordered Adverse Publicity, and Community Service

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Table 6.2 Classifications of Corporate Punishments from French and Fisse This table summarizes material from Brent Fisse, "Sanctions Against Corporations: The Limitations of fines and the enterprise of Creating Alternatives." This article is found in the book, **Corrigible Corporations and Unruly Law** and provides a taxonomy of different forms of punishment for corporations. It helps rate a corporate punishment in terms of whether it targets the guilty, produces a positive change within the corporation, avoids Cofee's deterrence trap, and minimizes interference in what Stone terms the corporate black box. For full reference to book see bibliography below.
	Description	Example	Target of Punishment	Deterrence Trap Avoided?	Non-financial Values Addressed?	Responsive Adjustment	Interference with Corporate Black Box
Monetary Exaction	Fines	Pentagon Procurement Scandals	Harms innocent	Fails to Escape	Few or None Targeted	None	No interference
Stock Dilution	Dilute Stock and award to victim		Stockholders (Not necessarily guilty)	Escapes by attacking future earnings	Few or None	Limited	No interference
Probation	Court orders internal changes (special board appointments)	SEC Voluntary Disclosure Program	Corporation and its Members	Escapes since it mandates organizational changes	Focuses on management and subgroup values	Passive adjustment since imposed from outside	Substantial entry into and interference with corporate black box
Court Ordered Adverse Publicity	Court orders corporation to publicize crime	English Bread Acts (Hester Prynne shame in Scarlet Letter)	Targets corporate image	Escapes (although adverse publicity indirectly attacks financial values)	Loss of prestige / Corporate shame / Loss of Face/Honor	Active adjustment triggered by shame	No direct interference (corporation motived to restore itself)
CommunityService Orders	Corporation performs services mandated by court	Allied chemical (James River Pollution)	Representative groups/individuals from corporation	Escapes since targets non-financial values	Adds value to community	Passive or no adjustment: sometimes public does recognize that cs is punishment	None

Requirements of Sarbanes-Oxley (From Dyrud: 37)

Provide increased protection for whistle-blowers
Adhere to an established code of ethics or explain reasons for non-compliance
Engage in "full, fair, timely and understandable disclosure"
Maintain "honest and ethical" behavior.
Report ethics violations promptly
Comply with "applicable governmental laws, rules, and regulations"
Dyurd cites: ELT, Ethics and Code of Conduct, n.d.; http://www.elt-inc.com/solution/ethics and code of conduct training obligations.html

Ammended Federal Sentencing Guidelines (Dyrud 37)

Establishing standards and procedures to prevent and detect criminal conduct
Promoting responsibility at all levels of the program, together with adequate program resources and authority for its managers
Exercising due diligence in hiring and assigning personnel to positions with substantial authority
Communicating standards and procedures, including a specific requirement for training at all levels
Monitoring, auditing, and non-internal guidance/reporting systems
Promiting and enforcing of compliance and ethical conduct
Taking reasonable steps to respond appropriately and prevent further misconduct in detecting a violation

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