Sharon Oded (Rotterdam Institute of Law and Economics ; University of California, Berkeley – Berkeley Center for Law, Business and the Economy) has posted “Corporate Monitors: Overcoming the Classification Failure of Targeted Monitoring Systems“, Berkeley Business Law Journal, Vol. 10, No. 2, 101-118.
The abstract is as follows:
Targeted monitoring systems have been embraced by many law and economics scholars, demonstrating that regulatory monitoring that prioritizes targets may efficiently increase the level of compliance. Only a few scholars, however, have paused to consider what criteria enforcement authorities should use to classify regulatees into differently-monitored groups. In this paper, I highlight the weaknesses of the classification criteria considered by the scholarly literature to date. Those criteria include (i) violation records, (ii) implementation of compliance programs, and (iii) the self-reporting of violations. I also develop a theoretical model that underlies an improved framework of targeted monitoring. The proposed framework is based on the appointment of independent corporate monitors as a signaling mechanism that creates an efficient targeted monitoring system. The proposed framework, which is applicable in a wide range of regulatory areas, enlists more corporations to become proactive in the battle against misconduct, while economizing the overall costs of public enforcement.