The GFC and beyond – how do we deal with corporate misconduct

Published March 2020

Comino (2018). The GFC and beyond – how do we deal with corporate misconduct?. The Journal of Business Law 15-39.


  • The Global Financial Crisis (GFC) and procession of scandals since, both globally (eg, manipulation of LIBOR) and locally (most recently, involving Westpac, alleging serious breaches of anti-money laundering and counter-terrorism financing laws), have highlighted widespread corporate misconduct, raising the question ‘how to best cope with corporate wrongdoing’?
  • Post-GFC, instead of prosecuting corporate wrongdoers, regulators began to trial a variety of alternative approaches. Some jurisdictions, such as Australia already had an established system of civil penalties and enforceable undertakings (EUs). Other jurisdictions, such as the US and, more recently, the UK, turned to agreements to terminate or defer prosecution (under specified conditions), which are commonly known as “deferred prosecution agreements” (DPAs) as the preferred way to resolve the regulatory dilemmas associated with pursuing criminal cases (including satisfying the criminal burden of proof ‘beyond a reasonable doubt’) against high profile, well-resourced corporate violators.
  • With flawed cultures being a recurring theme in analyses of corporate wrongdoing, one of the main arguments supporting the shift away from criminal action in favour of such ‘new’ regulatory tools as DPAs and EUs is that they have potential to work for prevention – the DPA and EU by requiring corporations to improve corporate governance can change their future behaviour and end cultures that encourage, condone or conceal wrongdoing.

What’s new

  • The purpose of this article is to look critically at the different responses of regulators to the challenges presented by policing contraventions of corporate and securities law in the aftermath of the GFC to endeavour to resolve the issue of how best to cope with corporate wrongdoing in the future.
  • In addition to exploring the use of civil penalties in Australia, this article provides an in-depth consideration of the strengths and problems relating to the use of these ‘new’ administrative tools – EUs, which have been popular in Australia and DPAs, which have become the regulatory ‘tool of choice’ in the US and UK, as well as the criticisms that have been made of their use in handling serious corporate wrongdoing.

Bottom line

  • Despite the criticisms and problems identified with their use, it has been argued that EUs and DPAs are part of the solution but only if, instead of expediency and regulatory pragmatism, the overall philosophy for them, which will guide both their design and enforcement strategy, is properly conceived. It should be founded on the principles of restorative/preventive (rather than retributive) justice. In this way, such measures can harness the potential to transform the corporate cultures that produced the wrongdoing in the first place.
  • Moreover, by adhering to the ideals of restorative/preventive justice and giving companies the opportunity, in the first instance, to ‘mend their ways’, it is only when they fail to do so by breaching the terms of an EU that this might trigger court action and, in the case of a DPA, criminal action, the law appears ‘just’.  The big question, however, remains whether victims of corporate wrongdoing and the wider community will be so convinced?
  • In matters where DPAs are deployed against companies in cases of serious wrongdoing, perhaps the best way to achieve this and ensure that public trust in enforcement of serious white collar-crime is not undermined is if those DPAs are accompanied by prosecutions of their top executives and directors (not just of some ‘lower-down’ employees, which appears to have been the case to date). If this occurred, it would also help blunt criticisms concerning the differential treatment of corporate and ‘ordinary’/ ‘street’ criminals.

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