Law, College of
Date of this Version
2006
Abstract
Recent corporate scandals demonstrate that rank-and-file employees often remain silent in the face of significant fraud. This silence is unfortunate because corporate employees have inside knowledge of misconduct that gives them an information advantage over more traditional corporate monitors, such as independent directors and government regulators. To address this problem, the Sarbanes-Oxley Act utilized a new approach that encourages employee whistleblowers to disclose information about corporate wrongdoing. This approach, which Professor Richard Moberly labels the “Structural Model,” requires that corporations provide a standardized channel for employees to report organizational misconduct to official monitors within the corporation. This Article offers an original framework for analyzing the effectiveness of Sarbanes-Oxley’s Structural Model. Utilizing behavioral science research that analyzes whistleblower motivations, Professor Moberly finds that the Structural Model reduces difficulties corporate employees experience in disclosing misconduct, and thereby provides an improved mechanism to encourage employees to become more active and effective corporate monitors. However, the Structural Model has significant flaws, which Professor Moberly addresses by offering several suggestions for improving the model’s usefulness as a tool against corporate crime.
Comments
Published in Brigham Young University Law Review 2006, pp. 1107-1180. Copyright BYU Law Review. Used by permission.