[When it comes to sentencing corporations or white collar offenders individually,] contemporary policies . . . fail to shame or to show community disapproval to any degree.[1]

Shaming punishments . . . unambiguously express moral disapprobation.[2]

[S]hame [also] works wonders in leading a corporation to shape up after its wrongdoing has been exposed to public condemnation.[3]

Under the Organizational Sentencing Guidelines,[4] when a corporation is sentenced for violations of federal law, the sentencing judge may require the chief executive officer (CEO) to appear in court personally to receive the corporation’s sentence.[5] This compelled court appearance apparently has three purposes: to impress upon the CEO the gravity of the corporation’s wrongdoing; to signify to the community that the leadership of the corporation has accepted responsibility for the crime; and to extract some indication that the corporation intends to comply with the law in the future.

The origin of this provision—I’ll call it the "corporate icon" provision—is thought to be the legacy of federal district Judge Jack E. Tanner, and is based on his conduct when he came to dispose of a case involving Pennwalt Corporation in 1989. Charged with spilling 75,000 gallons of cancer-causing chemicals into Washington’s Puget Sound, Pennwalt had agreed to plead guilty to a felony and pay $1.1 million in fines.[6]

When Pennwalt’s lawyers appeared before him with the plea agreement, Judge Tanner turned them away, ordering them not to return unless they brought Pennwalt’s "top man" with them. "Who is the corporation? I think the public is entitled to know who’s responsible," barked Tanner.[7] When the lawyers returned with three top-level local Pennwalt executives, Tanner again refused the plea. Only when CEO Edwin E. Tuttle appeared in court, flying in from across the country, did Tanner accept the company’s guilty plea. He did so, however, only after questioning Tuttle carefully on how the chemical spill could have happened and how (in light of Pennwalt’s imminent sale to an overseas acquirer) the people of the state of Washington could be assured that nothing so destructive could ever happen again. Tuttle, composed and courteous, responded to all of Judge Tanner’s questions. Later, Tanner recalled, "the only way to get their attention [was] to make the top guy responsible."[8]

Until recently, few other federal judges have thought to employ this emblematic approach to the corporate hierarchy, and the exceptions to this rule have been controversial. In 1984, federal district Judge Miles Lord summoned three top executives from A.H. Robins, Inc., including the company’s CEO and general counsel, to his Minneapolis courtroom to denounce the company’s conduct in the Dalkon Shield case.[9] In 1992, federal district Judge H. Lee Sarokin personally castigated top executives in the tobacco industry for their "concealment and disinformation" in the course of pre-trial discovery.[10] In 1995, federal district Judge John S. Martin, Jr., confronted the Chairman of the Board of Consolidated Edison Company in his courtroom in connection with the company’s failure to report environmental violations.[11]

For the most part, however, judges historically have treated corporate chief executives as separate and distinct creatures from the corporations they oversee. CEOs are thus safely immune, except in singularly egregious cases, from any thought of personal liability, or, indeed, from any need ever to appear at the courthouse. This is particularly true in the case of publicly-held companies, whose CEOs are typically shielded by their lawyers from any litigation entanglement.[12]

By employing the corporate icon provision, however, a federal sentencing judge can now insist that a CEO become more personally engaged in the company’s criminal litigation. This personal engagement serves several critical law enforcement goals. First, by involving a high-level executive in the sentencing process, the corporate icon proceeding commands the attention of uppermost corporate management. The criminal proceeding is no longer a matter entrusted solely to lawyers. Second, if the company’s control system has been deficient, thus permitting the criminal activity to occur, the icon proceeding may highlight the deficiencies and publicly commit the CEO to improvement. Third, if the company’s top managers have been complicit in the crime or if the company has sought to thwart the government’s investigation of the crime, those facts, too, may be brought to light in the icon proceeding.[13] The CEO can then be required to answer for the corporation’s conduct.

The existing corporate icon provision is deficient in three respects. First, the corporate icon proceeding is discretionary for the sentencing judge. Second, the sentencing judge may require the CEO’s presence only when the corporation has voluntarily sought a reduction in its sentence by "demonstrating recognition and affirmative acceptance of responsibility" for its crime.[14] Typically, acceptance of responsibility requires the corporation to enter a guilty plea.[15] Consequently, corporations that defend against criminal charges and later lose their cases are not subject to the corporate icon proceeding. Third, the corporate icon proceeding involves the CEO, but excludes the corporation’s directors.

The discretionary sentencing proceeding for directors—for now, I’ll call it the directors’ woodshed proceeding—and the mandatory corporate icon proceeding that I propose each are designed to meet the criticism of the current sentencing system that "[it] has failed to provide adequate means for ensuring that corporate defendants are sentenced in a manner directly geared to achieving internal accountability."[16]

This Article will unfold in seven parts. Part II begins with a brief exploration of the role of shame in corporate sentencing. Recent criminological studies have recognized that individual shame can be a powerful motivator, especially as applied to highly-placed executives, and can have a significant deterrent impact on both corporate executives and the companies they oversee.[17] Both the mandatory corporate icon proceeding and the discretionary directors’ woodshed proceeding are premised, in part, on the findings embodied in those studies.

Shame can take many forms, however. Shame that merely stigmatizes or humiliates a corporate leader may not achieve the desired result. What must be sought instead is what criminologist John Braithwaite has called "reintegrative" shaming, a process by which a wrongdoer admits his misconduct, recognizes its social significance, pledges corrective action, and is welcomed back ("reintegrated") into the community of law-abiding citizens.[18] Reintegrative shaming is said to be particularly well-suited for use in sentencing white collar defendants.[19] I will argue that it is even more constructive in the context of corporate crime.

Part V examines the role the board of directors plays in corporate criminality, and the processes by which directors, as distinguished from CEOs, can either stimulate or minimize criminality within the firms they oversee. The fact is, corporate directors are empowered to, and have available many tools with which to, shape the corporate culture and thereby influence the likelihood that corporate crime will occur. Where directors fail to employ those tools effectively, they may violate their fundamental duty of care. This, at least, was the conclusion of the Delaware Chancery Court in its opinion in In re Caremark.[20] It is therefore appropriate that directors, no less than a CEO, be required to play a role in the corporate sentencing process, or at the least be required to do so where the sentencing judge concludes it is appropriate.

The existing corporate icon proceeding is one of a number of "shaming rituals"[21] currently scattered throughout the Sentencing Guidelines.[22] Both the icon proceeding and the woodshed proceeding I propose are based on the notion that an informal sanction—such as the shame that accompanies a compelled appearance before the sentencing court—may be every bit as significant a deterrent as more formal sanctions, such as imprisonment or the imposition of monetary fines.[23] This may be an unproven assumption, but increasing evidence suggests that well-crafted shaming sanctions—especially as applied to top-level corporate executives—can serve as an effective influence on individual and corporate behavior.

The population of top corporate executives in America can be characterized as living in an exclusive small town. As Edward Rock has pointed out, "the senior managers and directors of large, publicly held corporations, and the lawyers who advise them—form a surprisingly small and close-knit community. The directors of large, publicly held corporations number roughly four to five thousand."[24] In such a community, information travels, impressions are formed and hardened, loyalties are tested, and reputations are built and dismantled, extremely efficiently, often with just a few phone calls. In a rarefied community such as this, the role of reputation is significant. CEOs after all, and the directors with whom they work, are status-conscious creatures. The reason many of them seek high corporate office or serve on corporate boards in the first place often has to do with visibility and personal prestige.[25]

Successful executives typically conduct themselves so as to enhance the perception that they are wise and all-knowing, that their judgment is valued by others, and that they move in influential public circles. They serve on charitable boards, for example, and participate as distinguished speakers at university functions. Some participate in politics; others write autobiographies. Many subject themselves willingly to the hagiography of the business press.[26] Challenges to these men’s and women’s reputations consequently are not taken lightly—and events that cast them or their business skills in an unflattering light may have a particularly dramatic impact upon them.

For example, studies have shown that publicity about corporate criminal behavior with which executives have had no personal association may nevertheless "embarrass them and their families tremendously."[27] It may cause them to feel "tainted" among their family members and in their local communities.[28] It may also cause them to become anxious about their chances for advancement and future prestigious assignments.[29]

When the executive has played some role in the company’s wrongdoing, or when the wrongdoing can be attributed to her failure as a leader, the fear of exposure and accompanying shame may take on an even greater significance. A number of recent studies have suggested that, especially for top-level managers and members of their social class, fear of being shamed before their family members and peers may even exceed the fear of criminal prosecution, exposure to civil lawsuits, or other forms of officially imposed sanctions.[30] For these individuals, "in the rational weighing of the costs and benefits of crime, loss of respect weighs more heavily . . . than formal punishment."[31] This is why shaming rituals, such as the corporate icon proceeding or the directors’ woodshed proceeding, are likely to be effective.

High status business leaders may be especially susceptible to shaming rituals. "They are the people most likely to worry about public appearances, to be vulnerable to moralistic or judgmental social groups, to defer to authority and to be relatively conventional in attitudes toward ‘law and order.’"[32] They are also the people most likely to be concerned about maintaining the appearance of business competence and professional accomplishment.

Also, because they regard themselves as participants in a "culture of honor," they are especially sensitive to the opinions of their peers.[33] Dan Kahan has described the way in which corporate executives distinguish between public disgrace and disgrace in the eyes of other corporate elites:

Consider, for example, a corporate executive who is deciding whether to bribe a public official or to dump toxic wastes. He might not care that much about what an auto mechanic in a remote part of town will think of him if he is caught and word of his offense is broadcast to the community at large. But he probably cares a lot about what his family, his colleagues, his firm’s customers, his neighbors, and even the members of his health club think.[34]

Consider how Evans, Reilly, or Wasserstein felt when reading these opinions. Consider how the members of the special committee, identified by name in the opinion, must have felt to be characterized as "torpid, if not supine" by the Delaware Supreme Court, combined with the equally strong terms used by the chancery court. Consider what it must be like to live with such a public shaming, to see in acquaintances’ eyes the unasked question, "How could you have stood by and allowed this to happen?" Imagine how other managers and directors, when they read or heard about these opinions, felt about the prospect of being similarly pilloried. Anecdotal evidence confirms what we all would expect: No one, including directors and officers of Delaware corporations, Wall Street investment bankers, and Wall Street lawyers, enjoys being held up to this sort of public condemnation.[35]

In short, shaming sanctions—especially those designed to be communicated to the "small town" comprised of family members, business colleagues, and business peers—are likely to be effective in capturing the attention of high-level corporate executives.[36] As we will see in the next section, shaming sanctions are also likely to be effective in changing corporate behavior.

The power of the icon and woodshed proceedings is the power to take men and women who typically think of themselves as beyond public criticism and censure, and subject them to a very discomfiting moment of public exposure in the context of a serious criminal prosecution. The result is what one commentator has called a "reputational rub-off" effect.[37] I prefer to call it the "who me?" effect. Recalling the strong reaction business executives exhibited when they first were characterized as "racketeers" under the Racketeer Influenced and Corrupt Organizations Act (RICO),[38] or when American corporate executives first were sentenced to (even brief) imprisonment,[39] it is easy to see how powerful and disturbing the experience can be when a business leader’s spotless self-image becomes commingled with that of a convicted criminal. It is perhaps less easy to see how the phenomenon of shame may become translated into a meaningful change in individual (not to mention organizational) behavior.

As for the first approach, a number of studies indicate that both the experience of shame and the anticipation of shame in the future can serve as substantial deterrents to corporate crime.[40] Many observers agree, moreover, that aiming the courts’ resources at individual leaders, as well as at the corporate entity, is the most effective way to deter corporate criminal activity.[41]

The second approach to the question of deterrence involves specific versus general deterrence.[42] The purpose of both the corporate icon and the directors’ woodshed proceedings—like the purpose of corporate sentencing generally—is to change managerial behavior.[43] The intention behind these proceedings specifically is to change the way CEOs and their boards of directors operate—how they structure performance incentives, for example, and how they react to allegations of wrongdoing. This is the case not only for those CEOs and directors actually subjected to a shaming proceeding, but also for those in the broader business community. In other words, one hopes that these proceedings can be characterized both as a specific and a general deterrent. Shame offers both of these features.[44]

There is yet a third way in which shame can have an impact on the likelihood that corporate crime will occur. Corporate crime is widely understood to be more deterrable than violent crime, and this is true for both specific and general deterrence.[45] The basis for the deterrence may be strictly economic (in the form of monetary fines). Modern theorists argue, however, that effective deterrence (at least of individuals) can also come from non-economic sources.[46] Shaming is one such source.

Finally, to be truly effective, a sanction must ideally achieve two kinds of measurable results: behavioral changes aimed at remedying the harm that has already been done (remedial behavior), and behavioral changes aimed at avoiding future acts of misconduct and hence avoiding future shaming incidents (preventive behavior).[47] Criminologists believe that shame—or the anticipation of shame—can give rise to both of these types of behavioral changes.[48] Though we don’t yet know for certain that this is so,[49] there is substantial reason (including considerable anecdotal evidence) to believe that the prediction is correct.

As we have already discovered, "[w]ith white collar crime, as with common crime, . . . shame within tightly-knit families, communities and corporate cultures [can be] a more profound deterrent than formal punishment."[50] "[T]he nub of [this] deterrence is not the severity of the sanction but its social embeddedness; shame is more deterring when administered by persons who continue to be of importance to us."[51]

In other words, the value of the corporate icon and directors’ woodshed proceedings I propose, lies not so much in the fact that the general public may learn of them, but in the fact that family members and valued peers will surely do so.[52] Stated yet another way, it is not the immediate shame of standing before a federal judge that will have the greatest deterrent impact on corporate officers and directors. Rather, it is their residual awareness that family members, colleagues, and other corporate leaders will have reason to believe they have failed in their leadership roles that will give these proceedings their transformative power.

One must still, however, consider just what kind of shaming ritual is likely to be most effective with a group comprised solely of corporate elites. Here, I rely largely on the insights of criminologist John Braithwaite, who has advocated the concept of "reintegrative shaming," particularly in the context of white-collar crime.[53] According to Braithwaite, an effective shaming ritual should not merely inflict momentary pain and humiliation on the subjects. The objective of a shaming ritual should be "reintegration"—the process by which participants in shaming rituals are encouraged to "attend to the moral claims of the criminal law"[54] and then embrace and internalize their communities’ behavioral norms.[55]

Specifically, Braithwaite distinguishes between "stigmatizing" shaming rituals, which may be counterproductive, and shaming rituals emphasizing reintegration: "Reintegrative shaming is shaming which is followed by efforts to reintegrate the offender back into the community of law-abiding or respectable citizens through words or gestures of forgiveness or ceremonies to decertify the offender as deviant."[56] On the other hand, "[s]tigmatization is shaming which creates outcasts, where ‘criminal’ becomes a master status trait that drives out all other identities."[57]

Braithwaite emphasizes that reintegrative shaming is likely to be especially effective with white collar offenders and other corporate elites.[58]

[S]haming has a great advantage over formal punishment. Shaming is more pregnant with symbolic content than punishment. Punishment is a denial of confidence in the morality of the offender by reducing norm compliance to a crude cost-benefit calculation; shaming can be a reaffirmation of the morality of the offender by expressing personal disappointment that the offender should do something so out of character, and if the shaming is reintegrative, by expressing personal satisfaction in seeing the character of the offender restored.[59]

From these brief excerpts, one can see that reintegrative shaming fits quite well into a situation in which executives themselves are not personally charged with a crime, but in which the companies they manage have been found guilty of criminal activity. Indeed, the corporate icon and directors’ woodshed proceedings are intended to provide precisely the type of reintegrative experience that Braithwaite prescribes. The proceedings are intended, for example, to be educative, not punitive, and to involve both "one-sided moralizing" by the judge[60] and some dialogue with the participants designed to elicit an indication of their contrition. The judge is expected to conduct the proceedings with dignity and respect, without characterizing the participants as "irresponsible" or "untrustworthy."[61] The participants are expected in turn to be "reasonable, of good faith, and motivated to heed [the judge’s] advice."[62]

The proceedings will also be designed so as to include concrete references not only to the negative aspects of the corporation’s crime, but also to the socially positive aspects of the corporation’s activities.[63] The result of the proceeding should be a recognition by the CEO (in the case of the corporate icon proceeding) or the corporation’s directors (in the case of the woodshed proceeding) that the corporation with which they are associated has violated important societal norms. The judge will then urge the participants to acknowledge and "internalize a commitment to the rules"[64] and will offer some sign of support and reconciliation.[65]

Though the icon and woodshed proceedings are not a perfect fit for Braithwaite’s theories,[66] they adhere very closely to his vision of correctional policy. We will adopt that vision for the balance of this Article. With this theoretical framework in mind, we now turn to the specifics of the icon and woodshed proposals.

The current corporate icon provision may be employed only where the defendant corporation seeks a sentence reduction for "acceptance of responsibility" in connection with its crime.[67] As a practical matter, this includes only those corporations that plead guilty.[68] Whether or not to convene an icon proceeding is wholly discretionary with the sentencing judge.

The problem with this approach, however, is that it inevitably will be costly and time consuming. It is also likely to result in many more false-negatives than false-positives. Furthermore, it won’t address that portion of the icon proceeding that is designed to satisfy the public’s retributive needs. Even the housecleaning CEO may learn something useful in an icon proceeding about the corporation whose reins she has seized. And involving such a CEO will also have some trickle-down value to employees whose tenure spans the "old" and the "new" corporate regimes.[69]

There are other compelling reasons why an icon proceeding should be convened in every case in which, by plea or by verdict, a corporation is adjudged guilty of criminal behavior. First, bringing the CEO before the sentencing judge takes specific note of the powerful influence a CEO can have on a corporation’s culture.[70] Second, there is an important public message to be conveyed when a court forces a corporate leader to atone for the social and economic harm her company’s misconduct has caused.

Experts agree that "top management, and in particular the chief executive officer . . . sets the corporate ethical tone."[71] "Top managers or the leaders of organizations shape and determine the behavior patterns considered acceptable in the organization."[72] These executives may set a high standard for ethical and professional behavior. They alternatively may create an atmosphere in which unethical or unlawful conduct is overlooked, implicitly condoned, or sometimes even overtly encouraged.[73] Whether positive or negative, the values of, and the role played by, the chief executive officer are important—often pivotal—in determining a corporation’s receptivity to deviant or criminal behavior.[74]

There are many examples of this phenomenon. For instance, when a CEO emphasizes his personal commitment to social justice, he can lead his company to great achievements, while still responding to social needs.[75] By the same token, when a CEO endorses the Ku Klux Klan and tells his employees "I don’t like niggers and I do not want to see them in my stores,"[76] it is little wonder that a pattern of race discrimination develops from the top to the bottom of his firm.[77]

Some CEOs—especially those with charismatic management styles—are more likely than others to inspire their subordinates to adopt the kinds of behaviors they think the CEO would value. In companies headed by such CEOs, employees may come not only to embrace officially sanctioned procedures, but also to emulate the speech patterns, buzzwords, sports preferences, or even the manner of dress of the CEO.[78] They also are likely to internalize the competitive values and behavioral practices embraced by the CEO. As a consequence, the most powerful CEOs often play a significant role in a corporation’s movement toward criminality, sometimes doing so inadvertently.

If the CEO is obsessed with profits, for example, profit-seeking behavior by lower-level employees may ultimately eclipse honest business practices. This is a common scenario.[79] If the CEO is protective of employees who are caught breaking the rules, or resists sanctioning wrongdoers out of a misguided sense of loyalty, his mid-level managers are far less likely to manage "by the book" or to enforce the company’s ethical guidelines. Lax environments can evolve from executive actions (or inaction). CEOs whose cultural message is to "win at all costs" often can be found presiding over tragically compromised institutions.

Consider some recent examples. John Gutfreund, until 1991, was CEO of the Salomon Brothers investment banking firm. Legendary for his aggression, acquisitiveness, and money lust,[80] and known in the industry for insisting on absolute control of the deals in which Salomon Brothers participated,[81] Gutfreund ended his career in disgrace after a senior Salomon official was found to have rigged federal treasury bond auctions, which ensured that the firm would be able to acquire more than the legally-mandated ceiling of thirty-five percent of any issue sold.[82] Salomon Brothers only narrowly escaped criminal indictment for these actions, and Gutfreund himself was enjoined from associating with securities firms in the future.[83]

A second example is Robert M. Fomon, another powerful CEO known for his devotion to "winning at all costs."[84] Fomon was the CEO of E.F. Hutton Company, another Wall Street powerhouse. He encouraged a "‘whatever it takes’ culture" at E.F. Hutton,[85] and averted his eyes whenever thorny business or legal problems presented obstacles to landing new clients and ever-bigger deals. Fomon was also known for ruthlessly humiliating subordinates who failed to bring in increasing profits for their departments.[86] Before being forced out by his board of directors in 1986, Fomon presided over E.F. Hutton’s indictment for, and ultimate guilty plea to, 2,000 felony bank fraud counts in a massive check-kiting scheme that netted E.F. Hutton millions at the expense of its correspondent banks.[87]

A more recent example is Daniel E. Gill of Bausch & Lomb, Inc., a manufacturer of optical products. Like Fomon, Gill insisted on herculean performance in his operating units, and belittled or fired subordinates who failed to meet their quarterly sales growth targets. Described as "tenacious, demanding, and very numbers-oriented,"[88] Gill expected his managers to meet his demands and seldom cared how they did it. "Double-digit increases were demanded every quarter, every year, regardless of local economic conditions."[89] Predictably, ethical lapses in the company became common—sales were booked before they were complete (or even existed), and unsold inventory was dumped on the black market. Eventually, claims of financial fraud surfaced, customers complained of intimidation, and Bausch & Lomb’s earnings fell fifty-four percent.[90] The firm had to amend its financial statements and settle (for $68 million) several consumer class action suits.[91] Gill, like Fomon, was replaced by his board, but not until after the company had lost close to one billion dollars in market capitalization.[92] Business Week described Bausch & Lomb’s numbers-driven business culture as a "train wreck waiting to happen."[93]

The final, and most recent, example of a culturally-influential CEO is Robert L. Scott, former CEO of Columbia/HCA Healthcare Corporation. "[O]nce celebrated as a visionary reformer of the American hospital industry but more recently criticized for his aggressive tactics,"[94] Scott was forced out by his board just as the Justice Department and several state agencies were intensifying their investigations of overbilling, tax violations, and Medicare fraud at the national hospital chain. "People close to Mr. Scott characterized his downfall in terms suitable for a Greek tragedy; portraying him as a brilliant and incisive business-man who was undone by his fatal flaws. Those flaws, they said, included an arrogance and aggressiveness that permeated the company."[95] Complaints circulated that Scott had "[driven] underlings to produce 15% to 20% rates of growth. Many stressed-out hospital managers [had] quit."[96] Those who met the targets received substantial cash bonuses.[97] When the dust had settled, Scott’s successor, Dr. Thomas F. Frist, Jr., called for "a complete overhaul of the aggressive culture established by Mr. Scott."[98] Noting that, as a director, he had never been informed that there were any concerns relating to the company’s Medicare reimbursement submissions,[99] Frist promised to revamp the relationship between the CEO and Columbia/HCA’s board.

Not every CEO, to be sure, wields the kind of cultural influence over his employees that Gutfreund, Fomon, Gill, and Scott apparently did, especially in large bureaucratic enterprises. Growth and profit-driven CEOs do not inevitably preside over calamitous corporate declines. By the same token, corporate crime may occur notwithstanding the rectitude of a company’s leaders and even the assiduous efforts of those leaders to discourage criminal behavior. In other words, there is no inevitable correlation between the personal ethics or management style of a CEO and his company’s tendency to organizational crime.[100] Nevertheless, personalizing a corporation’s crime to its CEO—putting a face on corporate crime—offers a court the opportunity to focus on systemic behaviors that might otherwise escape official attention.

The public or symbolic role of the CEO has many facets. Often, CEOs are quite deliberately cast as the embodiment of their companies, appearing in advertisements, making public appearances, and serving as spokespersons when a crisis occurs. They also appear before investment analysts and Congressional committees. As a consequence, they sometimes become media personalities or even political candidates. Indeed, some CEOs’ strong identification with the companies they lead and the public roles they are called upon to play give them a nearly sovereign-like character.[101] This means that like true sovereigns, CEOs may sometimes be deposed when things go wrong within the company—even things over which they had no effective control.[102] It also means that they should expect to be called to task—at least symbolically—when their companies engage in significant criminal activity.[103]

The most important argument in favor of mandating an icon proceeding in every case in which a corporation is found guilty of a crime is that corporate crime "violate[s] trust and undermine[s] social institutions."[104] It doesn’t matter whether a corporation has pleaded guilty or not—when a corporation is convicted of a crime, a social harm has been committed. It is therefore fitting that the top corporate leader be required to confront the fact of the company’s wrongdoing, and be subject to some public censure on the company’s behalf. This is true regardless of the CEO’s personal management style, involvement (if any) in the circumstances leading up to the crime, or conduct upon being informed that an investigation of wrongdoing was underway. It is also true regardless of the CEO’s public profile, or even of the company’s size and prominence.

It may be said that employing a corporate icon proceeding in every case in which a corporation is found (or pleads) guilty to a crime, exemplifies the theory of "expressive sentencing."[105] Regardless of its theoretical basis, the corporate icon proceeding responds to a very legitimate communal desire to hold some individual accountable when corporate crime occurs. It also affords courts the opportunity to begin the process of reintegration at the level where change is most likely to take place.[106]

Making the corporate icon proceeding mandatory does not necessarily mean that all corporate icon proceedings will be the same, or even that all of them will be critical of the defendant’s CEO. For example, the CEO of a corporation that has put in place an effective program to prevent and detect crime,[107] or one that has self-reported the crime, fully cooperated in the ensuing investigation, and demonstrated acceptance of responsibility for the crime,[108] should experience a very different type of icon proceeding than the CEO of a company that has overseen a lax operation, stonewalled throughout the government’s investigation, vigorously and publicly denied the charges, shielded and indemnified key employee witnesses, and taken a public stand of defiance toward the government. In the first instance, the sentencing judge will have every incentive to laud the CEO’s conduct and hold her or him up as an exemplar to the business community (in this case making the CEO a true "icon"). In the latter instance, the sentencing judge will be fully justified in recapping the evidence adduced against the company, noting the impact of the crime on the community or the industry, and reminding the CEO of the obligations of corporate citizenship.

Ideally, a corporate icon proceeding should include the very same elements that first surfaced in the sentencing hearing for Pennwalt Corporation:[109] an expression by the sentencing judge of the relevant community’s abhorrence of the crime; an exploration with the CEO of how the crime could have occurred; a discussion with the CEO concerning the response of the corporation after learning of the crime; an assurance by the CEO that similar crimes will not recur; an acceptance by the judge of the CEO’s assurance; and an admonition by the judge that the company is expected to be a good corporate citizen. At a minimum, it is essential that the CEO be required to acknowledge the fact that the crime(s) occurred, the role of corporate management both before and after the crime occurred, and the finding of guilt.

The next phases of the icon proceeding should be designed to make sure that the CEO answers specifically for the elements of the crime and its aftermath. For example, the judge may wish to go through each count of the complaint, or go through the allegations of harms to the public, requesting the CEO’s acknowledgment of each one seriatim. He may wish to ask specifically about the corporate practices and procedures that permitted the crime to escape detection.[110]

One might argue that when corporate crime occurs, the company’s directors should always be as involved in the sentencing proceedings as is the CEO, and for the same reasons—to command their attention, to provide some public sense of closure, and to extract some promise of organizational reform. Such a position, however, would be unmindful of the distinction between an on-the-premises manager and a fiduciary part-timer.[111] Thus, rather than crafting a mandatory corporate icon provision that would include directors as well as the CEO in a corporation’s sentencing in all cases, I suggest an alternative: In any case in which a corporation is found guilty of a federal crime, the trial judge should have the discretion to convene the corporation’s board of directors to address systemic failures of the corporation’s governance structure and also to receive the sentence of the court.

Experts have long agreed that corporate directors have some obligation to ensure that their companies conduct their businesses ethically and comply with applicable laws.[112] What has been less obvious is just how extensive that obligation is, what directorial behavior is sufficient to satisfy the obligation, and what role, if any, a board of directors should play in crafting the specifics of a corporate compliance policy. Opinions on these questions have evolved in recent years and, like other aspects of directors’ fiduciary duties, there remain some open questions as to the dimensions and form of a corporate director’s role.

For many years, the conventional wisdom was that, in the absence of some "red flag" alerting them to the likelihood that corporate misconduct was going on within the company, a corporation’s board of directors had no duty to create (or compel the creation of) a program to detect that misconduct or to insert themselves into the processes of ensuring legal compliance. The language often cited is that "absent cause for suspicion there is no duty upon the directors to install and operate a corporate system of espionage to ferret out wrongdoing which they have no reason to suspect exists."[113] This was the position of the Delaware Supreme Court, and was widely understood to be the state of the law generally in jurisdictions throughout the country.[114] Then, the adoption of the Organizational Sentencing Guidelines in 1991 created significant incentives for corporations to establish an "effective program to prevent and detect violations of the law."[115] As a result, commentators began to suggest that the old Allis-Chalmers rule might warrant revisitation.[116]

In 1996, the Delaware Chancery Court issued its opinion in In re Caremark,[117] suggesting that, indeed, Allis-Chalmers is probably no longer good law. Caremark was a decision assessing the fairness of the proposed settlement in a shareholders’ derivative action arising out of Caremark’s criminal indictment on multiple felony counts of Medicare and Medicaid fraud. As the result of the criminal and related litigation, the company had to pay out approximately $250 million in restitution and civil and criminal fines. The shareholders alleged that, by failing to detect rampant misconduct within the company, Caremark’s board had violated its fiduciary obligations and should be held liable for damages to the shareholders. This assertion placed squarely into question the viability of the Allis-Chalmers decision.

In reviewing the proposed settlement, Chancellor Allen addressed the specific question "what is the board’s responsibility with respect to the organization and monitoring of the enterprise to assure that the corporation functions within the law to achieve its purpose?"[118] Noting particularly the "powerful incentives" provided by the Sentencing Guidelines,[119] and arguing that "any rational person attempting in good faith to meet an organizational governance responsibility" must take those incentives into account,[120] Chancellor Allen suggested that directors of Delaware corporations should:

Obviously, the level of detail that is appropriate for such an information system is a question of business judgment. And obviously, too, no rationally designed information and reporting system will remove the possibility that the corporation will violate laws or regulations, or that senior officers or directors may nevertheless sometimes be misled, or otherwise fail reasonably to detect acts material to the corporation’s compliance with the law. But it is important that the board exercise a good faith judgment that the corporation’s information and reporting system is, in concept and design, adequate to insure that appropriate information will come to the board’s attention in a timely manner as a matter of ordinary operations, so that it may satisfy its responsibility.[121]

Though Chancellor Allen’s decision was not appealed and, therefore, his dictum on the role of the board in creating information and reporting programs has not been endorsed by the Delaware Supreme Court,[122] the Caremark opinion has been closely followed and widely discussed.[123] As a consequence, materials on corporate compliance programs—aimed at directors as well as top-level administrators—have recently been circulated to a variety of audiences.[124] Whole books are now available on how to build a successful compliance program, often with special emphasis on the role of the board of directors.[125]

The directors’ oversight duties discussed in the Caremark opinion need not rest solely on the foundation of the Organizational Sentencing Guidelines. Several federal statutes, including the Foreign Corrupt Practices Act of 1977 (FCPA),[126] the Insider Trading and Securities Fraud Enforcement Act of 1988 (ITSFEA),[127] and the Private Securities Litigation Reform Act of 1995 (PSLRA),[128] also impose obligations on companies to have in place data gathering and reporting programs aimed at specific forms of misconduct.[129] Several federal agencies in recent years also have issued policy statements that offer significant incentives to companies that establish systems to ensure that their operations are in compliance with the agencies’ regulatory goals.[130] These agencies regularly consider the quality and effectiveness of a regulated company’s compliance mechanisms, when considering whether to initiate civil or criminal proceedings.[131] And when these agencies settle enforcement proceedings, they often require boards to become involved in corrective efforts.[132]

The need for board involvement in compliance program oversight is most compelling in public companies. The Securities and Exchange Commission has officially censured at least one public company’s board of directors for failure to take appropriate corrective actions upon learning of apparent wrongdoing by the company’s executives.[133] It also has brought enforcement proceedings against boards of directors that fail to ensure that top-level executives are properly disclosing corporate information.[134] Collectively, these statutory provisions and regulatory actions, taken together with the Organizational Sentencing Guidelines, form the foundation for a board of directors’ duty to ensure that an appropriate system of compliance programs is in place.

How directors exercise that duty, of course, may differ across organizations. Those corporations in fraud-prone industries,[135] for example, and those with criminogenic profiles,[136] may require aggressive and sustained attention from the board. Those in more compliant industries, and those individual companies with a well-established and proven compliance record, may require substantially less effort. At a minimum though, experts say that any corporate board would be well advised to be briefed regularly on the status of all compliance practices designed to satisfy the Organizational Sentencing Guidelines, especially those involving the discipline of employees accused of misconduct and management’s response to specific complaints.[137] The board should also regularly review the company’s ethics code and the structure of any compliance program(s), to ensure that they reflect current industry practices, new legislation, and the company’s own experience.[138] The board (through its audit committee) should work carefully with outside auditors to make sure that they know the board’s expectations regarding prompt reporting of evidence of misconduct.[139] "There [also] should exist a mechanism to ensure that directors learn sooner (rather than later) about allegations of significant illegality by corporate officers or directors."[140]

Another reason directors—as well as a company’s CEO—should be involved in the corporate sentencing process is that directors play an essential role in establishing a company’s core values. Through the priorities they set and the reward structures they put in place, directors can do much to define a corporation’s culture.[141]

Indeed, directors are uniquely situated to influence the corporate culture, both by direct and indirect methods. Simply by performing routine directorial tasks—selecting (and replacing) top-level executives, approving executive compensation policies that reward the behaviors the directors think most important,[142] responding to external challenges and engaging in management oversight generally—directors can convey a powerful set of messages. One of the simplest ways a board can shape a company is to seize control of its agenda.

One of the simplest ways a board can communicate its values is to create board-level committees that represent those values. Many corporate boards, for example, have established board-level committees to deal with environmental and safety matters.[143] Other corporate boards have established committees dealing with employee and human resource issues,[144] nuclear safety issues,[145] social responsibility issues,[146] ethics issues generally,[147] and issues related to community relations and public affairs.[148] A number of banks have created board-level committees that monitor compliance with the Community Reinvestment Act.[149] Some banks, in addition, have created committees to oversee compliance with regulatory orders aimed at ensuring their continued solvency.[150] A handful of companies, often those recovering from a crisis (and sometimes under government compulsion), have created board-level committees simply to ensure that the legal requirements applicable to the companies’ operations are being observed.[151] Several other companies—presumably including some that are attempting to adopt "best practices"—have recently created board-level committees to ensure that their employees are adhering to internal or industry codes of conduct or various other regulatory requirements.[152]

There are still other ways, however, in which directors individually, and collectively, can influence a corporation’s culture. First, directors can build into the criteria by which they evaluate senior management performance in the area of legal compliance.[153] Second, they may condition executives’ access to stock options or indemnification rights on the executives’ cooperation in internal investigations.[154] Third, they may wish to consider a consistent policy of cooperation with investigatory agencies, and when the occasion for self-reporting arises, insist on prompt action, even when management would prefer a more combative stance.[155] Fourth, they may choose to participate personally in in-house ethics and compliance training programs. All these actions, especially if they are announced publicly and made visible to all employees, would send a powerful signal regarding the corporation’s commitment to legal compliance, ethical business practices, and personal responsibility in pursuit of the company’s objectives. And all of these actions also fit easily within the traditional boundaries of directorial concerns.

Directors who are subject to a woodshed proceeding can fairly expect the following to occur: The proceeding will disrupt their personal routines and require them to convene in an unfamiliar—perhaps inconvenient—courtroom setting; it will reconfigure—at least temporarily—the directors’ traditional patterns of deference to the CEO[156] and cause them to defer instead to a powerful sentencing judge; it will force the directors to familiarize themselves with, and examine in some detail, the practices and policies of the corporation that led to the crime at issue, management’s failure to prevent or detect the crime, and management’s response upon learning that a crime had occurred; and it will cause the directors, rather than some hired litigator, to witness and actually listen to the sentencing judge’s comments, particularly as regards harm to the community, impact on victims, and the need for improved management oversight.

Under the current regime, corporate criminal convictions have no discernible impact on a corporate directors.[157] Criminal convictions, even for shocking corporate crimes, seldom bring about changes in board composition, for example. One does not find a reduction in directorial compensation following a guilty verdict. Though occasionally a CEO may be sacrificed,[158] outside directors are seldom, if ever, involved in such purges. Indeed, until Chancellor Allen’s decision in the Caremark case, corporate directors could safely assume that their companies’ criminality had little, if any, connection with their work.

Edward Rock has recently written on the informal mechanisms by which corporate norms are transmitted.[159] These include the narrative stories told in the opinions of the Delaware courts, speeches and out-of-court comments made by Delaware judges, media coverage examining the misbehavior of corporate executives, and gossip. Focusing on the role of the courts, Rock asserts that Delaware judges engage in the practice of delivering "corporate law sermons"[160] and that "we come much closer to understanding the role of courts in corporate law if we think of judges more as preachers than as policemen."[161] The same line of thinking applies to judges in criminal cases as in corporate law cases—part of their task is to send messages to distant listeners setting forth the boundaries of acceptable organizational behavior. The directors’ woodshed proceeding is just one way in which these messages may be widely disseminated.

— whether the corporation had in place an effective program to prevent and detect violations of the law;[162]

The shorthand formula for sentencing judges should be this: In those (infrequent) cases where there is evidence that the board "participated in, condoned, or was willfully ignorant of" the conduct at issue, the prosecution could of course invoke those provisions of the Sentencing Guidelines that permit an enhancement of the corporation’s sentence.[163] In all such cases, the sentencing court should also order a directors’ woodshed proceeding. In those (more common) cases where the board has had no direct knowledge of the crime and did nothing specific to condone it (or willfully ignore it), the sentencing judge may still wish to order a woodshed proceeding, depending on the circumstances surrounding the crime and the board’s public profile. And even where the corporation’s directors have done everything in their power to minimize the likelihood of corporate crime in the ways suggested in Part V.B., the sentencing judge may nevertheless decide to convene a directors’ woodshed proceeding, depending on the gravity of the case and other factors enumerated in this section. Regardless of the circumstances giving rise to the woodshed proceeding, it should be conducted along the lines of those set forth for the conduct of the icon proceeding,[164] and should incorporate similar reintegrative themes.

Woodshed proceedings are likely to be quite rare. Most corporate defendants are closely-held businesses,[165] in which (if there is a board) the board’s participation in a woodshed proceeding would have little, if any, general deterrent value. But for those companies, especially public companies, in which serious criminal conduct has occurred, there may be a strong symbolic value in requiring a directors’ woodshed proceeding in connection with the companies’ sentencing. As one critic has observed, though ostensibly about truth-seeking, a judicial proceeding is in fact "a drama that the public attends and from which it assimilates behavioral messages."[166] A woodshed proceeding, like other forms of symbolic punishments, would simply be a variation on this theme.

In thinking about the constitutionality of both the mandatory corporate icon proceeding and the discretionary directors’ woodshed proceeding, one might first turn to those cases in which corporate executives have invoked the fiduciary shield doctrine.[167] These executives have argued that extending personal jurisdiction over them in civil cases for conduct undertaken solely on behalf of the corporations with which they are affiliated would violate their personal due process rights. The consistent response to this argument has been that the fiduciary shield doctrine does not assume constitutional proportions.[168] Indeed, it has been abandoned in many states. Moreover, the fiduciary shield cases involve the potential for personal liability for the executive, whereas submission to an icon or woodshed proceeding risks nothing more than a transient reputational injury. At best, being summoned to appear in a sentencing proceeding can be likened to receiving a subpoena to testify at trial.

A more plausible constitutional argument is the one raised by the CEO, general counsel, and a senior corporate executive at A.H. Robins Co. when Judge Miles W. Lord used a settlement hearing in a civil case as an occasion to publicly castigate those executives for their complicity in the company’s manufacture of the Dalkon Shield.[169] These executives, seeking to have his comments expunged from the record, argued successfully that Judge Lord had, in effect, issued factual findings regarding their wrongdoing without giving them notice and an opportunity to be heard. The Court of Appeals held that Judge Lord’s critical comments toward the executives had implicated the executives’ liberty interests, and that their due process rights had been infringed.[170]

A more significant critique of the corporate icon and directors’ woodshed proceedings comes from Toni Massaro, who has characterized some shaming rituals as meaningless "retributive spectacle[s]."[171] Massaro focuses on the more humiliating of the shaming rituals—judicially ordered sign wearing and the posting of public apologies. However, the corporate icon and directors’ woodshed proceedings differ from those forms of shaming censure in several important ways.

First, these proceedings will be confined to the courtroom and will not require any public displays of self-abasement. There is likely to be some publicity about many icon and most woodshed proceedings but being lectured to briefly in a courtroom by a judge does not equate to parading one’s misdeeds in a public place among strangers, or for a protracted period of time. In addition, neither the icon proceeding nor the woodshed proceeding—unlike some other shaming rituals—is likely to create much of a "spillover effect."[172] Thus, innocent bystanders, such as spouses and children, should not be made to feel too personally stigmatized or shamed.

Second, there is little likelihood that either the icon proceeding or the woodshed proceeding will raise issues of unequal or discriminatory application.[173] Both proceedings will be conducted by judges whose cultural experiences, by and large, will have been similar to those of the men and women appearing before them. Though the power imbalance at the moment of shaming will be obvious, there is little risk that the process will be (or will be perceived as being) a product of class bias or racial animus.

A third concern, specious in my view, is that implementation of a mandatory corporate icon proceeding or a discretionary directors’ woodshed proceeding would disrupt executives’ expectations of autonomy and tend to overdeter them. One might argue, for example, that the specter of such a proceeding might discourage CEOs from serving in companies with a high risk of criminal exposure, or would discourage directorial service in such companies.[174] Alternatively, one might argue that the existence of icon and woodshed proceedings would stifle innovation and cause CEOs and their directors to become excessively risk-averse.[175] Neither of these claims outweighs the potential deterrent value of the proposed proceedings, in my view, and neither is supported by any evidence. It is highly unlikely that the possibility of a corporate icon proceeding (as compared to, say, the risk of being fired for poor performance or the burdens of defending multiple lawsuits) will drive good CEOs out of office. And the remote possibility of a proceeding such as that envisioned by the directors’ woodshed proposal is hardly so Draconian as to move corporate directors toward excessive business timidity, let alone toward resignation from their posts.

A pragmatic concern is that if too many icon or woodshed proceedings are conducted, each additional proceeding may become devalued and those persons (primarily business colleagues) at whom these proceedings are directed, will cease paying attention to them and will no longer be deterred. Professor Massaro refers to this scenario as "shaming overload."[176]

First, unless corporate crime increases dramatically, the number of icon and woodshed proceedings will be small. At present, across the country, the average rate of corporate sentencing proceedings is just around four per week,[177] or less than one for each active federal judge per year.[178] Most of these cases involve closely-held corporations[179] for which woodshed proceedings will seldom be necessary. And many of these cases involve defunct corporations where even the icon proceedings might be dispensed with. The geographic distribution of the remaining cases, the nature of the crimes committed, the array of industries involved, the range of harms, and the personalities and organizational structures that gave rise to the corporations’ sentences, should all keep icon and woodshed proceedings from becoming too routine.

V.S. Khanna has argued that shaming sanctions are expensive, in the sense that they are more costly to administer than the simple imposition of a monetary fine.[180] He consequently suggests that, rather than be subjected to a shaming sanction, top managers of convicted corporations should be ordered to pay a fine based on some theory of strict liability.[181] Fining would be "socially cheaper," and also "more accurate" than any shaming sanction is likely to be.[182]

Dan Kahan and Eric Posner respond that (apart from any constitutional infirmities inherent in Khanna’s proposal), focusing on bookkeeping type criticisms such as these without also factoring in the "expressive utility" of shaming sanctions is "a bad idea."[183] In other words, they argue, shaming sanctions have an independent value beyond that available from the use of financial penalties—they satisfy the public’s demand for expression of moral condemnation.[184]

A more straightforward way to respond to the concern about cost is to note that the "cost" side of the cost-effectiveness equation as applied to shaming sanctions involves very low costs both for the courts and for the parties. Shaming sanctions need not command much in the way of judicial resources, and they would be less intrusive—and certainly less costly to the defendant—than court-ordered "community service,"[185] "corporate probation,"[186] or a court-supervised compliance program[187] would be. It also would be less publicly humiliating to the corporation (and thus less harmful to the corporation’s shareholders) than a formal "publicity sanction" would be.[188] Finally, a shaming sanction would not involve the vast sums of money that would be required to defend against a shareholders’ derivative action (though submission to an icon or woodshed proceeding would not be a defense to such an action). Looking strictly at costs, the icon and woodshed proceedings look like a bargain. The "effectiveness" side of the cost-effectiveness equation is the subject of the following section.

A final criticism of both the mandatory corporate icon proceeding and the discretionary directors’ woodshed proceeding has to do with the actual effectiveness of these proceedings. If it is true that most crime occurs somewhere near the middle-management level,[189] then focusing the court’s attention on the CEO and board of directors arguably may represent misplaced energy. In fact, however, directing the court’s attention to the top of the corporate pyramid is a singularly efficient method of conveying the message of the sentencing court to absent mid-level managers.

As noted above, the CEO is the single most potent force for change within an organization and corporate directors, although more distant, can also make substantial contributions toward improving an organization’s culture. More importantly, mid-level managers are very attuned to the shame that is heaped upon their bosses. In a seminal study of the human responses within organizations that had been caught in serious wrongdoing,[190] Brent Fisse and John Braithwaite found that, when the spotlight was turned on the company or its top executives, employee morale suffered and the problems revealed became a "relentless topic of conversation" in the workplace.[191]

More important, however, was the finding that shame generated organizational reforms. In case study after case study, companies improved in many areas after significant shaming incidents. Some improved their compliance programs[192] and internal auditing functions.[193] Others revamped their compensation plans and other incentive schemes.[194] Still others revised company procedures to ensure that the kinds of problems that had given rise to the scandal would not recur,[195] and that information about misconduct would more effectively make its way to the top.[196] In many companies, sanctions were put in place to deal with employees who violated internal policies,[197] and several improved their employee education programs.[198] Finally, in some situations, particularly those involving egregious misconduct, companies were entirely reorganized.[199] In short, in virtually every case Fisse and Braithwaite examined, public shaming resulted in measurable reforms from the top to the bottom of the corporate hierarchy. Thus, "adverse publicity played a significant role in prodding the company into change."[200]

The Organizational Sentencing Guidelines were intended to be an organic document to be altered as experience suggests additional ways in which sentencing procedures could be more effective in minimizing criminal activities.[201] This Article proposes an amendment to the Guidelines, designed (1) to increase the likelihood of corporate self-reporting of crimes and cooperation with investigators in determining the scope and extent of a corporation’s crime, and (2) to increase the likelihood that corporations—especially public ones—will be more attentive to legal compliance values, and more assiduous in establishing internal compliance programs. Both of these objectives are salutary and achievable.

If embraced by the U.S. Sentencing Commission, these proceedings will directly support what the Sentencing Guidelines in theory seek to achieve—to "provide just punishment, adequate deterrence, and incentives for organizations to maintain internal mechanisms for preventing, detecting, and reporting criminal conduct."[202] They will also reinforce the teachings of basic corporate law: that officers and corporate directors should, on some occasions, be held accountable as individuals for the corporate wrongdoings that occur on their watch.