December 28, 2010
Comments of Robert Shattuck on File No. S7-33-10
Proposed Rules for Implementing the Whistleblower Provisions of Section 21F of the Securities Exchange Act of 1934
(submitted electronically on December 28, 2010)
December 17, 2010 deadline for submissions
I was out of the country from December 8 through December 16. I first learned of the proposed rules on December 26. I request that my comments be received and considered by the SEC even though not submitted on or before December 17th.
Background of submitter
I am a retired lawyer with no professional or corporate affiliation.
For many years I have had an acute interest in corporate wrongdoing and what society can do to lessen the same. I have had a special interest in whether the work of plaintiffs lawyers aids in the deterrence of corporate wrongdoing. I have concluded that their work undermines business ethics and deterrence. I have recently devoted much time urging ethics professionals to evaluate the validity of my belief that plaintiffs lawyers undermine the deterrence objective of the civil law, and, if they agreed, in turn for those ethics professionals to raise the matter with management and/or make advocacy to lawmakers and others regarding how to increase the deterrence efficacy of the civil law.
I have a blog How To Combat Plaintiffs' Lawyers (URL http://robertshattuck.blogspot.com) in which I have reported my work during the past several years. I have an article Does the Civil Liability System Undermine Business Ethics? (URL http://robertshattuck.blogspot.com/2007/11/i-thought-this-would-be-effective-email.html) in my blog in which I set forth my argumentation that plaintiffs' lawyers undermine business ethics and deterrence.
A main consideration confronting the SEC regarding the proposed rules is how they will interact with, and whether they will undermine, internal compliance programs.
Based on the experience I have had in my work, I offer the following comments on the foregoing important consideration confronting the SEC:
Corporate wrongdoing is perpetrated by corporate officers and employees who participate in the design, implementation and execution of corporate actions and activities that comprise a wrongdoing.
As regards deterrence, I believe more efficacious deterrence is achieved by punishing the responsible corporate officers and employees individually than is achieved by punishing the corporation.
Based on my experience, I believe corporate management is less than fully supportive of trying to achieve deterrence through the punishment of responsible officers and employees individually. I further believe that corporate compliance and ethics officers, as well as corporate counsel, follow the lead of management in this regard and are less than fully assiduous in advocating for punishment of officers and employees individually to achieve a maximum deterrent effect.
The basis for my foregoing beliefs is that I have engaged in very extensive communications to corporate management (and proxies for corporate management such as the chamber of commerce), to ethics and compliance officers and their organizations (such as the Ethics Compliance Officer Association), and to corporate counsel (including the Association of Corporate Counsel). These parties largely exhibited no interest in the question of whether punishing responisble officers and employees would achieve better deterrence than punishing the corporation. These extensive communications are memorialized in my blog.
It is possible that I have misinterpreted the responses of the foregoing parties to my communications. It is possible that they do have an interest in what better deters corporate wrongdoing and that they have beliefs about whether punishing responsible officers and employees individually achieves or does not achieve better deterrence. To seek clarification of this, I will re-contact the parties and ask them whether I have misinterpreted their responses. I will provide whatever answers I receive to the SEC as a further submission.
If there is less than full support within the corporation for that which maximizes deterrence, that is a factor that the SEC should weigh in the balance concerning how the proposed rules will interact with, and whether they will undermine, internal compliance programs.
Birmingham, AL 35223