Abstract

Culture is a powerful force in corporate compliance. Corporate culture shapes how employees behave, dictating whether, when, and how they follow the law. Cases arising out of cultural failures often involve public harm—plane crashes, poisoned rivers, tainted cancer drugs, and collapsed mines. Before these awful outcomes, however, the corporations that caused these harms fostered cultures that permitted the disregard of legal commands and public commitments. Managers disparaged safety regulations. Messages about profits and production drowned out messages about compliance and safety. Yet, there is a gap between all we know about the power of culture and our understanding of corporate law doctrine's power to change it.

This Article makes sense of that gap and offers a theoretical framework to bridge it by arguing that culture plays a more central role in the essential elements of oversight doctrine than scholars have yet recognized. Corporate directors and officers have fiduciary duties that require them to oversee a firm's compliance with law. Through the Caremark doctrine, shareholders have the power to assert claims against corporate leaders if the corporation fails to adequately oversee its legal compliance.

When cultural risks are viewed as legal risks, the real power of shareholder oversight can be harnessed to prevent corporate acts of public harm. Culture already informs key features of corporate oversight doctrine. This Article explains that legal risk, good faith, and "mission critical" risk—essential components of modern oversight doctrine—each implicitly interrogate the culture of the firm. With this understanding, this Article demonstrates that corporate law—in the form of the Caremark doctrine—can and should require managerial oversight of corporate culture to ensure that firms take seriously their promises of legal compliance.

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