2007 Issue 1 - New York City Bar Association

L A W Y E R ’ S R O L E I N C O R P O R A T E G O V E R N A N C E
The January 4 Statement also highlights seven additional factors that
will bear upon the decision whether to impose a corporate penalty: (1)
the need to deter the particular type of offense charged in the proceeding;
(2) the extent of the injury to innocent parties; (3) whether complicity in
the violation is widespread throughout the corporation; (4) the level of
intent on the part of the perpetrators; (5) the degree of difficulty in detecting
the particular type of offense; (6) the presence or absence of remedial
steps taken by the corporation; and (7) the extent of cooperation with
the SEC and other law enforcement agencies shown by the corporation.
Thus, the SEC continues to identify cooperation as a factor that will
be considered in the process of determining sanctions. It remains to be
seen, through the development of future cases, whether the weight attached
to cooperation will change and whether the Commission will continue
to impose civil money penalties at the recent, escalated levels.
4. Culture of Compliance
Finally, the SEC has underscored the importance of instilling a culture
of compliance in companies. Then SEC Chairman William H. Donaldson
suggested that the first priority of any Board of Directors should be to fix
the company’s “moral compass” and define the ethical standards that
make up the “corporation’s DNA.” 51 Furthermore, Cutler has directly compared
the Seaboard Report’s concern with a culture of compliance with
the parallel emphasis found in the Thompson Memo and the Sentencing
Guidelines .52 Like Donaldson, Culter noted that it is important that directors
and executives set the “tone at the top,” and that means “[y]ou’ve
got to talk the talk; and you’ve got to walk the walk.” 53 Every company
must have a strong culture of ethics that is communicated to employees,
and every company and employee must live by this code.
C. New York Stock Exchange
1. Cooperation Memo
On September 14, 2005, the NYSE issued its “Cooperation Memo” to
all member firms detailing the Exchange’s position on cooperation. 54 Like
51. William H. Donaldson, Remarks at 2003 Washington Economic Policy Conference (Mar.
24, 2003), available at http://www.sec.gov/news/speech/spch032403whd.htm.
52. See Stephen M. Cutler, Tone at the Top: Getting it Right, Speech at Second Annual
General Counsel Roundtable, (Dec. 3, 2004), available at http://www.sec.gov/news/speech/
spch120304smc.htm.
53. Id.
54. See Susan Merrill, Exec. V.P., NYSE Div. of Enforcement, NYSE Information Memo No.
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