Commentary on the Limits of Compensation and Deterrence in Legal Remedies

The subject of this symposium, corporate misconduct and the legal system’s potential to deter it, is a matter of substantial importance. Regularly, if not daily, print and broadcast journalists report violations of legal norms by business corporations that affect thousands of persons. If the savings and loan industry debacle was the most painful example of widespread business misconduct that caused public as well as private injury, the emerging healthcare industry problems with illegal side payments to physicians appear to be the most recent. Problems of systematic corporate violation of legal norms have public significance in large part because of the scale of the operations of the modern publicly financed corporation. Much of our economic production occurs within the corporate form of organization. We are naturally concerned that legal rules designed to protect private rights and public health, safety, and welfare be observed as these organizations function to produce wealth. Thus, it seems quite natural for us to consider the deterrence effects that our system of rules and remedies create. As this issue of Law and Contemporary Problems demonstrates, the deterrence of rule violations is, however, not entirely simple. I welcome the invitation to comment upon the scholarly papers of Professors James Cox and Deborah DeMott. Their thoughtful articles richly reward the attention of their readers. But before I make any comment directed specifically to those papers, I first offer some more general comments on the topic of deterrence. Questions raised by the subject of appropriate deterrence of corporate misconduct may sensibly be sorted into two broad classes. The first class of ques-