GCGC (3): Liability and Regulation in a Changing World

GCGC (3): Liability and Regulation in a Changing World

July 26 2019

The Global Corporate Governance Colloquia (GCGC) is a global initiative to bring together the best research in law, economics and finance relating to corporate governance at a yearly conference held at 12 leading universities in the Americas, Asia and Europe. The 2019 event was hosted by the Research Center SAFE (Sustainable Architecture for Finance in Europe) at the House of Finance and Goethe University. This article is the third in a four-part summary of the conference which seeks to highlight some of the interesting new work and research questions that were addressed at the event.

Who to target for defective corporate culture?

In spite of widespread regulatory interest, there are numerous different definitions of corporate culture. Rationales for why a healthy corporate culture matters also widely differ. They include arguments that corporate culture is a vital component of risk management, compliance, business implementation and strategy, or economic success. Some of these rationales focus on performance, whereas others have an accountability basis. The many corporate scandals demonstrate that defective corporate culture can inflict serious damage on stakeholders (such as employees, customers and shareholders), communities, and society as a whole. A study by Prof. Jennifer Hill (Monash University) presented at the conference explores whom the law should target for wrongdoing that arises from flawed corporate culture – be it the corporation itself; the individuals that committed the wrongful acts (often low-level employees); or senior managers and directors, by looking at (i) entity criminal liability and (ii) personal liability of directors and officers for breach of the duty of oversight. Adopting a comparative analysis, the paper examines the scope and effectiveness of these forms of liability in three jurisdictions – the US, the UK, and Australia.

It was also highlighted at the event that in the US, corporate and criminal law have fundamentally different approaches: corporate law sets limits with respect to the accountability of managers. It recognizes that excessively high liability risks could make directors and officers risk-averse. The goal of criminal law, on the other hand, is quite different. Its aim is to implement criminal punishment and shareholders’ interests are irrelevant to this goal. Therefore, it is questionable whether corporate law and criminal law can be considered as pursuing the same objectives. The paper is particularly interesting in its comparative analysis, particularly regarding Australian developments concerning the introduction of provisions under the Model Criminal Code, which provide entity liability for defective corporate culture, but which have been rarely applied in practice.

The presentation opened a broad range of additional issues on the topic of culture: i) tension between corporate culture and different business models; ii) the difficulty of measuring and targeting organizational culture, given its complexity; iii) The impact of the Volcker Rule on corporate culture; iv) the close connection between culture and incentives; v) the operationalization of culture as a mechanism to hold directors liable;  vi) the implications of corporate culture for a shareholder value model of the firm.

Click here to watch the presentation | Click here to access the draft paper | Click here to read the summary comments

Does more protection mean more pollution?

A new study presented by Prof. Ian Appel, looked at how parent liability for subsidiary environmental cleanup costs affects industrial pollution and production. The study finds that increased liability protection for parents leads to a 5-9% increase in toxic emissions by subsidiaries, with evidence suggesting that the increase in pollution is driven by lower investment in abatement technologies rather than reallocation across plants or increased production. The study includes cross-sectional tests which suggest a harm-shifting motivation for these effects. The results highlight moral hazard problems associated with limited liability and also ‘the legal dilemma’ in which legal responsibility for dishonorable actions of affiliated firms causing negative externalities on the society contrasts one of the principles of corporate law, limited liability.

Click here to watch the presentation | Click here to access the paper | Click here to read the summary comments

Keeping up with changing financial markets

An early paper presented by Prof. Katheryn Judge (Columbia Law School) explored some of the problems that flow from the tension between how finance is regulated and the nature of finance. The paper emphasises that the many dynamics of the financial system matter as they can impede market discipline, firm governance, and supervision. Furthermore, they can exacerbate fragility, delay and impede crisis response and create challenges for how to regulate finance. The point was made that the system is so complex and dynamic, that there is always much that remains unknown. The paper suggests “Eastern,” or holistic, approaches to regulation as an important complement to existing western-style regulation, pointing to examples of slow processes and unpredicted outcomes. One suggestion that emerged from the paper was decennial commissions that assess what is working, what is not, and why? What are the unintended consequences? This then prompted much discussion and challenging questions as to how to approach the issue.

Click here to watch the presentation | Paper not yet available for publication | Click here to read the summary comments


The next GCGC Conference will take place on 12-13 June 2020 at Seoul National University, South Korea. Submissions are now being accepted (deadline 13 September). Click here for details. 

Continue reading: Part one | Part two | Part four


"Corporate Culture and Liability", Jennifer G. Hill (2019)

Akey, Pat and Appel, Ian, The Limits of Limited Liability: Evidence from Industrial Pollution (September 7, 2018). 13th Annual Mid-Atlantic Research Conference in Finance (MARC) Paper; European Corporate Governance Institute - Finance Working Paper No. 611/2019. Available at SSRN: https://ssrn.com/abstract=3083013 or http://dx.doi.org/10.2139/ssrn.3083013

"Eastern Medicine for Western Finance: Rethinking Financial Regulation", Dan Awrey & Kathryn Judge (2019)


GCGC Conference Hosts by year:


2015 – Stanford University, USA

2016 – Swedish House of Finance, Sweden

2017 – University of Tokyo, Japan

2018 – Harvard University, USA

2019 – Frankfurt University, Germany

2020 – Seoul University, Korea

2021 – Yale University, USA

2022 – University of Oxford, UK

2023 – Peking University, China

2024 – Columbia University, USA

2025 – Imperial College London, UK

2026 – National University of Singapore





Elaine McPartlan

GCGC Secretary General





Professor Marco Becht







About the Global Corporate Governance Colloquia (GCGC)


The Global Corporate Governance Colloquia (GCGC) is a conference series, which, for an initial period of 12 years, brings together the best research in law and finance relating to corporate governance each year. The conferences, which are organised by the ECGI, are held in turn at 12 major universities that are leaders in the fields of law and finance in the Americas, Asia and Europe.

These conferences attract invited and contributed research papers of the highest scholarly quality. It includes at least one session devoted to the region or country where the conference takes place. These events are primarily “academic to academic” conferences with a few high profile participants from industry and the public sector. 

The launch conference was held at Stanford University in June 2015, and since then has also convened in Stockholm, Tokyo, Harvard and Frankfurt. Each University partner of the series will host the conference once in a 12 year period.

The 12 hosting institutions are: 

Columbia University, Goethe University Frankfurt, Harvard University, Imperial College London, National University of Singapore, Peking University, Seoul National University, Stanford University, Swedish House of Finance, University of Oxford, University of Tokyo and Yale University. 

The aim of the conference series is to attract current research papers of the highest scholarly quality in the field of corporate governance. The conferences are primarily 'academic to academic' events with some participants from industry and the public sector including the practitioner partners of GCGC and other invited panelists. The current practitioner partners are Zurich Insurance Group, and Japan Exchange Group (JPX) and others may be considered.


About the European Corporate Governance Institute


The ECGI is an international scientific non-profit association which provides a forum for debate and dialogue between academics, legislators and practitioners, focusing on major corporate governance issues and thereby promoting best practice.

Its primary role is to undertake, commission and disseminate research on corporate governance. Based upon impartial and objective research and the collective knowledge and wisdom of its members, it can contribute to the formulation of corporate governance policy and development of evidence based best practice.

In seeking to achieve the aim of improving corporate governance, ECGI acts as a focal point for academics working on corporate governance in Europe and elsewhere, encouraging the interaction between the different disciplines, such as economics, law, finance and management.