Is S&P facing a "death penalty"?
Should we fear for the survival of Standard & Poor's?
It has found itself the object of an aggressive civil prosecution that seeks $1 billion in fines and an actual admission of guilt, the result of the SEC's new policy that it will no longer blithely allow companies to settle without "admitting guilt or denying guilt."
I noted previously the view that there are some interesting parallels between the S&P case and the infamous Arthur Andersen case. Recall that the latter eventually led to a "death penalty" imposed on the company. There are certainly some clear differences between the two, but the issue has been rekindled, and it's worth noting the debate that surrounds the issue. It's fair to say that the fear of a "death penalty" has prompted many to adopt the view that mere indictments can spell irreparable harm for companies.
Many assume that's the big reason why criminal prosecutors have trended toward deferred prosecutions of corporations. But is this really true?
One answer comes from a recent study published this year in the University of Pennsylvania Journal of Business Law. It holds that "there is no evidence to support the existence of the 'Andersen Effect' and the much-hyped corporate death penalty. Indeed, no one has ever empirically studied what happens to companies after conviction. In this Article, I do just that. Using the database of organizational convictions made publicly available by Professor Brandon Garrett, I find that no publicly traded company failed because of a conviction in the years 2001–2010."
This is surely not the last word on an interesting debate.
- here's the article