Afterword and Comment: Towards an Ethical Duty to Market Investors

Sean Griffith, University of Connecticut School of Law

Abstract

... I. CORPORATE GOVERNANCE AND LEGAL ETHICS ... This Part applies the perspective of the hypothetical market investor to real world examples, drawing an example from each of the firms at the center of the current crisis--Enron and WorldCom. ... Enron also used off-balance sheet transactions through its SPEs to generate "earnings" for the corporate parent. ... What should an ethical gatekeeper have done in this situation? A professional observing her duties to ex ante investors would have refused to manipulate disclosure in this manner. ... The collapses of both Enron and WorldCom provide examples of practices that may skirt the edges of legality but that are plainly undesirable from the perspective of the ex ante market investor. ... If, after engaging in this act of imagination, the lawyer finds an answer to the question that she does not like, or if a particular action of the corporate client--such as the design of a particular SPE transaction or a tactic to evade disclosure--is improper from the perspective of a market investor, business lawyers have an ethical duty to resist. ... Enron and WorldCom have created a crisis in confidence in professional ethics that, unlike the crisis in corporate governance, cannot be effectively addressed by mere tinkering at the margins. ...