CORPORATE CRIME REPORTER

Linklaters’ Lawrence Byrne Says Monitors Are a Bad Idea
22 Corporate Crime Reporter 12, March 22, 2008

Corporate monitors are a bad idea.

That’s the take of Linklaters’ Lawrence Byrne.

“Monitors are a very bad idea,” Byrne told Corporate Crime Reporter last week. “And there is a strong argument that monitors are actually illegal under Delaware corporate law, particularly in those instances where monitors are made to sit on the board of directors. Under Delaware law, directors have a fiduciary duty to act in the best interests of the shareholders.”

Not that corporations that have engaged in wrongdoing don’t need supervision.

“Clearly, there need to be remedial efforts,” Byrne says. “There needs to be oversight. The Department of Justice’s deferred prosecution agreements have accomplished that. But the use of monitors in particular has been abused. And they are being used far too frequently. Congress is having an appropriate negative reaction to the use of monitors. Both the SEC and the Department of Justice have used monitors. And it is simply not the right way to address conduct.”

Byrne says that lawyers stand to profit handsomely from monitorships – at the expense of shareholders.

“The monitor is usually a lawyer,” Byrne says. “And the first thing he does is goes out and hires his law firm to run up hundreds of thousands or millions of dollars in legal bills that again takes money away from shareholders.”

Wait a second. Are you saying that if you were approached to be a monitor, you would turn down that business?

“I would,” Byrne says flatly. “I would have to candidly say that I am opposed to monitors as a general matter and wouldn’t be interested. I have never accepted an appointment as a monitor.”

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