Delaware news: Wal-mart bribery case in local court could have far-reaching implications for US corporate governance

In 2012, the New York Times revealed evidence that Wal-Mart’s management had covered up internal reports on widespread bribery by its staff and executives in Mexico.

Since then, a group of Wal-mart shareholders have sued the board in Delaware, where over a million corporations are legally registered.

Corruption Crime Compliance points to a remarkable series of posts by Michael Scher on the FCPA blog. Scher has been present at key public hearings in the Delaware Supreme Court.

In this post, Scher explains why the case is so relevant. For context, the accepted guidelines for board responsibility in an overseas bribery case involving a US company are based on a 1996 case known as “Caremark”:

The Caremark guidelines generally say that if there has been bribery abroad and the board is accused of not knowing about it or allowing it to happen, and the company is thereby damaged, the board is not liable provided there has been a information reporting and monitoring system, i.e. a compliance program.”

“Some believe the Caremark guidelines are counterproductive. That do nothing directors can avoid liability to shareholders for overseas bribery (and accountability to the public) by citing the existence of a paper compliance program and a few stage-managed meetings a year with a compliance officer.”

“So the question that hung in the air Thursday in Wilmington was, does the Delaware Supreme Court need to adjust the Caremark guidelines? And will Walmart be the case that compels the change?”

Although some legal bloggers are more sceptical about the importance of the case, CorruptionCrimeCompliance concludes that:

“It will take years but the shareholders will eventually shine light on Wal-Mart’s Board and its failure to act, and possibly even complicity in a cover up of a major bribery scandal within the company.”

“Wal-Mart’s conduct and behavior will go down in history as the catalyst to important corporate governance changes.”

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