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81 North Dakota Law Review 1 (2005)
Copyright North Dakota Law Review


Recent corporate scandals and allegations of corporate fraud in public companies have most people asking how things went so wrong. When looking to assess blame for corporate malfeasance, many ask, “Where were the lawyers?” In several high-profile corporate fraud investigations, outside and in-house lawyers were criticized for not doing more to prevent corporate executives from violating the law, and several general counsels were charged with criminal misconduct by state and federal authorities. Why would the general counsel of a public corporation risk his or her career, reputation, and criminal prosecution to assist executives in perpetuating corporate fraud? The answer may be in the purported reason for corporate greed and ultimately corporate fraud – the desire for equity wealth. This article generally explores the issue of whether stock options granted to the general counsel increases financial dependence of the general counsel on a single client, aligns the financial interests of the general counsel too closely with the financial interests of senior management, and risks the loss of independent judgment and candor by general counsel. Part II of the article reviews the role of the general counsel in public companies, the growth in salary and stock option compensation, and introduces discussion of the Sarbanes-Oxley Act. Part III examines case law and administrative decisions, the Sarbanes-Oxley Act, and subsequent Securities and Exchange Commission regulations.