In new research, Anat R. Admati, Nate Atkinson, and Paul Pfleiderer argue that when misconduct is profitable, enforcement mechanisms aimed at deterring corporate misconduct often fail to achieve their goals and they may even backfire. The reason is that corporations can adjust internal governance mechanisms, particularly managerial compensation, to reduce or nullify the deterrent effects of corporate or managerial sanctions. These responses may lead to more misconduct and exacerbate social harm.