This Article examines the common law respondeat superior test for corporate criminal liability and proposes that it be expanded to include moral culpability. This Article supports this proposal by noting that the Department of Justice has already incorporated a moral culpability element into its analysis of corporate. criminal liability through the Department’s Principles of Federal Prosecution of Business Organizations. While some might argue that the Department of Justice’s voluntary implementation of a new corporate criminal liability standard is enough, this Article discusses two fundamental flaws with this position. First, while federal prosecutors’ consideration of the Principles of Prosecution may be “mandatory,” these guidelines create no legal rights for corporate defendants. Second, the Principles of Prosecution contain elements for consideration that are outside the appropriate scope of inquiry because they examine the corporation’s actions after the criminal conduct under scrutiny. Thus, this Article proposes a revised common law respondeat superior test that includes a legally binding moral culpability element that focuses on a refined and appropriately limited group of pre-offense and offense-specific factors: the nature and seriousness of the offense; the pervasiveness of wrongdoing within the corporation; the corporation’s history of similar conduct; and the existence and adequacy of the corporation’s preexisting compliance program.
Category: Volume 41 Page 1 of 3
Under the current corporate criminal liability standard, corporations may be prosecuted despite their implementation of corporate compliance programs. This Article argues that the current standard does not adequately serve the detection and deterrence goals of the criminal justice system because it subjects a corporation to criminal liability no matter how diligent the corporation may have been in establishing a corporate compliance program. This Article further argues that the current standard, which resulted from a fundamental misreading of Supreme Court precedent, should be reformed to differentiate between responsible and irresponsible corporations. By examining recent developments in corporate liability, including the Supreme Court’s limitation of corporate liability in civil cases, the Model Penal Code’s “due diligence” approach, the United Kingdom Bribery Act, and amendments to the Unites States Sentencing Guidelines, the Author concludes that changes to the current standard that would allow a corporation’s compliance efforts to constitute a defense to criminal allegations would better serve the goals of the criminal justice system and encourage responsible behavior by corporations.
There has been little scholarly discussion of whether all-as opposed to only some-corporations should be subject to criminal liability. This Article argues that criminal liability is only appropriate for those corporations that have reached a certain level of self-referential complexity. This Article uses organizational theory as a guide to determining when a corporation becomes an autonomous entity capable of criminal culpability. A corporation begins to emerge as a sufficiently complex autonomous actor when its internal rules guide its conduct and determine its membership, and when the corporation becomes distinct from the individuals comprising it. This Article insists that criminal law as applied to individuals should apply to a corporation only when the corporation emerges as an autonomous actor. Thus, culpability should determine the threshold question of guilt and should not be limited to a factor affecting punishment. This Article suggests three main effects of recognizing corporate immatureness as a bar to the imposition of criminal liability on a corporation. First, shell companies would be excluded from criminal punishment. Second, piercing the corporate veil would be consistent with corporate criminal culpability because piercing aims to reach the individuals behind the veil rather than to punish the fictitious corporation. Third, because “immature” corporations should be free from criminal liability, determining a specific benchmark for when a corporation should be considered a full-fledged offender versus a diminished offender is a challenge that should be met in the future.
This Article examines how the evolution of corporate criminal liability in the United States has resulted in the transformation of corporations into “government proxies,” thereby allowing the government to circumvent the Bill of Rights. In support of this argument, the Author discusses how the government provides prosecutorial incentives for corporate cooperation that force corporations to turn against their employees. The Article examines the role of outside counsel in conducting an internal investigation, and the circumstances that often deprive employees of their rights. For instance, corporations may monitor an employee’s phone calls, search an employee’s desk or locker, and even fire an employee if he or she refuses to answer questions. Corporations enjoy near-unlimited powers for investigating wrongdoing. These powers go beyond those possessed by the federal government-corporations are not limited by the Constitution. Consequently, the Author asserts that this partnership between the government and corporate America poses a serious threat to civil liberties in the twenty-first century.
Reciprocity requires corporations to accept criminal responsibility for crimes against society in exchange for the benefits society grants to those corporations. Corporations are legal entities, like persons, that have rights such as freedom of expression and freedom from unreasonable searches and seizures. Allowing corporations to be viewed as artificial entities causes concern because they lack the conscience of a human mind. The proposed solution is to make corporations liable for criminal activities in the same way that a human person would be held liable. Reciprocity has its roots in biology and is evidenced in several instances in nature. A reciprocal relationship is complex-even more so in humans-and is dependent on several factors such as how close the individuals are and what type of activity is being reciprocated. Communities are strongest when individuals feel a high sense of reciprocity toward society. If corporations are to be treated as legal entities, they should also have reciprocal relationships with society. When a corporation criminally acts against society, it must be held liable for its actions. Society can impose this liability on corporations based on the benefits granted to those corporations; a reciprocal relationship between the two is only fair.
Challenging the view inspired by neoclassical economic theory that corporate behavior is best governed by the self-regulating process of the free market, this Article maintains that corporations should continue to be subjected to criminal prosecution for violating the law. Stressing the underlying struggle between social and economic institutions to shape our society, the Author employs institutional economic theory to identify the shortcomings inherent in market-deployed mechanisms as they relate to curtailing corporate criminal behavior. First, the Article details the public mistrust of corporations in light of recent scandals and explores divergent views among academia and practicing attorneys regarding the application of criminal law to artificial entities. Next, the Author examines the relationship of corporations and the criminal law through the lens of institutional economic theory, asserting that financial penalties alone both fail to deter corporate criminal activity and also fail to express society’s view of the social meaning of corporate criminality. The Author questions the claim that individual actors, and not corporations, commit crimes-asserting that corporate cultures tacitly influence and empower the individual actor and thus the entity should bear responsibility for criminal behavior performed in its service. Finally, the Article suggests that assigning criminal liability to corporations appropriately reflects public sentiment and eliminating corporations from the ambit of criminal law runs counter to the legitimate expectations of society.
This Article addresses the current debate over whether criminal corporate misconduct can be better managed by more corporate regulation, specifically placing more regulatory focus on personal, individual liability of the directors and officers of these corporations. The Author brings to the surface the most significant issues causing this debate, namely the standard procedural and substantive hurdles on which potential plaintiffs-usually shareholders-stumble over in their attempt to hold directors and officers liable for breaching fiduciary duties. Corporate laws are first addressed, with the Author illustrating how precedent has led to little to no individual liability for directors, especially outside directors. Securities laws are next examined, with no substantial difference found. The Author includes the findings of a study indicating that during the twenty-five-year period examined, no cases held the directors themselves personally liable under securities actions. After noting a few additional situations in which directors see very little risk of personal liability, the Author addresses, and discounts, the leading arguments for heavier corporate regulation by means of individual liability. In addressing each argument, the Author points out-as discussed in detail in Part I of the Article-that current corporate regulation has essentially eliminated individual liability for directors. The Author notes that if higher legal sanctions are placed on directors and officers, corporations will still almost always foot the bill as a result of their insurance and indemnification provisions. The Author concludes by opining that the real issue may well be that the corporate and securities laws themselves are insufficient to support such regulation.
This Article explores the potential implications of Citizens United v. Federal Election Commission for corporate criminal liability and corporate procedural rights. By treating corporations as natural persons, Citizens United reinforces the legitimacy of criminal punishment for corporate misconduct. At the same time, it provides grounds for eliminating some of the harsher aspects of that punishment, such as strict liability and “death penalty” sanctions. Citizens United‘s treatment of corporations as natural persons may also call for expanding corporate Fourth and Fifth Amendment rights. Finally, this Article speculates how these changes in corporate law might modify criminal law and criminal procedure as it applies to humans.
The decision of the United States Supreme Court in Citizens United v. Federal Election Commission, while dealing with the issues of the First Amendment and federal campaign finance, affirmed previous case law that characterized corporations as legal persons. While this case has great importance in the context of constitutional law and federal election law, the arguments and analysis presented may also apply to corporate criminal liability. This Article looks at Citizens United as well as a recent Tennessee Attorney General (TAG) opinion to explore their potential effect on the characterization of corporations as legal persons in the context of corporate criminal liability. The Author focuses on two potential approaches to determining corporate personhood in the context of corporate criminal liability, the potential all-or-nothing approach suggested by the Court in Citizens United versus the more nuanced approach suggested by the Stevens opinion in Citizens United and the TAG opinion. The Court’s opinion in Citizens United, a possible all-or-nothing approach, would leave little room for considering policy and theory arguments in determining that a corporation is a person in the context of corporate criminal liability. In contrast, the Stevens and TAG opinions would allow for a more flexible, and what this Author deems a potentially more desirable, approach to corporate personhood that involves consideration of theory and policy arguments in determining whether a corporation is a person for purposes of corporate criminal liability.
Criminal corporate liability is a debate that, in the United States, has primarily focused on ethical issues of accountability and the usefulness of criminal penalties. The current American debate on the topic may be benefited by a look into the development of criminal corporate liability in other countries, in particular in Ireland where the development of the legal system has been similar to that of the United States. In this Article, the Author gives a brief overview of the problem of instability that arises when attempting to use a common law basis for criminal corporate liability. The Author proceeds to outline a possible solution, the Irish Law Reform Commission’s (LRC) suggested legislative standard for corporate manslaughter liability, gross negligence, including the requirements of each element of the proposed test. The Author then moves to an overview of the array of the LRC’s proposed possible sanctions against corporations in criminal cases, which includes unlimited fines, remedial orders, community service orders, adverse publicity orders and restraining orders/injunctions. This Article proposes that taking a comparative look at the Irish development of proposed legislative standards in the world of criminal corporate liability, in particular the range of proposed potential sanctions, may add insight and alternative viewpoints to the American discussion and may be what the American system needs to refocus its own debate on the subject.