Corporate Criminal Liability: When Does It Make Sense?

Article excerpt

INTRODUCTION

This Article suggests three points. First, that extending criminal liability to fictional entities (1) is a good idea. Second, the current standard in American law for holding fictional entities criminally liable is flawed. Third, that adding an affirmative defense to the current standard for corporate criminal liability would repair the deficiencies in the current standard. Part I of this Article discusses the advantages and disadvantages of prosecuting fictional entities. Part II addresses the current standard for corporate criminal liability and explains why it is deficient. Part III proposes a new standard for extending criminal liability and explains how it remedies the problems posed by the current standard.

I. IS PROSECUTING CORPORATIONS A GOOD IDEA?

A. Reasons to Prosecute Corporations

There are two reasons why criminal liability should extend to corporations. First, corporations often engage in activity that harm lots of people. Mislabeling drugs, shipping contaminated food, dumping pollutants into waterways, and falsifying financial data are a few obvious examples. Any societal actor that engages in such wide-ranging and potentially harmful activities should be subject to criminal prosecution since it is the most potent regulatory mechanism society possesses.

Second, because of their organizational structure, corporations pose unique opportunities for unlawful behavior to occur. For this reason, organizations are more difficult to control than individuals acting alone. There are two characteristics of organizations that help incubate criminal activity. The first is that group dynamics can cause individuals to suspend their own judgment and disregard their usual sense of caution. (2) Because of the pressure to hold on to a job, or please the boss and coworkers, the workplace presents especially strong temptations to "go along." Second, the diffuse nature of organizations creates conditions where violations of the law can occur, and continue undetected. When individuals are responsible for only their duties and do not have a full picture of corporate activities, it becomes difficult for even the most honorable to see that something is amiss. (3)

Because of these two policy reasons, it makes sense to prosecute corporations. In addition, there are three facts about fictional entities that make criminal prosecution a tempting tool of social control. These facts are not justifications for prosecuting fictional entities and should not be mistaken for such; they are, however, benefits of such prosecutions.

The first fact about prosecuting fictional entities is that corporate actors are highly deterable. (4) For this reason, criminal liability, or the threat of it, is an extremely efficient regulatory mechanism. Individuals who run corporations are trained to assess the benefits and costs of potential corporate actions and to choose the option they believe will bestow the greatest benefit for the least cost. This applies to criminal activity as well as to any other business decision. Thus, unlike most criminal defendants who are not deterable because they commit crimes without weighing the cost of doing so (i.e. they act in the heat of passion or under the influence of chemical substances, for example), corporate actors are highly deterable. Most corporate leaders make decisions based, in part, upon their best assessment of whether they (or their company) might be prosecuted if their company undertakes certain actions.

The second fact about prosecuting corporations is that it is easier to prosecute them than it is to prosecute individuals. Piercing the corporate veil to identify who within an organization directed criminal activity or possessed the necessary intent to commit a crime is difficult, if not impossible. By comparison, prosecuting a fictional entity, certainly under the current standard for corporate criminal liability in American law, is easy. …