Academic journal article Fordham Journal of Corporate & Financial Law

The 2004 Amendments to the Federal Sentencing Guidelines and Their Implicit Call for a Symbiotic Integration of Business Ethics*

Academic journal article Fordham Journal of Corporate & Financial Law

The 2004 Amendments to the Federal Sentencing Guidelines and Their Implicit Call for a Symbiotic Integration of Business Ethics*

Article excerpt


The United States Sentencing Commission (the "Commission") recently made substantial revisions to the Federal Sentencing Guidelines for organizations (the "Guidelines"), with the changes going into effect on November 1, 2004.' In making these revisions, the Commission promised to create a "new era of corporate compliance" where organizations would focus "on ethical corporate behavior" and being a "good corporate citizen."2 According to the Vice Chairman of the Commission, the new Guidelines seek to build a "model company" and stress that "a good corporate citizen must first and foremost operate ethically."3 To accomplish this, the new Guidelines toughen the criteria an organization must follow to create an effective compliance program. Perhaps most importantly, the Guidelines require that organizations establish an effective compliance and ethics program that promotes an organizational culture that "encourages ethical conduct and a commitment to compliance with the law."4 Although organizations are not required to comply with the new Guidelines,5 the Guidelines set the benchmark for proper corporate conduct. If an organization is subsequently convicted of a federal crime, its failure to maintain "an effective compliance and ethics program" may result in the assessment of harsher penalties against the organization by the court.6

This article reviews the changes to the Guidelines and assesses their ability to integrate notions of a "good corporate citizen" from law, management, and ethics. Linking these perspectives, we argue, is the concept of trust. We characterize trust as consisting of three distinct but interrelated types of trust that are drawn from the fields of law and economics, organizational sociology, and philosophy. We argue that seeking effective compliance and ethics programs would be further enhanced by an authentic, symbiotic corporate governance strategy that integrates these three types of trust. This article is a step in the direction of showing how such a symbiotic integration is now legally mandated, as well as being a potentially fruitful exercise of interdisciplinary academic inquiry.

This article proceeds as follows. Part I reviews the Guidelines as originally formulated and the criticisms of the Guidelines in terms of achieving compliance with the law. Part II discusses the 2004 revisions of the Guidelines and assesses their potential impact. Part III analyzes the Guidelines in terms of establishing trust within organizations and between organizations and society, and considers the role of the law in fostering such trust. Part IV provides concluding comments.


A. Organizational Criminal Liability and the 1991 Sentencing Guidelines

An organization is vicariously liable for the criminal acts of its employees and agents done within the scope of their actual or apparent authority and with the intent to benefit the organization.7 Thus, an organization is liable when it knowingly and intentionally authorizes an agent to act illegally on its behalf (i.e., actual authority) or where a third party reasonably believes that the agent was expressly authorized to take the action resulting in the criminal violation (i.e., apparent authority).8 In federal court, criminal liability is imposed regardless of the agent's position within the organization.9 Moreover, criminal liability may be imputed to an organization even where the organization received no actual benefit from the criminal conduct; the agent must only intend to bestow some benefit, however minimal, on the organization. 10 Even if an organization expressly prohibits the illegal conduct and uses its best efforts to prevent any wrongdoing, it may still be held criminally liable for its agents' illegal acts.11 Although an organization may not be imprisoned, it can be fined, sentenced to probation, ordered to make restitution, required to issue public notices of conviction and apology, or to forfeit assets. …

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