Corporate wrongdoing and the limits of the criminal law

Abstract

Public perceptions of crime are no longer exclusively dominated by images of an urban underclass and so?called 'street crime?, but increasingly involve the illegal activities of corporate executives and managers. The collapse of Enron provided a compelling narrative of managerial greed and injurious loss that captivated global public attention and came to symbolise the problem of corporate crime in the United States. High profile corporate crime cases have also occurred in many other countries, for example, the Livedoor securities fraud case in Japan, the Lee Ming Tee case in Hong Kong, and the Vodafone?Mannesmann affair in Germany. This wave of corporate scandals has prompted policy?makers around the world into a systematic reevaluation of regulatory strategies that, in many cases, has resulted in a significantly expanded role for the criminal law in regulating the organisation, financing, and activities of corporations.1 In spite of these reforms, however, many questions remain unanswered about what constitutes an appropriate response to corporate wrongdoing. In particular, several critics have questioned the expanded role of the criminal law in this area and have suggested that the deterrent effects of the criminal sanction have been greatly exaggerated.2 This chapter will offer a brief introduction to some of the limits of the criminal sanction as a response to corporate wrongdoing. The chapter is not suggesting that the criminal law has no role to play in the regulation of corporations. Such an argument would be absurd. However, it is argued that the political desire to take a strong stance on corporate wrongdoing means that a large number of difficult questions about the limits of a criminal justice?based approach are being obscured and, in some cases, neglected. Consequently, alternatives to the criminal law ? such as efforts to promote socially responsible forms of corporate culture ? are not receiving adequate attention from politicians, the mass media or the public in general. This chapter will not attempt to be comprehensive in its examination of these issues but will instead focus on two examples of the limits of existing models of criminal law in regulating corporate wrongdoing. Section 2 will examine the normative limits of the criminal sanction via a discussion of the difficulties often associated with identifying clear moral justifications for criminalising corporate wrongdoing. Section 3 will focus on the conceptual and practical limits of the criminal sanction via a discussion of corporate criminal liability. As such, a number of important issues will not be addressed, most obviously the very real obstacles associated with investigating corporate crime, the problem of selective prosecutions, the difficulties of securing convictions in cases involving well?funded defendants, debates on sentencing (specifically alternatives to the fine), and the lack of empirical evidence supporting the positive effects of punitive approaches to corporate control.3 Moreover, the discussion will focus primarily on developments in the Anglo?American world, although the line of argument has relevance in other jurisdictions. Before turning to the substance of the discussion it is worth noting two preliminary, but nevertheless, important points. Firstly, within English language criminological literature there is a tendency to use the term ?corporate crime? in a non? legal sense to encompass a broad range of illegal or otherwise undesirable acts that may or may not be crimes in a strict sense. An illustration of this approach can be found in John Braithwaite's definition of corporate crime as ?the conduct of a corporation, or employees acting on behalf of a corporation which is proscribed . . by law.?4 By not specifying what kind of law is involved, Braithwaite accepts that ?corporate crime? not only includes acts that violate the criminal law, but extends to civil and administrative violations as well. Other scholars go further and argue that harmful but legal acts are to be included in the category of ?corporate crime?.5 This approach has a number of merits and certainly represents an intentional decision on the part of the authors. Most importantly, it draws on an argument first made by Edwin Sutherland in his landmark paper on ?white collar crime? that it is precisely because of their high social status that the undesirable acts of corporate officers escape the reach of the criminal law in spite of the fact the amount of damage caused may exceed that associated with so?called 'street crime?.6 By designating such harmful acts ?crimes', the severity of corporate wrongdoing can be emphasised and the bias of the criminal law exposed. However, by potentially blurring the distinction between positive analysis (what is a crime?) and normative analysis (what should be a crime?) this type of definition can be the source of confusion, especially in a contemporary context where the scope of the criminal law is far wider than when Sutherland first considered these issues in the 1940s.7 In this chapter, therefore, a distinction will thus be made between ?corporate crime? (corporate acts or acts on behalf of the corporation that violate the criminal law), ?corporate illegality? (corporate acts or acts on behalf of the corporation that are unlawful in the broad sense encompassing criminal, civil, and administrative illegality), and ?corporate wrongdoing? (acts which although harmful in some undefined sense are nonetheless not necessarily illegal). Although not without difficulties, this distinction at least retains a certain legal precision in its definition of corporate crime.8 The second preliminary point concerns the basic premise of this chapter, namely the rapid expansion of the scope of the criminal law in the context of corporate wrongdoing. This chapter proceeds from the assumption that this ?punitive turn? has been a general trend across multiple jurisdictions that can be traced back to the 1960s.9 Due to limitations of space this premise will not be explored in detail. 10 However, it is worth perhaps making a few brief observations. Although the recent spate of corporate scandals has renewed interest in the criminal sanction, this is not a new phenomenon.11 In an influential article, Jack Katz suggested that political moves against corporate wrongs only really emerged in the 1960s in the US as a result of the Watergate scandal, the Vietnam War, student protests, and the civil rights movement, that is, at a time when political leaders had lost their moral authority and ?considerable ability to protect power centers from moral attack?.12 Of course, this trend has not been limited to the United States. The clearest evidence of this punitive turn has been the creation of new categories of criminal offence combined with a greater willingness on the part of regulators to employ criminal sanctions against corporate wrongdoers.13 Criminal law now applies to a wide range of corporate acts, including fraud (e.g. false advertising, consumer fraud, financial fraud, tax evasion), labour violations, manufacturing violations, environmental violations, unfair business practices, abuse of authority (i.e. corruption), and judicial and regulatory violations (including perjury and obstruction of justice). The recent wave of law?making in this area is, therefore, just another example of a broader trend in which politicians, keen to be perceived as taking a tough stance on corporate wrongs, hastily enact new criminal legislation in the wake of high profile scandals.14 Paralleling this expansion in the scope and use of criminal law has been a corresponding tendency to weaken the mens rea requirement for corporate wrongdoing in order to facilitate convictions. The emergence and rapid expansion of strict liability (i.e. no?fault or public welfare) offences is the most obvious example of this transformation. It is probably no coincidence that many strict liability offences are concerned with corporate activities, such as pollution, and health and safety, where there is a clear public interest at stake in halting the proscribed acts.15 And yet, there has also been a more general trend on the part of legislators in the Anglo? American world, at least, to move from relatively ?high level? mens rea requirements, such as intent or knowledge, to relatively low level requirements, such as recklessness and negligence. As with strict liability, this general trend has also been important in the context of corporate regulation.16 In addition, many jurisdictions have responded to concerns about corporate wrongdoing by adopting a number of procedural reforms that greatly empower State actors in their efforts to regulate corporations. These strategies include expanding the powers of law enforcement agencies responsible for investigating and prosecuting corporate offenders, enacting whistleblower/witness protection legislation, and, reforming sentencing guidelines to allow for more severe and diverse sanctions, including greater use of shame?based sanctions in cases involving corporations and corporate offenders.17 Since the 1960s, therefore, there has been a gradual widening of the criminal justice ?net? in the context of corporate regulation.18 This chapter, although it is not systematic or comprehensive, raises in a preliminary way the question of whether this turn to the criminal law has always been appropriate. © 2009 Springer-Verlag Berlin Heidelberg.