Manhattan Moment: On criminalizing corporate conduct

The Manhattan Institute’s PointofLaw.com website brings together leading thinkers to discuss important legal topics. In recent years, both the federal and state governments have increased the prosecution of “white collar” crimes, including direct prosecution of corporations themselves. Scholars differ as to the propriety of such actions, as demonstrated by the following excerpts from a PointofLaw.com discussion last week between two leading academics, John Hasnas and Mike Seigel:

 

Prof. Hasnas: This is the 100th anniversary of the Supreme Court decision that created corporate criminal liability. The Court’s decision was a mistake when it was decided, remains a mistake today, and should be explicitly overruled. There is no justification for criminalizing any corporate conduct. 

 

Let’s be clear about what I am asserting. Plenty of criminal activity takes place within corporations and other business organizations. The individuals who perpetrate such crimes are subject to prosecution for any crime they commit. Criminal law, however, may be properly imposed only on those persons and entities that can be deserving of punishment, that is, to those capable of acting in a morally blameworthy way. That’s why infants, the incompetent, and the legally insane are excluded from criminal punishment. Corporate criminal liability is theoretically incoherent because it imposes punishment, which requires morally blameworthy action, on an entity that is not a moral agent.

 

Prof. Seigel: Corporations are, of course, legal constructs; we often refer to them as “legal persons.” Obviously, a corporation can only act through its “agents,” i.e., its board of directors, officers, and employees. When these humans act in their agency role, however, they are not simply a bunch of people with titles doing whatever they want. They are acting on behalf of their principal, the corporation. They have a fiduciary duty to put the interests of the corporation ahead of their own.

 

As a result of their collective nature, corporations are extremely powerful actors in our economic system. They do a tremendous amount of good – adding trillions to our gross domestic product each year. But corporations also do some things that are not so good. Just because a corporation acts through human agents, does it make any sense to say that it is not a “morally responsible agent” when its contract breach costs taxpayers millions of dollars or its poorly designed automobile blows up on impact and kills innocent people?

 

Corporate criminal liability has some very significant benefits in deterring corporate crime and forcing corporations that commit crime to clean up their act. Without the possibility of a criminal conviction hanging over its head, a corporation has zero incentive to cooperate with prosecutors. By circling the wagons, it has a good chance of shielding its own from prosecution. And even if this strategy eventually fails, so what? A few individuals will be prosecuted and the corporation will continue on its merry (and probably criminal) way.

 

Prof. Hasnas: I think Mike has described the only purpose of corporate criminal liability, and it is a crucial one: Coercing corporations into cooperating in the investigation and prosecution of their employees. Under our traditional criminal law, however, there is no duty to aid the government in one’s own prosecution. The presumption of innocence places the burden on the government to prove every element of its case, and the reasonable-doubt standard makes that very difficult to do. The privilege against self-incrimination guarantees that an accused does not have to help the government overcome this hurdle.

 

As Mike points out, the ability to threaten the corporation with criminal indictment shifts the balance of power between prosecutor and defendant. And that is the purpose of corporate criminal liability. The reason why it does not advance any of the traditional purposes of punishment is that it is not designed to punish. It is designed to circumvent the pro-defendant, liberal bias inherent in our system of criminal law.  

 

Note: This except merely outlines the basic arguments developed in full on PointofLaw.com. The professors’ full exchange is available at http://www.pointoflaw.com/feature/.

 

John Hasnas is a professor at Georgetown University, and Mike Seigel is a professor at the University of Florida.