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Corporate Crime

In criminology, corporate crime refers to crimes committed either by a corporation (i.e., a business entity having a separate legal personality from the natural persons that manage its activities), or by individuals acting on behalf of a corporation or other business entity. Some negative behaviours by corporations may not actually be criminal; laws vary between jurisdictions. For example, some jurisdictions allow insider trading.

Corporate crime overlaps with:

1) white-collar crime, because the majority of individuals who may act as or represent the interests of the corporation are white-collar professionals;

2) organized crime, because criminals may set up corporations either for the purposes of crime or as vehicles for laundering the proceeds of crime. The world’s gross criminal product has been estimated at 20 percent of world trade.

3) state-corporate crime because, in many contexts, the opportunity to commit crime emerges from the relationship between the corporation and the state.

The legal principle of vicarious liability applies to hold one person liable for the actions of another when engaged in some form of joint or collective activity.

In criminal law, corporate liability determines the extent to which a corporation as a legal person can be liable for the acts and omissions of the natural persons it employs. It is sometimes regarded as an aspect of criminal vicarious liability, as distinct from the situation in which the wording of a statutory offence specifically attaches liability to the corporation as the principal or joint principal with a human agent.

The imposition of criminal liability is only one means of regulating corporations. There are also civil law remedies such as injunction and the award of damages which may include a penal element. Generally, criminal sanctions include imprisonment, fines and community service orders. A company has no physical existence, so it can only act vicariously through the agency of the human beings it employs. While it is relatively uncontroversial that human beings may commit crimes for which punishment is a just desert, the extent to which the corporation should incur liability is less clear. Obviously, a company cannot be sent to jail, and if a fine is to be paid, this diminishes both the money available to pay the wages and salaries of all the remaining employees, and the profits available to pay all the existing shareholders. Thus, the effect of the only available punishment is deflected from the wrongdoer personally and distributed among all the innocent parties who supply the labour and the capital that keep the corporation solvent.

Because, at a public policy level, the growth and prosperity of society depends on the business community, governments recognise limits on the extent to which each permitted form of business entity can be held liable (including general and limited partnerships which may also have separate legal personalities).

Criminal or civil controls?

1) Using the criminal law



Represents formal public disapproval and condemnation because of the failure to abide by the generally accepted social norms, codified into the criminal law. Police powers to investigate can be more effective, but the availability of relevant expertise may be limited. If successful, prosecution reinforces social values and shows the state's willingness to uphold those values in a trial likely to attract more publicity when previously respected business leaders are called to account. The judgment may also cause a loss of corporate reputation and, in turn, a loss of profitability.

Justifies more severe penalties because it is necessary to overcome the higher burden of proof to establish criminal liability. But the high burden means that it is more difficult to secure a judgment than in the civil courts, and many corporations are cash-rich and so can pay apparently immense fines without difficulty. Further, if the corporation knows that the fine is going to be severe, it may seek bankruptcy protection before sentencing.

The theoretical value of punishment is that the offender feels shame, guilt or remorse, emotional responses to a conviction that a fictitious person cannot feel.

If a state turns too often to the criminal law, it discourages self-regulation and may cause friction between any regulatory agencies and businesses that they are to regulate.

2) Using the civil law

With the lower burden of proof and better case management tools, civil liability is easier to prove than criminal liability, and offers more flexible remedies which can be preventative as well as punitive.

But there is little moral condemnation and no real deterrent effect so the general management response may be to see civil actions as a routine cost of business which is tax deductible.

Criminal laws

Most jurisdictions use criminal and civil systems in parallel, making the political judgment on how infrequently to use the criminal law to maximise the publicity of those cases that are prosecuted. While others enact specific legislation covering health and safety, and product safety issues which lay down general protections for the public and for the employees. The difficulty of proving a mensrea is avoided in the less serious offences by imposing absolute, strict liability, or vicarious liability which does not require proof that the accused knew or could reasonably have known that its act was wrong, and which does not recognise any excuse of honest and reasonable mistake. But, most legislatures require some element of fault, either by way of an intention to commit the offence or recklessness resulting in the offence, or some knowledge of the relevant circumstances. Thus, companies are held liable when the acts and omissions, and the knowledge of the employees can be attributed to the corporation. This is usually filtered through an identification, directing mind or alter ego test which proves that the employee has sufficient status to be considered the company when acting.


Date: 2015-01-29; view: 849


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