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Escrito por: Marcelo Corrales

Do you think is a good idea or not? Which versions do you like the best?

Societas delinquere non potest is a Latin phrase, meaning “corporations can not commit a crime.” Historically, the opinion of all legal systems did not accept the theory that a corporation could be the subject of criminal liability because the mens rea (the “guilty mind” or the intention of the individual) is missing. In the past, corporations were regarded to be incomplete legal subjects not capable of having moral thoughts. However, this concept evolved and other states, in particular, common law countries, grasped the idea that corporations are criminally liable as an extension of vicarious liability from civil law.

According to Marshal Clinnard, there are two types of corporate crimes: 1) Occupation crimes: the crime is committed during the course of their working activities; and, 2) Organizational crime: any crime committed by the culture of an organization. The corporation is a (moral) actor.

In 1995, International Treaties obliged civil law countries to embrace corporate criminal liability. The questions that arise are: can a company commit a crime? Is this convenient at all? If so, what legal standards shall we have to adopt since countries tend to adopt different standards?

In Germany, for example, the concept of “Schuld” (guilt) is necessary to impute a person for a crime. This guilt is inherent to individuals only (natural persons), and it is not possible to impute the guilt of a natural individual to a legal person. The Anglo American world is, however, more pragmatic and they ignore the concept of guilt.

Advantages and Disadvantages of Corporate Criminal Liability

The rationale in favor of corporate criminal liability is, that by placing the financial assets and the reputation of the corporation at stake, all the individuals who are part of the corporation will be highly incentivized to avoid or correct the wrongdoing. This will also grant the possibility to monitor and fix the wrongdoing (internally) more efficiently and with minimal cost to society.

The other main reason is associated with the concept of fairness. A company has all the attributes of a natural person (e.g., decision making), thus the concept of guilt and punishment should be extended to legal persons as a characterization of individuals. In addition, all the other forms of liability, i.e., corporate civil liability, individual and administrative criminal liability, are limited and not sufficient.

Corporate criminal liability provides an alternative which can be combined with other types of liabilities and transmit a “moral” disapproval to the society as an added extra value. It implies the idea of “shame” as a moral condemnation that Dan Kahan calls “expressive retribution”. According to Durkheim, when a society punishes a criminal act, it binds and unites the members of a society. The collective outrage makes them feel closer. It creates ties that he calls “social solidarity”. Finally, with corporate criminal liability the regulator and prosecutor will act on behalf of the public interest, having more expertise and resources (e.g., access to information) to sue the companies.

Nevertheless, besides the potential collateral damages (everyone in the company may suffer) typical of these kinds of transplanted vicarious liabilities, one of the main drawbacks is the imprecise terms covering the concept that glosses over various groups of individuals whose criminal acts can be imputed to the company. In this respect, there are three different approaches discussed in greater detail below.

Models of Corporate Criminal Liability

  1. The U.S. approach: the corporation is criminally accountable for the acts of its agents (i.e., any employee) no matter what their ranks are. Two conditions are required: 1) the agent (employee) must act in the course and scope of his working activities, and; 2) the employee must act with the intention (at least in part) to benefit the company. This approach is called the “imputation model” and is very The main advantage of this approach is that it provides a good standard to incentivize the monitoring of wrongdoing. However, one of the main drawbacks is the concept of “agent” has been defined too broadly and could be construed in a way to also include part-time employees. As a result, the monitoring (especially in big corporations) becomes unrealistic. This could lead to the completely opposite effect that a company would simply cope with the risk that any employee may eventually engage in a criminal act. The other problem is that the requirement of the intent to “benefit the company” (at least partially) is not very convincing. What if the employee was not trying to benefit the company? There have been cases where the company was the victim and not the criminal.
  2. The English approach: is based on the “corporate organ theory” and, in contrast to the U.S. approach which proposes a broad concept of “agents” (any employee), the English approach submits the so-called “directing minds” theory. The problem with the English law approach is that it is more difficult to find the “directing mind”. They are also in the position to hire the best lawyers and are highly motivated not to cut a deal with the prosecutor.
  3. The Australian approach: uses the concept of business administration and is the most radical approach. It is built upon the British model; however, it adds the concept of “corporate culture”. In the same way individuals have their own culture, a company has its own corporate culture (e.g., vision, aim, values and norms, practices, language, history, etc.). In addition to the formalistic and functional approaches where you can prove and prosecute the wrongdoing of the board of directors and high managerial agents, a “corporate culture” that encourages or tolerates a criminal act could be prosecuted because of its failure to keep a lawful environment.

Conclusion

The issue whether it is necessary to introduce corporate criminal liability in addition to other kind of liabilities is still controversial, especially how to delineate and conceptualize the scope and outer limits of such a doctrine. The main problem with this seems to be the potential collateral damages to individuals who perhaps tried their best to prevent the wrongdoing or were not even aware of the criminal acts. The other problem seems to be that, in reality, a rational prosecutor would try to make a deal with the individuals involved in the criminal act in order to try to prosecute the whole company. This would lead to the question of reliance on the discretional power of the prosecution offices.

In my opinion, individual liability is not enough, and we need extra means of protection. The same could be said with regards to other kinds of liabilities.  Corporate civil liability, for instance, provides a pecuniary sanction which is usually not enough punishment for many high profile multinational corporations, whereas corporate criminal liability is more severe. This opinion does not mean to reject individual liability in its entirety. Sometimes, prosecuting individuals will be more effective, while in other situations prosecuting the corporation will be more reasonable. An amalgam of these two approaches could also work as an alternative; this hybrid approach would include corporate criminal liability in addition to individual liability, depending on the circumstances.

With regards to the different types of corporate criminal liability discussed above, I think the Australian approach provides a more creative solution, as it is built on the English model and evolved to a more holistic approach taking the whole culture of the company into account. However, I think that a lot of research needs to be done to improve this approach and corporate criminal liability in general. For example, I think that different kinds of corporate crimes should be typified under a corporate criminal liability legal framework. The scope of this framework does not necessarily need to be based on the extension of individual vicarious liability to corporate crimes, as it seems to be the dominant rationale behind this theory, but perhaps a good way would be to create a list of different kinds of corporate crimes, including preventive measures.

Finally, I think we should identify different kinds of corporations according their aims and objectives. This approach could be included with the Australian model, as it uses the concept of business administration. That is, there are different kinds of corporations e.g., financial institution, biotechnology companies and corporations selling different kinds of goods and services. These corporations deal with different kinds of individuals, internally and externally. Arguably, it could be said that they all have (generic) different corporate values, vision, aims, practices, etc. Therefore, the corporate criminal liability should be tailored to the “corporate culture” of each category of corporation. I think that a typified framework which is specifically designed to include certain groups of companies would take the question of whether corporate criminal liability is desirable or not to a more practical and realistic level.

 

 

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