PrepTest 90+, Section 1, Question 26
The use of criminal sanctions against corporations is well established, but the practice has recently come under fire from legal theorists who maintain that corporations should be held civilly rather than criminally liable for wrongdoing. Civil liability, these theorists argue, shares important features with criminal liability: both impose punishment on a company, both aim at deterrence, and both degrade a company's reputation. Yet, they claim, civil liability is better able to determine appropriate levels of damages. Furthermore, because criminal liability causes a greater loss of reputation, its overall cost to corporations is far higher than that of civil liability; this additional cost is borne by society at large in the form of higher product prices. Finally, civil liability is also more cost-effective from the point of view of the government: the greater procedural protections of criminal law make deterrence through criminal prosecution extremely expensive.
Even if it is less economical, however, criminal liability is a much stronger deterrent. The considerable enforcement powers involved, including the ability to detain and question corporate officials, are themselves significant deterrents. Furthermore, the fact that private civil litigation requires an identifiable victim with the necessary resources to commence litigation weakens its deterrent impact. Most importantly, the main function of criminal law is to censure wrongdoing and to emphasize that society forcefully rejects such conduct. Civil liability is ill suited for this purpose.
Other legal theorists who do not object to criminal sanctions per se argue that individuals within corporations, rather than corporations themselves, are the appropriate target of criminal prosecution in cases involving corporate wrongdoing. They maintain that individuals within corporations are more responsive to deterrence because they generally fear prosecution and the loss of employment that can result from it. Additionally, they say, punishment of a corporation, in the form of a fine, essentially punishes shareholders, creditors, employees who may be laid off, and ultimately the public, which is forced to absorb higher prices.
However, this approach is also misguided. Corporations often bury responsibility within complex hierarchies, with the result that no individual responsible for corporate misdeeds can be identified. Another problem is that under this approach, a corporation will often find it cheaper to designate and compensate an internal scapegoat to face prosecution than to refrain from wrongdoing. The most effective way to ensure that corporations improve their practices is to hold corporations themselves criminally liable for their conduct. Indeed, criminal liability works on shareholders as well as corporate officers and employees: because criminal punishment of corporations decreases their wealth, it can motivate shareholders to push for better corporate practices. Arguments that shareholders and employees need economic protection are outweighed by the greater societal interest in ensuring the safety of employees, the public, and the environment.
The use of criminal sanctions against corporations is well established, but the practice has recently come under fire from legal theorists who maintain that corporations should be held civilly rather than criminally liable for wrongdoing. Civil liability, these theorists argue, shares important features with criminal liability: both impose punishment on a company, both aim at deterrence, and both degrade a company's reputation. Yet, they claim, civil liability is better able to determine appropriate levels of damages. Furthermore, because criminal liability causes a greater loss of reputation, its overall cost to corporations is far higher than that of civil liability; this additional cost is borne by society at large in the form of higher product prices. Finally, civil liability is also more cost-effective from the point of view of the government: the greater procedural protections of criminal law make deterrence through criminal prosecution extremely expensive.
Even if it is less economical, however, criminal liability is a much stronger deterrent. The considerable enforcement powers involved, including the ability to detain and question corporate officials, are themselves significant deterrents. Furthermore, the fact that private civil litigation requires an identifiable victim with the necessary resources to commence litigation weakens its deterrent impact. Most importantly, the main function of criminal law is to censure wrongdoing and to emphasize that society forcefully rejects such conduct. Civil liability is ill suited for this purpose.
Other legal theorists who do not object to criminal sanctions per se argue that individuals within corporations, rather than corporations themselves, are the appropriate target of criminal prosecution in cases involving corporate wrongdoing. They maintain that individuals within corporations are more responsive to deterrence because they generally fear prosecution and the loss of employment that can result from it. Additionally, they say, punishment of a corporation, in the form of a fine, essentially punishes shareholders, creditors, employees who may be laid off, and ultimately the public, which is forced to absorb higher prices.
However, this approach is also misguided. Corporations often bury responsibility within complex hierarchies, with the result that no individual responsible for corporate misdeeds can be identified. Another problem is that under this approach, a corporation will often find it cheaper to designate and compensate an internal scapegoat to face prosecution than to refrain from wrongdoing. The most effective way to ensure that corporations improve their practices is to hold corporations themselves criminally liable for their conduct. Indeed, criminal liability works on shareholders as well as corporate officers and employees: because criminal punishment of corporations decreases their wealth, it can motivate shareholders to push for better corporate practices. Arguments that shareholders and employees need economic protection are outweighed by the greater societal interest in ensuring the safety of employees, the public, and the environment.
The use of criminal sanctions against corporations is well established, but the practice has recently come under fire from legal theorists who maintain that corporations should be held civilly rather than criminally liable for wrongdoing. Civil liability, these theorists argue, shares important features with criminal liability: both impose punishment on a company, both aim at deterrence, and both degrade a company's reputation. Yet, they claim, civil liability is better able to determine appropriate levels of damages. Furthermore, because criminal liability causes a greater loss of reputation, its overall cost to corporations is far higher than that of civil liability; this additional cost is borne by society at large in the form of higher product prices. Finally, civil liability is also more cost-effective from the point of view of the government: the greater procedural protections of criminal law make deterrence through criminal prosecution extremely expensive.
Even if it is less economical, however, criminal liability is a much stronger deterrent. The considerable enforcement powers involved, including the ability to detain and question corporate officials, are themselves significant deterrents. Furthermore, the fact that private civil litigation requires an identifiable victim with the necessary resources to commence litigation weakens its deterrent impact. Most importantly, the main function of criminal law is to censure wrongdoing and to emphasize that society forcefully rejects such conduct. Civil liability is ill suited for this purpose.
Other legal theorists who do not object to criminal sanctions per se argue that individuals within corporations, rather than corporations themselves, are the appropriate target of criminal prosecution in cases involving corporate wrongdoing. They maintain that individuals within corporations are more responsive to deterrence because they generally fear prosecution and the loss of employment that can result from it. Additionally, they say, punishment of a corporation, in the form of a fine, essentially punishes shareholders, creditors, employees who may be laid off, and ultimately the public, which is forced to absorb higher prices.
However, this approach is also misguided. Corporations often bury responsibility within complex hierarchies, with the result that no individual responsible for corporate misdeeds can be identified. Another problem is that under this approach, a corporation will often find it cheaper to designate and compensate an internal scapegoat to face prosecution than to refrain from wrongdoing. The most effective way to ensure that corporations improve their practices is to hold corporations themselves criminally liable for their conduct. Indeed, criminal liability works on shareholders as well as corporate officers and employees: because criminal punishment of corporations decreases their wealth, it can motivate shareholders to push for better corporate practices. Arguments that shareholders and employees need economic protection are outweighed by the greater societal interest in ensuring the safety of employees, the public, and the environment.
The use of criminal sanctions against corporations is well established, but the practice has recently come under fire from legal theorists who maintain that corporations should be held civilly rather than criminally liable for wrongdoing. Civil liability, these theorists argue, shares important features with criminal liability: both impose punishment on a company, both aim at deterrence, and both degrade a company's reputation. Yet, they claim, civil liability is better able to determine appropriate levels of damages. Furthermore, because criminal liability causes a greater loss of reputation, its overall cost to corporations is far higher than that of civil liability; this additional cost is borne by society at large in the form of higher product prices. Finally, civil liability is also more cost-effective from the point of view of the government: the greater procedural protections of criminal law make deterrence through criminal prosecution extremely expensive.
Even if it is less economical, however, criminal liability is a much stronger deterrent. The considerable enforcement powers involved, including the ability to detain and question corporate officials, are themselves significant deterrents. Furthermore, the fact that private civil litigation requires an identifiable victim with the necessary resources to commence litigation weakens its deterrent impact. Most importantly, the main function of criminal law is to censure wrongdoing and to emphasize that society forcefully rejects such conduct. Civil liability is ill suited for this purpose.
Other legal theorists who do not object to criminal sanctions per se argue that individuals within corporations, rather than corporations themselves, are the appropriate target of criminal prosecution in cases involving corporate wrongdoing. They maintain that individuals within corporations are more responsive to deterrence because they generally fear prosecution and the loss of employment that can result from it. Additionally, they say, punishment of a corporation, in the form of a fine, essentially punishes shareholders, creditors, employees who may be laid off, and ultimately the public, which is forced to absorb higher prices.
However, this approach is also misguided. Corporations often bury responsibility within complex hierarchies, with the result that no individual responsible for corporate misdeeds can be identified. Another problem is that under this approach, a corporation will often find it cheaper to designate and compensate an internal scapegoat to face prosecution than to refrain from wrongdoing. The most effective way to ensure that corporations improve their practices is to hold corporations themselves criminally liable for their conduct. Indeed, criminal liability works on shareholders as well as corporate officers and employees: because criminal punishment of corporations decreases their wealth, it can motivate shareholders to push for better corporate practices. Arguments that shareholders and employees need economic protection are outweighed by the greater societal interest in ensuring the safety of employees, the public, and the environment.
Suppose a corporation has for decades polluted a river on which a major city is located with toxic waste known to increase the incidence of certain forms of cancer. Which one of the following scenarios would most closely conform to the author's views regarding how corporate wrongdoing is most effectively addressed?
In response to criminal prosecution of the corporation, several of the corporation's shareholders put pressure on the corporation's board of directors to ensure that the corporation will dispose of waste in an environmentally sound manner.
In order to assist in civil litigation against the corporation, the federal government moves to expand the use of enforcement powers traditionally reserved for criminal prosecution.
The corporation's largest shareholders are sued by several residents of the city who suffer from a form of cancer associated with the toxic waste dumped by the corporation.
The city prosecutes the corporation's top executives for violating several city ordinances when they ordered the dumping of toxic waste into the river.
The city government and several residents of the city hold a press conference in which they attempt to undermine the reputation of the corporation and thereby pressure the corporation to change its practices.
0 Comments