This report addresses the use of criminal sanctions to control corporate behavior — prosecutions both of corporations and of employees for actions taken on corporations' behalf. The authors describe the current state of the use of criminal sanctions in controlling corporate behavior, describe how the current regime developed, and offer suggestions about how the use of criminal sanctions to control corporate behavior might be improved.
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Research Questions
- How did criminal liability, which historically focused on individual wrongdoing, come to be applied to a legal construction, the corporation? What lessons can we draw from that history?
- What are the recent developments in this area?
- What are the quantitative trends in criminal prosecutions of corporate activity over the past 25 years?
- What policy reforms should be considered to address any shortcomings in the application of corporate criminal liability?
What should be the role of the criminal law in controlling corporate behavior, and how can the execution of that role be improved? On the one hand, corporations have enormous power, and, when a corporation causes harm, there is a natural instinct to apply criminal sanctions, society's most serious expression of moral disapproval. In the wake of a harm in which a corporation had a prominent role, there are often calls for an increased use of the criminal law to tame corporate excesses. On the other hand, criminal liability has historically usually required criminal intent, a concept that applies oddly to a legal construction, such as a corporation. And more recently, critics have decried what they have termed the overcriminalization of corporate behavior, suggesting that there has been an overreliance on the use of criminal law in this context.
To provide guidance to policymakers on the proper role of criminal sanctions in this context, RAND Corporation researchers (1) measure the current use of criminal sanctions in controlling corporate behavior, (2) describe how the current regime developed, and (3) offer suggestions about how the use of criminal sanctions to control corporate behavior might be improved.
Key Finding
There Is Mixed Evidence About the Changing Role of Criminal Law in Regulating and Controlling Corporate Activity
- With the exceptions of the application of the Sarbanes-Oxley Act and the Foreign Corrupt Practices Act, the number of criminal prosecutions of corporations has declined in recent years, suggesting less formal prosecutorial activity rather than more. However, use of deferred-prosecution agreements (DPAs), nonprosecution agreements (NPAs), and debarment activity has increased sharply, suggesting that the threat of criminal action is still playing an important role in controlling behavior in this context.
Recommendations
- Recognize that criminal sanctions in this context are instrumental tools and not moral judgments. Lawmakers should be reluctant to pass statutes that punish without proof of criminal intent, courts should be reluctant to interpret statutes in ways that ignore criminal intent, and prosecutors should bring such prosecutions sparingly.
- Have judges review deferred-prosecution and nonprosecution agreements. This practice would provide some assurance that the agreements are genuinely in the public interest and might allow third parties affected by the agreements to air their objections in a neutral forum. Policymakers should give serious consideration to requiring that every DPA and NPA be reviewed by an appropriate federal judge. This practice would provide additional transparency and reassure the public that justice was being served.
- Carefully review debarment provisions. Debarment decisions should be made on a case-by-case basis by the relevant governmental agency, depending on the severity of the allegations made and their relevance to the domain of the governmental entity.
- Consider substituting the use of civil sanctions. In many cases, civil sanctions that include formal fact-finding might function as well as or better than criminal sanctions.
Table of Contents
Chapter One
Introduction
Chapter Two
How Did Criminal Law Come to Be Applied to Corporate Behavior, and What Lessons Can We Draw from That History?
Chapter Three
Recent History: A Shift to Reforming Corporations from Within
Chapter Four
Trends in Prosecutions of Corporations and Individuals
Chapter Five
Conclusions and Policy Implications
The research described in this report was performed by the RAND Institute for Civil Justice and the RAND Center for Corporate Ethics and Governance.
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