Corporate crime


In criminology, corporate crime refers to crimes committed by either a corporation, or by individuals acting on behalf of a corporation or other business entity. Corporate crimes can be seen as distinct from other workplace crimes like white-collar crime because illegalities are committed for and congruent with the goals of legitimate companies, such as price fixing or circumventing health and safety regulation.
Corporate crimes involving health and safety offences may result in nearly 3 million work-related fatalities from injuries and ill-health every year worldwide, as the International Labour Organisation estimates that 2.93 million workers die each year from work-related factors. Overall, however, discussions on corporate crime are not usually prominent in academic, political, or public discourse. Many academics, such as Tombs and Whyte, note the relative obscurity of corporate crime in discussions concerning criminology.
Corporate crime shares similarities with:
  • white-collar crime, because the majority of individuals who may act as or represent the interests of the corporation are white-collar professionals;
  • 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. ; and
  • state-corporate crime because, in many contexts, the opportunity to commit crime emerges from the relationship between the corporation and the state.

    Definitional issues

Legal person

An 1886 decision of the United States Supreme Court, in Santa Clara County v. Southern Pacific Railroad, has been cited by various courts in the US as precedent to maintaining that a corporation can be defined legally as a "person", as described in the Fourteenth Amendment to the U.S. Constitution. The Fourteenth Amendment stipulates that,
In English law, this was matched by the decision in Salomon v A Salomon & Co Ltd AC 22.
In Australian law, under the Corporations Act 2001 , a corporation is legally a "person".

Criminal capacity

The concepts of crime and punishment, as they apply to individuals, cannot be easily transferred to the corporate domain. International treaties governing corporate malfeasance thus tend to permit but not require corporate criminal liability. Recently a number of countries and the European Union have been working to establish corporate criminal liability for certain offences.
United States law currently recognizes corporate criminal capacity, although it is extremely rare for corporations to be litigated in criminal proceedings.
French law currently recognizes corporate criminal capacity.
German law does not recognize corporate criminal capacity: German corporations are however subject to fining for administrative violations

Enforcement policy

Corporate crime has become politically sensitive in some countries. In the United Kingdom, for example, following wider publicity of fatal accidents on the rail network and at sea, the term is commonly used in reference to corporate manslaughter and to involve a more general discussion about the technological hazards posed by business enterprises.
In the United States, the Sarbanes-Oxley Act of 2002 was passed to reform business practices, including enhanced corporate responsibility, financial disclosures, and combat fraud, following the highly publicized and extremely harmful scandals of Enron, WorldCom, Freddie Mac, Lehman Brothers, and Bernie Madoff. Company chief executive officer and company chief financial officer are required to personally certify financial reports to be accurate and compliant with applicable laws, with criminal penalties for willful misconduct including monetary fines up to $5,000,000 and prison sentence up to 20 years.
The Law Reform Commission of New South Wales offers an explanation of such criminal activities:
Similarly, Russell Mokhiber and Robert Weissman assert:

Criminalization

Behavior can be regulated by the civil law or the criminal law. In deciding to criminalize particular behavior, the legislature is making the political judgment that this behavior is sufficiently culpable to deserve the stigma of being labelled as a crime. In law, corporations can commit the same offences as natural persons. Simpson avers that this process should be straightforward because a state should simply engage in victimology to identify which behavior causes the most loss and damage to its citizens, and then represent the majority view that justice requires the intervention of the criminal law. But states depend on the business sector to deliver a functioning economy, so the politics of regulating the individuals and corporations that supply that stability become more complex. For the views of Marxist criminology, see Snider and Snider & Pearce, for Left realism, see Pearce & Tombs and Schulte-Bockholt, and for Right Realism, see Reed & Yeager. More specifically, the historical tradition of sovereign state control of prisons is ending through the process of privatisation. Corporate profitability in these areas therefore depends on building more prison facilities, managing their operations, and selling inmate labor. In turn, this requires a steady stream of prisoners able to work.
Bribery and corruption are problems in the developed world, and the corruption of public officials is thought to be a serious problem in developing countries, and an obstacle to development.
Edwin Sutherland's definition of white-collar crime also is related to notions of corporate crime. In his landmark definition of white collar crime he offered these categories of crime:
  • Misrepresentation in financial statements of corporations
  • Manipulation in the stock market
  • Commercial bribery
  • Bribery of public officials directly or indirectly
  • Misrepresentation in advertisement and salesmanship
  • Embezzlement and misappropriation of funds
  • Misapplication of funds in receiverships and bankruptcies.

    Corruption and the private sector review

One paper discusses some of the issues that arise in the relationship between the private sector and corruption. The findings can be summarized as follows:
  • They present evidence that corruption induces informality by acting as a barrier to entry into the formal sector. Firms that are forced to go underground operate at a smaller scale and are less productive.
  • Corruption also affects the growth of firms in the private sector. This result seems to be independent of the size of the firm. A channel through which corruption may affect the growth prospects of firms is through its negative impact on product innovation.
  • SMEs pay higher bribes as percentage of revenue compared with large companies and bribery seems to be the main form of corruption affecting SMEs.
  • Bribery is not the only form of corruption affecting large firms. Embezzlement by a company's own employees, corporate fraud, and insider trading can be very damaging to enterprises too.
  • There is evidence that the private sector has as much responsibility for generating corruption as the public sector. Particular situations such as state capture can be very damaging for the economy.
  • Corruption is a symptom of poor governance. Governance can only be improved via coordinated efforts among governments, businesses, civil society.

    Organi-cultural deviance

Organi-cultural deviance is a recent philosophical model used in academia and corporate criminology that views corporate crime as a body of social, behavioral, and environmental processes leading to deviant acts. This view of corporate crime differs from that of Edwin Sutherland, who referred to corporate crime as white-collar crime, in that Sutherland viewed corporate crime as something done by an individual as an isolated end unto itself. With the Organi-cultural deviance view, corporate crime can be engaged in by individuals, groups, organizations, and groups of organizations, all within an organizational context. This view also takes into account micro and macro social, environmental, and personality factors, using a holistic systems approach to understanding the causation of corporate crime.
The term derives its meaning from the words organization and culture. This reflects the view that corporate cultures may encourage or accept deviant behaviors that differ from what is normal or accepted in the broader society. Organi-cultural deviance explains the deviant behaviors engaged in by individuals or groups of individuals.
Because corporate crime has often been seen as an understudy of common crime and criminology, it is only recently that the study of corporate crime has been included in coursework and degree programs directly related to criminal justice, business management, and organizational psychology. This is partly due to a lack of an official definition for crimes committed in the context of organizations and corporations.
The social philosophical study of common crime gained recognition through Cesare Beccaria during the 18th century, when Beccaria was heralded as the Father of the Classical School of Criminology.
However, corporate crime was not officially recognized as an independent area of study until Edwin Sutherland provided a definition of white-collar crime in 1949. Sutherland in 1949, argued to the American Sociological Society the need to expand the boundaries of the study of crime to include the criminal act of respectable individuals in the course of their occupation.
In 2008, Christie Husted found corporate crime to be a complex dynamic of system-level processes, personality traits, macro-environmental, and social influences, requiring a holistic approach to studying corporate crime. Husted, in her 2008 doctoral thesis, Systematic Differentiation Between Dark and Light Leaders: Is a Corporate Criminal Profile Possible?, coined the term organi-cultural deviance to explain these social, situational and environmental factors giving rise to corporate crime.