The abstract and introduction below are from the paper published in the Iowa Law Review, Forthcoming; U Iowa Legal Studies Research Paper No. 2017-32. Link
Retribution and deterrence currently drive the politics and scholarship of corporate criminal law. Since the potential harms and private gains of corporate crime are so large, corporate punishment under these theories must be exacting…too exacting. In fact, it is difficult under current law to punish many corporations formally without killing them. Ironically, this fact leads to the under-punishment of corporations. Prosecutors — understandably hesitant to shutter some of the country’s largest economic engines — increasingly offer corporations deferred prosecution agreements in lieu of charges and trial.
This Article considers corporate punishment for the first time from the framework of a third major theory of punishment — character theory. Character theories of punishment focus first and foremost on instilling good character and civic virtue. Criminal law scholars have largely marginalized character theory because it struggles as a suitable framework for individual punishment. But the practical and moral problems character theory faces in the individual context do not arise with the same force for corporations. In fact, character theory offers the possibility of punishing corporations in a way that preserves and enhances the social value they create while removing the structural defects that lead to criminal conduct. Along the way, the Article defends some heterodox proposals, including abolishing the corporate fine and allowing sentencing judges to balance the need to punish against non-criminal aspects of a corporate defendants’ “character.”
“How about this new thing they’re talking about? How about this new like treatment that gets you out of prison in no time at all and makes sure that you never get back in again?” ~ Anthony Burgess, “A Clockwork Orange”
It is actually not so new. Though unpopular for the last few decades, punishing criminals by reforming them was once the predominant approach. Anthony Burgess poignantly described one prominent concern that led to its demise: Coerced reform risks turning people into “clockwork toy[s] to be wound up by . . . the Almighty State.” Forcefully changing character and personality is an affront to the self-defining freedom that is the root of human dignity.
While generally marginalized today, punitive reform is undergoing a resurgence for a different kind of “person”—the large, publicly-traded corporate criminal. Prosecutors are at the forefront of the movement. In the deals they cut with corporate suspects, prosecutors often require programs of reform. Implicit in how prosecutors now treat corporate defendants is the recognition that their fundamentally different nature allows for a different approach to punishment. Burgess’ complaint loses all its force in the corporate context. Corporations are not, and cannot be, free, selfdefining loci of dignity.
Scholars and lawmakers are still behind the curve. While prosecutors have been experimenting with reform-as-punishment, the dominant academic and political discourses on corporate crime still focus on deterrence and retribution. There is the seed of a third path in what prosecutors are doing. This article seeks to uncover the implicit logic behind corporate prosecutors’ decisions. In its present form, prosecutorial practice is focused on reform and rehabilitation. Were the logic of the practice pushed and perfected as an approach the entire criminal justice system could take toward corporate punishment, an organizing theory that is different from deterrence and retribution emerges—character theory. As argued below, character theory opens new conceptual space for solving some of the most persistent problems in corporate criminal law.
One of those persistent problems is the dark and unjust underbelly to the way prosecutors handle corporate criminals—criminal justice is often softer on corporate criminals than on real people. On paper, the Department of Justice officially treats corporations as ordinary people. Somehow, though, corporations are much less likely to see criminal charges. Less than .03% of corporations faced prosecution in the last quarter century. To put this in perspective, 8.6% of the U.S. adult population has a felony conviction. There are many possible explanations for this discrepancy, including over-criminalization of some forms of individual conduct and over-enforcement against certain demographics. Another possibility is that the large, public corporations that are the focus of this article receive some of the lightest treatment.
The perception that large, public corporations routinely escape conviction is troublingly paradoxical. These corporations are among those most likely to commit crimes, and their conduct most deeply impacts society. They have an extremely wide base of liability. Under current doctrine, they are automatically liable for almost any crime any individual employee commits on the job. This adds up to a staggering degree of exposure for large corporations—the seventy-five largest corporations in the United States employ over 100,000 potential points of liability. Though the de jure scope of corporate criminal liability has continued to expand since the early twentieth century, the chance of conviction for large public corporations continues to shrink. This is particularly puzzling in an environment where the outrage of Wall Street Occupiers over corporate unaccountability still reverberates in public sentiment. Failure to hold corporations accountable frustrates society’s effort to condemn corporate criminality and can cast a shadow on the broader legitimacy of criminal law.
This discrepancy between the scope of corporate criminal liability and the infrequency of conviction is in part to due to how prosecutors go about trying to reform corporations. For every conviction of a public corporation, and with increasing frequency, there is at least one other where prosecutors decline to take the corporate suspect to trial and instead enter into a specially negotiated deal: a deferred prosecution agreement (DPA) or non-prosecution agreement (NPA). Unlike guilty pleas, these agreements do not result in a guilty verdict; they may not even require an admission of wrongdoing. Corporate DPAs and NPAs are extremely controversial. They face a bevy of criticism from many perspectives: that they are too onerous, that they are too lenient, that they violate basic tenets of political morality, that they fail basic norms of transparency, and more. It is through these DPAs and NPAs that prosecutors frequently impose the reforms that interest this article. In addition to undermining corporate convictions, this article discusses below how poorly positioned prosecutors to be agents of corporate reform.
Many people blame prosecutors for the pitfalls of DPAs and NPAs, but prosecutors are hard to fault. DPAs and NPAs are a reasonable response to the legal and practical constraints prosecutors face, including, most importantly, the effects a successful conviction can have on a large public corporation. In 2004, prosecutors learned a hard lesson—their shortlived courtroom success against Arthur Andersen, one of the largest U.S. accounting firms, turned into a long-lasting catastrophe that put the company and its 75,000 employees out of business. For many firms, including Arthur Andersen, there are life-ending collateral consequences that automatically follow conviction, such as debarment or revocation of the privilege of doing business with the government. When a successful conviction could entail massive harm to the very social welfare prosecutors are supposed to protect, DPAs and NPAs are a natural choice.
There is a way to keep the good without the bad—to hold corporations accountable without destroying them and to reform corporations without relying on prosecutors to do all the work through DPAs and NPAs. This article argues that the stark choice that forces prosecutors to decline corporate prosecutions in favor of DPAs and NPAs is an unnecessary feature of corporate criminal law. It draws attention for the first time to punishment theory as a potential source of problems and solutions. The article argues that low conviction rates and a host of other familiar problems with corporate criminal law are, in large part, a consequence of the focus on deterrence in scholarship and retribution in public political discourse. These drive prosecutors and corporations out of the courtroom.
Though prosecutors are increasingly attentive to corporate reform, scholars and lawmakers have overlooked character theory as a framework for corporate punishment. While adopting a broadly consequentialist perspective,38 the Article points out that preventing corporate crime does not necessarily require deterring it. The Article does this by introducing character theory as a systematic approach for structuring corporate punishment. Character theory would refine the sorts of reform and rehabilitation that prosecutors currently pursue and make them the exclusive mode of corporate punishment. Character theory would avoid the need for DPAs and NPAs, and ultimately do more to prevent corporate wrongdoing than deterrent approaches can. It could also bring corporate criminal law into better alignment with the goals of retributive theorists. While various actors already attempt to reform corporations at various stages of the criminal justice system, their efforts are piecemeal and ineffective because they lack any coherent, coordinating theory. Poor execution and the distorting influences of deterrence and retribution continue to hamstring any chance of success. Fixing corporate character as the sole criterion for the extent and method of corporate punishment leads to some surprising, though ultimately beneficial, recommendations, such as abolishing the corporate criminal fine.
After detailing the problems retributivism (Part II) and deterrence theory (Parts III) bring to corporate criminal law (Part IV), the article introduces character theory (Part V) as an alternative. With the conceptual foundation set, the article shows the work character theory could do improving a diverse range of problems in corporate criminal law (Part VI). The article closes by addressing concerns that may arise from the perspective of other theories of punishment—the character approach proposed here performs well by their metrics too (Part VII).
One goal of this Article is to work so far as possible within the constraints of present legal and political realities. In theory, there may be ways to promote corporate reform and solve the problems discussed in this Article without turning to character theories of punishment. Some scholars think that scrapping corporate criminal law entirely and relying only on civil liability would improve things.41 But such proposals are fanciful in the current political climate. It is also far from clear whether the sorts of corporate reform that this Article advocates could be accomplished by using non-criminal fora. As such, abolishing corporate criminal law and other similarly radical options are outside this Article’s methodological ambit. It takes the basic contours of corporate criminal law as given and shows how they can function best. Character theory can do that work.
The full paper can be downloaded without charge from the Social Science Research Network electronic library here.
Mihailis Diamantis is an associate professor of law at the University of Iowa, in the College of Law and the Department of Philosophy. He writes about criminal law, corporate responsibility, and the philosophy of action. He holds a PhD in philosophy from NYU and his JD from Yale. Prior to joining the faculty at Iowa, Mihailis was an instructor and researcher at Columbia Law School. He clerked for Judge Alex Kozinski on the Ninth Circuit Court of Appeals and worked on white collar investigations as an attorney at Debevoise & Plimpton LLP.He attended the 2016 Summer Session “Virtue & Happiness” of the project Virtue, Happiness, & the Meaning of Life.