Clockwork Corporations: A Character Theory of Corporate Punishment

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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

Abstract

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”

 

Introduction

 

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. 

Law and Virtue in Jewish Tradition

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We’re presenting a short series of abstracts of the work-in-progress our scholars presented and discussed at their June 2017 Working Group Meeting.

David Shatz is Ronald P. Stanton University Professor of Philosophy, Ethics, and Religious Thought, Yeshiva University,

 

Because law plays a central role in Judaism, one initially assumes that its code of conduct is best characterized as an act morality rather than agent morality. In addition, one expects questions about proper conduct to be answered by rabbinic authorities formalistically– by derivation of the law from existing precedent laws by use of analogies. At their core, these expectations about Jewish ethics are correct. My aim in this paper, however, is to explore to what extent Jewish ethics can be characterized as well as an agent morality– that is, how, in Jewish tradition, considerations of virtue do or do not impact on norms and how they do or do not override formalistic derivations of proper conduct.  The topic itself is not new, but I aim at a synthesis, analysis, and critique that is somewhat distinctive.

It must be said at the outset that Jewish tradition pays close attention to developing virtues. Indeed the literature on virtue is immense. Most famously, we have Maimonides’ work Eight Chapters, which is largely about virtue, and a section of his monumental legal code Mishneh Torah titled “Laws of Character Traits,” Medieval pietistic literature is a goldmine for explorations of character, and the Musar (translation: ethical) movement in the 19th century addressed in prodigious detail what traits are desirable and how to acquire them. Humility, faith, self-control,  fear of heaven, love, kindness, compassion, altruism—these and more are foci of the huge virtue ethics literature in Judaism. The question is how this high regard for virtue, this spotlight on agent-morality, interacts with the rule-centeredness act-morality of Jewish law (Hebrew: Halakhah).

In particular, I want to show how the following theses about the law-virtue relationship appear in Jewish texts, and to explore some questions and disagreements surrounding them.

1)    Some biblical laws are based on the desire to inculcate certain virtues and not on the belief that the actions proscribed or prescribed are in and of itself objectionable.

2)    At times doing the right thing may diminish one’s character. (I’ll call this the problem of moral attrition.)

3)    At times, doing the right thing reflects a character flaw—some right actions are such that a good person wouldn’t do them.

4)    A concern for virtue expands the parameters of obligation.

5)    Actions “bein adam la-havero” (=between two people, such as a giver of charity and a recipient) should not be motivated by submission to rules but rather should flow from inclinations (pace Kant).

 

Such claims appear in general philosophical literature, and the paper will utilize some of that material in examining the Jewish texts.

Racism and Negligence

 

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Torch-bearing white nationalists rally around a statue of Thomas Jefferson on the University of Virginia campus in Charlottesville, Va., on Aug. 11, 2017. (Edu Bayer/New York Times)

For those who thought the racial tensions that have long shaped the fault lines of American politics could continue to be ignored, Charlottesville was the seismic event that shook up this complacency. Like many an earthquake, much of the damage was not limited to the initial event; the political aftershocks have done equal, if not greater, damage. For when torch wielding Nazis and white supremacists march in large numbers, chanting racist slogans, screaming slurs, and threatening violence against minorities, when one of them drives his car into a crowd, killing one and injuring nineteen others, we should be able to expect our President, at the very least, to denounce them immediately and unequivocally. And yet this did not happen; incredibly, the opposite did.

 

Civility and a commitment to equality for all are American values that transcend partisan interests. We have a right to expect our leaders to form a government for everyone, and strive to keep the peace for all of the people. President Trump appeared to be trying to do this, denouncing “hatred, bigotry, and violence on many sides, many sides” (emphasis mine). However, this initial response was, as many have pointed out, disastrously off base: the bigotry was clearly on one side, and there is no moral equivalence between the promulgation of fascist and racist ideology and principled opposition to it. While the counter-protest was far from perfect, it was not worthy of our president’s equal condemnation.

 

Presidents are supposed to unify their citizens in times of crisis, but in the aftermath of Charlottesville the only thing that seemed to unify most Americans was disappointment in the president’s inability to carry out this vital task. In a rare moment of concession to his many critics, Trump later denounced the hate groups by name. But this rare act of humility was short-lived. Just a few days later Trump lashed out at the press and doubled down in defense of himself; notoriously, he even went so far as to claim that there were “some very fine people” involved in the “unite the right” rally. And just in case anyone doubted what his true priorities were, the following week Trump held a rally in Phoenix, not primarily aimed at defusing racial tensions or uniting a divided populace in turbulent times, but solely in defense and even celebration of his troubling remarks.

 

We are about a month on from Charlottesville; nuclear threats, destructive hurricanes, and football now dominate our news feeds, and it would be all to easy to forget about it. But forgetting about it is a kind of political negligence, a failure to give it the importance it deserves. Negligence is a too little considered feature of our moral and political life. It is also important to the analysis of what was so awful about Trump’s post-Charlottesville behavior.

 

Consider his defense of some of those marching for “historical preservation” in Charlottesville. Negligence is a key to grasping why these defenses are indefensible. Let us set aside the issue of whether it is legitimate to support confederate monuments, as it is beside the point. As is well known, the “unite the right” rally in Charlottesville was organized and promoted by white supremacist groups. The names listed to speak at the rally comprise a veritable who’s who of fascist and racist political leaders in America. These are men who openly admire Hitler, adopt Nazi imagery and rhetoric, and who advocate some form of racial apartheid in our country. A rally that is organized, promoted, and features speeches by such men is arguably a racist rally, no matter what cause it serves; but it is most certainly a racist rally when the cause is the defense of the statues of men who devoted their lives to the perpetuation of enslavement of blacks in the South. Any right thinking person who merely cared about preserving historical monuments as a testimony to history would not make common cause with Nazis, fascists, and white supremacists.

 

Even if we concede the very remote possibility that one of these warm hearted historical preservationists somehow missed the fact that the organizers, promoters, and speakers at the rally were all extreme racists, at best we could say their actions were grossly negligent, which makes them very far from being “very fine.” Failure to know what’s going on isn’t admirable, nor does it inoculate one against censure or blame. Ignorance doesn’t always excuse.

 

Determining culpable ignorance is an important aspect of morality and the law, and is part of any theory of negligence. Negligence comes from the Latin phrase “nec eligens” which literally translates to “not choosing.” Negligence is a normative and not merely descriptive word. There are an infinite number of choices I didn’t make this morning, but most of them, like the choice I didn’t make to begin writing the next great American novel, are of no consequence. Only a very small range of what I don’t do counts as a blameworthy failure, and the determination typically depends on the roles that can be legitimately assigned to me (for instance, as a parent, I am culpable if I oversleep and fail to get the kids to school on time).

 

We know as a matter of common sense morality and the law that we are responsible for what we fail to do, even when that failure is completely unintentional. Now, a prudent citizen should be well informed about the kinds of civic engagement he participates in; therefore a failure to notice that an event is organized by and prominently features white supremacists is a classic case of culpable ignorance.

 

Even so, one might still argue that culpable ignorance does not necessarily imply racism. Fine, but footage of Charlottesville reveals that once there one could have had no doubt that this was an event for promoting racist ideology. At that point, one is further at fault for not realizing that marching in the rally not only would not advance the cause of preserving history, but would also deepen racial tensions in Charlottesville and possibly lead to racially motivated violence.

 

To march alongside virulent racists shouting racist slogans and slurs displays a culpable lack of concern for members of the minority groups being targeted. We need to be clear that one is a racist not simply if one has active animus directed towards racial minorities, but also if one lacks active good will towards them; one lacks such good will when one does not care at all, or does not care enough about their well being and security to act (and not act) towards them in certain ways. One should care enough about minorities not to march alongside those that seek to marginalize and defame them. Failure to care enough about the manifest harms to these communities by placing the importance of historical preservation above their safety and well being is racist.

 

Charlottesville should still deeply trouble us. We cannot make racial progress, however, if we cannot come to a reasonable agreement about what racism is. If elements on the left can sometimes be blamed for making us all racists just in virtue of being born into a racially unequal society, elements on the right can sometimes be blamed for making the racist into a fantastical unicorn by imagining criteria for it that almost none of us will ever meet. A sensible understanding of the complexities of racism would steer a steady course between these two extremes, and we need such an understanding if we have any hope of having a reasonable public discourse about race in this country. A small step in this direction would be to acknowledge that racism of neglect is a real and damaging.


Jennifer A. Frey is Assistant Professor of Philosophy at the University of South Carolina and Principal Investigator with Virtue, Happiness, and the Meaning of Life.

Meet our Faculty for our 2017 Summer Seminar “Virtue, Happiness, & Self-transcendence”

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Our second summer seminar, “Virtue, Happiness, and Self-transcendence” is June 18  – 23, 2017 at the University of Chicago and features renown teachers in philosophy, psychology, and religious studies.

Our Seminar is intended for outstanding middle- and advanced-level graduate students and early career researchers in the areas of Philosophy, Psychology, and Theology/Religious Studies. Our aim is to involve participants in our innovative and collaborative research framework within these three fields, and to provide an engaged environment to deepen and enliven their own research.

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Fr. Stephen Brock will lead the sessions, “Friendship” and “Law.” Read more here.
Fr. Stephen L. Brock is Professor of Medieval Philosophy, Pontifical University of the Holy Cross, Rome. He earned a B.A. in Philosophy at the University of Chicago and a Ph.D. in Medieval Studies at the University of Toronto. Brock writes widely on Thomas Aquinas and action theory, ethics, and metaphysics. He is the author of The Philosophy of Saint Thomas Aquinas. A Sketch (Wipf & Stock, 2015) and Action & Conduct: Thomas Aquinas and the Theory of Action (T&T Clark, 1998).

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Jennifer A. Frey will lead the sessions: “Self-Love and Self-Transcendence” and “Happiness and Human Action.” Read more here.
Jennifer A. Frey is Assistant Professor of Philosophy at the University of South Carolina and principal investigator with Virtue, Happiness, and the Meaning of Life.  Prior to joining the philosophy faculty at UofSC, she was a Collegiate Assistant Professor of Humanities at the University of Chicago, where she was a member of the Society of Fellows in the Liberal Arts.  She earned her PhD in philosophy at the University of Pittsburgh, and her B.A. in Philosophy and Medieval Studies (with Classics minor) at Indiana University-Bloomington. Her research lies at the intersection of philosophy of action and ethics, with a particular focus on the Aristotelian-Thomist tradition.

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Dan McAdams will lead the sessions “Psychological perspectives on virtue and morality” and “A virtue aimed at transcending and expanding the self:  Generativity.” Read more here.
Dan P. McAdams is the Henry Wade Rogers Professor of Psychology and Professor of Human Development and Social Policy at Northwestern University.  A personality and life-span developmental psychologist, Professor McAdams has explored the role of life narrative in human development, and how themes of agency, redemption, and generativity shape American biography, politics, society, and culture.  He is the author most recently of The Art and Science of Personality Development (Guilford Press, 2015) and The Redemptive Self:  Stories Americans Live By (Oxford University Press, 2006/2013).

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Candace Vogler will lead sessions on “Virtue, Happiness, and Common Good.” Read more here.
Candace Vogler is the David B. and Clara E. Stern Professor of Philosophy and Professor in the College at the University of Chicago, and a principal investigator with Virtue, Happiness, and the Meaning of Life. She has authored two books, John Stuart Mill’s Deliberative Landscape: An essay in moral psychology (Routledge, 2001) and Reasonably Vicious (Harvard University Press, 2002), and essays in ethics, social and political philosophy, philosophy and literature, cinema, psychoanalysis, gender studies, sexuality studies, and other areas. Her research interests are in practical philosophy (particularly the strand of work in moral philosophy indebted to Elizabeth Anscombe), practical reason, Kant’s ethics, Marx, and neo-Aristotelian naturalism.

For more information on the seminar, the sessions, and to apply, click here.