Corporate crime

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 [1897] AC 22. In Australian law, under the Corporations Act 2001 (Cth), 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 (see Wells: 2001). 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 (to victims) scandals of Enron, WorldCom, Freddie Mac, Lehman Brothers, and Bernie Madoff. Company chief executive officer (CEO) and company chief financial officer (CFO) 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 (1999) assert: == Criminalization ==

Behavior can be regulated by the civil law (including administrative 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 (2002) 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 (1993) and Snider & Pearce (1995), for Left realism, see Pearce & Tombs (1992) and Schulte-Bockholt (2001), and for Right Realism, see Reed & Yeager (1996). 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. (Kicenski: 2002) 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 (O'Grady: 2011). ==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 (1949), 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 (a structured unit) and culture (the set of shared attitudes, values, goals, and practices). 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. 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. The term organi-cultural deviance incorporated the terms group think, and yes-men, to explain decision-related cognitive impairments inherent of corporations engaging in corporate crime. The researchers have found several interconnected dynamics that increase the likelihood of white-collar crime. The researchers have found specific group dynamics involved in white-collar crime are similar to the group dynamics present in gangs, organized crime organizations as well as cults. Moreover, the researchers have found that there are systems-level forces influencing the behaviors and cognitions of individuals. The subject of organi-cultural deviance was first taught in business management, leadership classes, and in a class titled Corporate Misconduct in America, at Casper College during 2008-2009. Organi-cultural deviance was introduced to students as a social philosophical term used to help describe, explain, and understand the complex social, behavioral, and environmental forces, that lead organizations to engage in corporate crime. Social dynamics The term organi-cultural deviance was later expanded and published in a 2011 paper titled Socialization of Individuals into Deviant Corporate Culture. Organi-cultural deviance was used to describe how processes of individual and group socialization, within deviant corporate cultures, serve to invert Abraham Maslow's (1954) Hierarchy of Needs into a theoretical "Hierarchical Funnel of Individual Needs". Organi-cultural deviance is based on the premise social pressure and economic forces exert strain on organizations to engage in corporate crime. Strain creates motivating tension in organi-cultural deviance. Robert Merton championed strain theorists in the field of criminology, believing there to be "a universal set of goals toward which all Americans, regardless of background and position, strive, chief among these is monetary success". Economic cycles result in observable patterns which are indicative of organi-cultural deviance. Organi-cultural deviance is likely to occur at different points in an economic cycle and system. The specific location of an economy in the economic cycle tends to generate specific kinds of leaders. Entrepreneurial leaders tend to be most visible at the bottom of an economic cycle, during a depression or recession. Entrepreneurial leaders are able to motivate their employees to innovate and develop new products. As the economy strengthens, there is a marked increase of bureaucratic leaders who standardise and operationalise the successes of entrepreneurial leaders. As the economy reaches the apex of the economic cycle, pseudo-transformational leaders are likely to emerge, promising the same, if not higher, rates of return in a booming or peaking economy. Often, these pseudo-transformational leaders engage in deviant practices to maintain the illusion of rising rates of return. ==See also==