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Sanctioning Corporations

I. REFORMULATING THE QUESTION

In Chapter 7 I have considered the substantive reach of the criminal law in light of a dignity-centered Kantian morality. I now turn to examine some implications of the same approach to criminal law on its personal reach, specifically with regard to the much-debated question of whether corporations should be criminally punished.[1] For ease of reference I label this the Question. The Question arises in the intersection between two sets of issues that occupied us in other parts of the book, ontological and normative: we need a conception of what collective entities, in particular corporations, are, and of what is just or appropriate punishment. There is no agreement on either of these foundational matters, with the result that the Question remains highly contested. But though the Question receives conflicting answers, there is one point of tacit agreement: that the Question is properly posed. The very disagreement as to whether corporations (and other collectivities) should be criminally punished attests to a shared premise that this question sets the correct scholarly agenda, and that a positive or negative answer is the desired goal. My starting point in this chapter is to question the Question. By presenting us with a binary option the Question forces upon us a false dilemma that distorts the debate and induces unwarranted, sometimes paradoxical consequences. Refusing the Question is the first step toward escaping the dilemma and rectifying the terms of the debate to which it gives rise.

Two tacit assumptions regarding criminal liability underlie the Question: that criminal liability is, first, a unitary category that, second, derives its meaning from a paradigm case involving individual offenders. The first assumption is implicit in the single label used to designate the practice under consideration. The second assumption is implicit in the challenge that corporations supposedly present in this regard: punishing corporations is perceived as extending a practice whose natural domain is populated by individuals. It is easy to see how these assumptions shape the debate. The first defines its conceptual contours. The question whether to hold corporations criminally liable is presented as a package deal; we are asked to cast a yes-or-no vote, as it were, on a single option, that of subjecting corporations to an existing regime of criminal justice. The second assumption dictates the normative tenor of the discussion: in order to be punishable, corporations must be assimilated in one way or another to the paradigmatic individual offenders, and so the normative considerations and concerns that bear on punishing corporations turn out to be those that bear on punishing individuals. In light of these two assumptions, the dilemma to which I alluded is clear: punishing corporations requires forcing them, conceptually as well as normatively, into a preexisting procrustean bed designed to accommodate a different type of occupant; yet to refrain from punishing them is to exempt some powerful agents, capable of great social harm, from a significant instrument of social control. However, when made explicit, both assumptions look shaky, and ways of loosening their grip appear.

Consider the first assumption. Criminal liability designates a variegated cluster of ideas and a complex institutional structure. It is not made of whole cloth. Nevertheless, treating it, with the aid of a single label, as an undifferentiated unit, has considerable practical as well as intellectual merit. Thinking, no less than practice, hinges on such composites whose unity is for the most part taken for granted. Yet depending on the goals we pursue or the nature of the investigation we conduct, it is sometimes advisable to disaggregate a given composite and refine the analysis by attending more closely to the composite’s components. The legal treatment of corporations is a sufficiently important matter to call for such an approach. Once we look at criminal liability through even the feeblest magnifying glass and subject it to the dullest scalpel, many disparate elements spring into view and can be pried apart. Criminal liability is a form of centralized social control that employs coercion, is initiated by the state, is rule-bound, is judicially administered, and so forth. Each of these elements can be in turn further unpacked: there is no algorithm for delimiting in advance the level of detail that would best serve in a thorough investigation of the kind the Question calls for; judgment is required to decide how fine-grained our approach ought to be. The Question, however, avoids such a judgment by hiding the multiplicity of issues and options that arise in this area under the terminological rug it blithely throws over them. However, when we peer under the rug or remove it entirely, we are in a better position to pick and choose among various elements in an effort to best adapt the practice of punishment as designed for individual offenders to the properties of the collectivities concerned.

Adjusting criminal punishment to a corporate context is also hampered by the second assumption underlying the Question. Conceiving of individuals as the paradigmatic criminal offenders implies a criterion, call it the criterion of individuality, in light of which the Question must be answered: corporations are punishable if and only if punishing them would amount to or be the equivalent of punishing individual human beings. There are two ways in which this criterion can be satisfied in principle, and they correspond to the two main schools of thought regarding the nature of collectivities that were discussed in the previous chapter: holistic and reductionist. As I pointed out, holists affirm the existence of collective entities over and above their individual members, whereas reductionists maintain that to talk about collective entities is to use a shorthand or indulge in a fiction, and in either case is to designate nothing but the multitude of individual agents and their interactions. Though the holistic and the reductionist approaches to collectivities are, ontologically speaking, polar opposites, their implications for the issue at hand can, perhaps somewhat surprisingly, converge. Whether the corporation is envisaged by the holist as an individual-like entity or by the reductionist as an aggregate of individuals, its legal treatment can be assimilated to the treatment appropriate for individual human actors. But in neither case is the fit comfortable and the conclusion happy. Consequently, deciding the Question in light of the criterion of individuality loads the dice in favor of a negative answer. For the holists, advocating corporate punishment requires that they identify in the corporation relevant human properties that permit analogizing it to an individual; such theorists risk committing the notorious anthropomorphic fallacy.1 Reductionist advocates of corporate punishment find themselves on an equally treacherous path: they in effect favor the imposition of a form of collective punishment on a heterogeneous group of people many of whom do not satisfy the requirements of blameworthiness ordinarily required by criminal law. Attenuating these requirements in the present context seems both dangerous and ad hoc.

In light of these difficulties, it is no surprise that many theorists opt for the negative horn of the dilemma created by the Question by rejecting corporate criminal liability, much as this position collides with a pretheoretical reluctance to let corporations off the criminal hook.2 Others resist this conclusion, contriving instead an affirmative answer.3 However, these theorists too have been led astray by the Question and fallen into what may be a less visible but no less perilous trap. By resolving the dilemma in favor of corporate punishment, these theorists are likely to view themselves as striking a blow against corporate power and its abuses; they fashion themselves the black rather than the white knights of the corporate world. In fact, the blow they strike may have just the opposite effect. To see this paradoxical aspect of the present debate we must return to the first assumption underlying the Question, concerning the supposed unity of criminal liability. In contesting this assumption, I have distinguished a number of disparate factors that this practice ordinarily combines.

However, for present purposes we need focus only on two. One is the sanction—that is, the use of power to affect conduct. But as noted in Chapter 7, the practice of criminal punishment has an additional salient aspect: an unusually restrictive system of constraints—substantive, procedural, and evidentiary—to which the use of this power is subject. The debate concerning the punishment of corporations focuses on the first element, the sanction, whereas the second element, the constraints, is mostly taken for granted, and so remains invisible. An affirmative answer to the Question accordingly involves not only a recommendation that corporations be liable to sanction, but also a further and usually undefended implication that once the state imposes sanctions on a corporation, it is bound by the same network of constraints that tie its hands when punishing individu- als.4 Once we depart from the unitary notion of criminal liability, and specifically distinguish between sanctions and constraints, the Question divides in two. First, ought corporations to be sanctioned—that is, subject to the enforcement of criminal norms? Second, ought the sanctioning of corporations be bound by criminal law’s strict restrictions?

These two questions can only be pursued in light of the answers to more fundamental ones: why does the criminal law impose sanctions? why does it employ constraints? Though this is a highly contested area, I will proceed with an approach to punishment that enjoys considerable support. According to this familiar story, criminal law’s coercive threats are designed to promote some social goals or values, mostly through deterrence. But these goals and values set necessary but insufficient conditions for punishment. As mentioned earlier,5 the reason is that we can imagine situations in which punishment would serve these purposes when imposed on someone who is innocent of any wrongdoing; yet, punishing the innocent even in those situations would be a moral outrage. But why? Seen in consequentialist terms, the answer is far from obvious; the opposition to punishing the innocent rests more securely on broadly Kantian grounds. Punishing the innocent, even in the service of some desirable goals, amounts to treating an individual as a means rather than as an end, and so is offensive to human dignity. To ensures that punishment be limited to the blameworthy thus requires restricting the consequentialist reasons that support sanctions in the first place by a system of dignity- based moral constraints.6 Evincing this heightened anxiety lest an innocent defendant be punished, the substantive, evidentiary, and procedural strictures of the criminal trial erect on the road to conviction some formidable obstacles that exceed what pure consequentialist considerations would mandate.7

In order to apply this account to corporations and answer the two questions just distinguished, we accordingly need to inquire, first, whether corporations are proper objects of the consequentialist considerations served by sanctions, specifically deterrence; and second, whether they are proper objects of the deontological concerns that call for side constraints. Some writers treat these two questions as equivalent, but the distinction I drew in the previous chapter between practical and moral personhood implies that they are not. This leads to an affirmative answer to the first question and to a negative answer to the second. In the interest of keeping the promise (made at the beginning of this book) of maintaining each chapter as freestanding, I will summarize the considerations presented in the previous chapter that lead to these conclusions, and then raise some additional points that bear on the two questions at hand. [2]

effects otherwise. The existence of global corporate acts would create a gap between controlling the conduct of particular individuals on the one hand, and a modification of the corporation’s conduct on the other, and so would provide corporate sanctions with a target and an objective. Without sanctioning the corporation, we would face an accountability and enforcement deficit. But this would be only half the case for sanctioning corporations. The fact that there is a gap does not mean that ways of filling it exist, and in particular that corporate sanctions would avail. The other half of the argument accordingly concerns the likely efficacy of imposing sanctions on the corporation. Here the notion of global effects comes into play. Corporate sanctions are distinguished precisely by the fact that they are designed to affect the corporation as such, rather than any particular individuals. This can be accomplished only if global, nondistributive effects on the corporation exist.

When the question of sanctioning corporations is posed in these terms, an affirmative answer seems quite straightforward, since despite the controversy regarding this question, it is not really clear whether the existence of global actions and effects that would support corporate sanctions are ever seriously contested. Although there is a wide range of approaches to what I have called in the previous chapter the corporation’s practical personhood, they tend to converge in their relevant conclusions. To see this we need look a bit closer at the main division, mentioned in the previous section, between holistic views and reductionist views. The holistic views differ, but they all share two abstract and general philosophical tenets. One is the distinction between constitution and identity: whereas a corporation is constituted by a bunch of individuals, it is not identical with them. Where does the difference come from? Here, the notion that comes into play is that of emergent properties. The world is after all full of composites with global properties quite different from the properties of their components (e.g., water is wet whereas H2O molecules are not). The same holds of human composites as well. In this vein, organization theory, broadly conceived, can be seen as carrying out a program of spelling out the various structural factors that mediate between what are seen as individual inputs on the one hand, and some global features or outcomes attributable only to the organization as a whole, on the other.

Although reductionists take a different ontological approach to collectivities, their conclusions regarding the corporation’s practical person- hood converge for the most part with the holists’. While insisting that an account of collective phenomena in terms of individual actors is in principle possible and desirable, few would deny the epistemological and other practical obstacles to actually performing the reduction and advocate eliminating the corporation as a unitary and independent factor. The upshot of these otherwise divergent views is that hardly anyone maintains that we can actually replace the name “the Ford Motor Company” in the statement “the Ford Motor Company manufactures the Mustang” with a list of all the individual contributions; nor is anyone likely to maintain that payment for the car could be made in the form of direct payments to all these people, prorated to their relative contributions. This broad agreement is sufficient to make the case that sanctioning corporations addresses a genuine need and has a viable target. For just as manufacturing a car is a global corporate action, and a buyer’s paying for it a global effect, so also are, respectively, polluting the environment and a fine.

As I mentioned, the case for sanctioning corporations depends not only on the need for such sanctions but also on their efficacy. To glimpse the ways sanctions may bring about a change in the corporation’s conduct it is useful to distinguish three possible mechanisms of deterrence: direct, indirect, and mediated. Direct deterrence designates the most common, garden-variety form of deterrence in which the sanction is designed to influence the decisions and so directly modify the conduct of the sanction’s intended object; the target of the sanction and the object of control coincide. In the two other forms, these diverge. Indirect deterrence occurs when, due to some special relationship between the target of sanction and the object of control, addressing the threat of sanction to the one will influence the decisions of the other. Think, for example, of a radical group kidnapping a politician so as to put pressure on the government, not on the captured politician. In mediated deterrence, the target of the sanction holds a position of power over the object of control or is otherwise able to modify the latter’s behavior. In this case, the sanction is intended to impact its immediate target, but only so as to induce actions by her that would in turn influence the ultimate object of control—for example, holding parents responsible for the misdeeds of their children, intended to induce parental control over the children’s behavior. Evidently, all three mechanisms of control apply in the case of a corporation. Sanctioning the corporation involves direct deterrence when we envisage the sanction, in impersonal terms, as a setback to the corporation’s goals and so as a “disturbing event” in the corporation’s environment that serves to alert its decision-making process to the existence of a certain dysfunction, triggering some standard operating procedure into taking remedial action consisting in some structural or systemic changes.8 Indirect deterrence takes place when, whether out of loyalty or self-interest, members of the corporation respond to the harm to the corporation represented by sanctions. Their response may amount to or bring about a change in the corporation’s behavior. Mediated deterrence reverses this direction of influence, which in this case runs from the corporation to its individual members: a corporation may be expected to react to sanctions, imposed in response to some harmful results ascribed to the corporation, by putting in place internal systems of pressures and rewards designed to change some individuals’ patterns of behavior, so as to prevent the recurrence of such harmful results.9 [3]

The notion of dignity (expounded in Chapter 6) applies to human beings by virtue of their autonomy, which makes them the origin of all value, and so endows them with worth. However, as explained in the previous chapter, we do not reach this conclusion by observing which beings happen to possess some abstractly conceived dignity-supporting traits, but rather by reflecting on what best accounts, from a first-person perspective, for one’s own experience as a self, and by investigating the significance and contours of the “I” in terms of which this experience is available and expressed. As I have also argued, however, the road to ascribing dignity to collectivities is not entirely blocked, since some collective affiliations, those that can be broadly labeled as communal, are constitutive of self, effacing the distinction between the respect due to the individuals qua members and the respect due to the collectivity as a whole. The final step in the argument then invokes an instrumental conception of business corporations to deny that affiliation with them by such constituencies as shareholders and employees plays this constitutive role. Since the identity of these groups’ members is not bound up with the corporation, nor is their dignity.

But even if affiliation with the corporation is not constitutive of the members’ identities, sanctioning corporations will have predictably negative effects on various stakeholders all the same. Do not these effects call for reinstating on the stakeholders’ behalf the battery of side constraints that punishing individuals requires? True, the nominal defendant in a corporate criminal trial is the corporation rather than any designated individuals. But isn’t ignoring the individual ramifications of the sanction taking this formality way too seriously, and ascribing to the corporate veil magical powers? The view of criminal law’s restrictions as designed to avert the special threat to human dignity that punishment poses implies a negative answer. As I have argued in Chapter 7,10 this threat is posed by punishment since it is an instance of a kind of deprivation I call mistreatment, a deliberate singling out of an individual for the sake of a severe deprivation.[4] The battery of restrictions created by criminal law is designed to mitigate this threat by ensuring, as much as possible, that the defendant is justly treated rather than being the victim of the equivalent of a crime. Punishing the corporation, however, involves no one’s mistreatment. None of the shareholders or other stakeholders who are made worse off by the corporate sanction are personally singled out for a deliberate deprivation. Consequently, the effects of corporate sanctions on shareholders and other individuals do not carry the invidious message of disrespect that mistreating them would have. For this reason, the corporate veil not only hides but morally shelters individuals from the effects of corporate punishment. The resulting individual deprivations must, of course, be taken into account in designing the system of corporate criminal liability. But the role that these “collateral harms” should play in our deliberations lacks the special urgency present when the mistreatment of individuals is at issue.

  • [1] Though this question arises about collective entities in general, like many others, I focuson the large business corporation. This designation combines the strictly legal notion of incorporation with the sociological notion of an organization, which connotes structure anda certain level of complexity. My comments can be extended, with caution and necessaryadjustments, to various other collectivities.
  • [2] WHY SANCTION The case for subjecting corporations to sanctions consists of two complementary claims: that sanctioning corporations is needed and that itis efficacious. Both the need and the efficacy depend on a dual distinction: between distributive and global corporate acts, and correspondingly,between distributive and global effects on the corporation. By distributiveacts I mean acts that, though ascribed to the corporation, are performedby some identifiable individuals; nondistributive acts are corporate actsthat are not traceable or reducible to the acts of particular individuals.Similarly in regard to effects on the corporation: actions that are putatively directed toward the corporation will have distributive effectswhen the effects are traceable to some particular individuals, and global
  • [3] AGAINST CONSTRAINTS Whereas for the reasons just given imposing on corporations a regime ofsanctions is warranted, subjecting these sanctions to the full panoply ofcriminal law’s constraints is not. On the conception of criminal punishment I have summarized, these constraints are designed to protect defendants’ dignity. To ask whether corporations ought to be protected by theserestrictions is accordingly to inquire whether dignity extends to corporations. And as I argued in the previous chapter, it does not. In a nutshell,the argument that leads to this conclusion consists of the following steps.
  • [4] The elements in this definition can come in various versions and in different degrees. Inparticular, one can “single out” in the relevant sense a group of individuals when one targetsan identity-fixing (e.g., ethnic or racial) property common to its members. It is significant
 
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