In a new paper, Criminally Bad Management, I take on the problem of the relationship between managers of large corporations and crime, and pursue an argument that, perhaps surprisingly, leads to a partial defense of corporate criminal liability.

Because of their leverage over employees, corporate managers are prime targets for incentives to control corporate crime, even when managers do not themselves commit crimes.  Moreover, the collective actions of corporate management—producing what is sometimes referred to as corporate culture—can be the cause of corporate crime, not just a locus of the failure to control it. Because civil liability and private compensation arrangements have limited effects on management behavior—and because the problem is, after all, crime—criminal law is often expected to intervene.

To see the problem, consider such familiar recent episodes as British Petroleum’s catastrophic oil spill in the Gulf of Mexico, General Motors’ installation of faulty ignition switches in cars that ended up in over 100 deadly crashes, or JP Morgan’s ‘London Whale’ trading desk that caused the bank to misreport its earnings by $1 billion. It is even possible that investigation of the marquee scandal involving Volkswagen’s emissions cheating could end up short of discovering CEO-level involvement.

In these systemic breakdowns, corporate managers bear serious responsibility for what happened but were not involved in crime, either as direct perpetrators or as fully complicit accomplices or conspirators. Conventional legal doctrines, for good reasons, do not authorize personal criminal sanctions. Some special doctrines of supervisory criminal liability exist but they are controversial and, to date, have been narrowly tailored.  The paper uses much of its space to explain, especially for lawyers and scholars who do not work in the criminal law, why all of this is inevitably so.

The law, of course, has other tools available for influencing management behavior, both directly and indirectly.  Only one of those tools, however, can claim the label ‘criminal’ and can mobilize a criminal justice process with all that entails, including the core idea of punishment. That tool is corporate criminal liability. It is criminal. It is a form of punishment. And it is directed, in important part, towards managers of firms.

The paper’s objective is to identify an underappreciated benefit of corporate criminal liability, and to make a modest normative claim from there. Crucial to any understanding of corporate criminal liability is recognizing that, as currently practiced in the US, the doctrine and its enforcement have developed organically—largely through the collective and incremental practices of enforcement authorities and the bar—to fill a gap between criminal law and corporate regulation.

Understanding the nature of this gap, and the reasons for it, is essential to giving corporate criminal liability its due, something it has not always received in recent commentary. The doctrine’s tenacity and its growth in practice can be understood as a natural response to the problem of how to influence, and even partially punish, corporate managers in relation to corporate crimes for which they simply cannot be held individually liable. The normative extension of this point is to say that corporate criminal liability might be a second best measure for dealing with management responsibility for corporate crime, in spite of the many deficits its critics have identified. 

Samuel W. Buell is the Bernard M. Fishman Professor of Law at Duke University.