Mihailis Diamantis has posted an article to SSRN entitled The Corporate Insanity Defense and also posted a summary to the Oxford corporate governance law blog:
... there are some criminal corporations whose deep or unpredictable disfunction presents a special challenge. These corporations are much less likely to respond constructively to criminal sanctions. In a forthcoming article—The Corporate Insanity Defense—I argue that criminal law needs a different approach for these corporations, one that emphasizes compulsory expert treatment rather than standard forms of punishment.
It's an interesting article, but I start from a premise founded on the aphorism famously attributed to Edmund, First Baron Thurlow: "Corporations have neither bodies to be punished, nor souls to be condemned." Applying the criminal law to corporate entities fits poorly with most of the basic purposes of criminal law.
- Deterrence: Corporations can act only through persons. It is those corporate agents who must be deterred. Entity level punishment will be less effective as a deterrent than direct punishment of the responsible corporate actors.
- Retribution: You can't send a corporation to jail. But you can send the responsible corporate actors to jail.
- Rehabilitation. Lacking a body and soul, the corporation has nothing that can be rehabilitated. But bad human actors can be rehabilitated.
- Restitution: Obviously, the corporation can provide restitution to those it harmed. But that would require directing corporate fines and penalties to the victims of wrongdoing rather than the government.
We should seriously rethink corporate criminal liability, which effectively amounts to vicarious liability, and replace it with direct liability for the individuals who are responsible for the wrongdoing.
