Corporate crime and deterrence

Research output: Contribution to journalReview articlepeer-review

Abstract

This Article sheds new light on the controversial doctrine of corporate criminal liability and other forms of collective sanctions. Critics contend that the use of criminal law to target business entities is undesirable given the disastrous consequences for firms convicted of misconduct, as graphically illustrated by the unraveling of the accounting firm Arthur Andersen. At the same time, the threat of going out of business is commonly perceived as providing firms with powerful incentives to contain misconduct. In this Article, we challenge the conventional view concerning the deterrence value of corporate criminal liability. Specifically, we show that harsh entity-level penalties might discourage monitoring for misconduct and undermine compliance incentives within professional firms. We also identify the conditions under which civil fines might enhance deterrence. Our analysis has implications for entity criminal liability and collective sanctions more generally. We call for greater reliance on purely financial corporate penalties and provide a deterrence-based justification for modifying the existing doctrine for holding firms criminally liable. We also explain why prohibiting law and accounting firms from organizing as limited-liability entities might be unwise.

Original languageEnglish
Pages (from-to)271-310
Number of pages40
JournalStanford Law Review
Volume61
Issue number2
StatePublished - Nov 2008
Externally publishedYes

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