White collar and corporate crimes - Research Paper Example

? White collar and corporate crimes White collar and corporate crimes Part One: Introduction and of the issue The continuous increase of criminal activity in all aspects of social and economic life has become a key problem for legislators worldwide. Current paper focuses on white collar and corporate crimes, as related to a wide range of professions, organizations and businesses. According to Edwin Sutherland, a researcher who studied the particular subject for many years, the term corporate crime is used for reflecting the ‘criminal activity of persons high social status and in the context of their profession’ (Sutherland 1939, cited in Simpson, 2002, p.6). From another point of view, white-collar crime has been related strictly to business, being considered as the violation of rules that regulate business activities, and not of rules related to other sectors (Geis, 2006, p.176). The specific issue has been considered as of critical importance due to the following fact: the recent financial crisis, of 2008, has severely affected economic activities worldwide. The crisis has been caused mostly because of the lack of effective control on the corporate governance practices of firms in the financial services sector. However, it has been made clear that many firms that controlled a major part of the global market were unable to monitor the activities of their CEO’s. In other words, white collar and corporate crimes had a key role in the crisis of 2008. Today, about 4 years after, the fears for recession have not been eliminated. In fact, cases of white collar and corporate crimes are published regularly showing the expansion of the phenomenon. In other areas also, white-collar crimes had caused severe problems, leading to conflicts and long – term turbulences. Therefore, the review of current status and of the causes of white collar and corporate crimes would help to understand the reasons for the problem’s expansion in all professions and businesses internationally. In addition, the study of the above problem could help to estimate its actual status, meaning the level of its expansion but also of its damages globally. Furthermore, by reviewing the literature and the empirical research published in this field, it would be easier to identify all aspects of white – collar and corporate crimes, as they appear at various levels of business or professional life. The findings of the empirical research developed in regard to this subject verify the critical role of white collar and corporate crimes in social and economic life. According to Allen (2010) the increase of corruption, as related to the recent recession, has led to the radical increase of fraud, with a particular emphasis on collar crime (Allen, 2010). In 2009 about ‘160 cases of serious fraud were reported’ (Allen, 2010). These cases reveal the relationship between fraud and business activity. However, it seems that corruption can be also related to geography, as revealed in a report of Corporate Crime Reporter (2007) where reference is made to Louisiana, as the region with the highest level of corruption in USA. At this point, reference should be made to the following problem: there is no mechanism monitoring and managing the collection of data related to white collar and corporate crime. As a result, the exact level of damages caused because of white collar and corporate crime cannot be estimated (Center for Corporate Policy 2004). The above problem is highlighted in a report of the USA Department of Justice, involving in the years 2001-2006 (Center for Corporate Policy 2004). It is clear that corporate and white-collar crime is a complex phenomenon; its review would help to identify all its aspects and retrieve the measures that would help towards its limitation. References Allen, K. (2009, December 31). Recession pushes white-collar crime to new highs. The Guardian. Retrieved 2012, March 10 from: http://www.guardian.co.uk/business/2009/dec/31/fraud-recession-kpmg-report Benson, M. & Simpson, S. (2009). White-collar crime: an opportunity perspective. Oxon: Taylor & Francis. Center for Corporate Policy (2004) Corporate Crime and Abuse: Tracking the Problem. Retrieved 2012, March 10 from: http://www.corporatepolicy.org/issues/crimedata.htm Corporate Crime Reporter (2007, October 8) Louisiana Most Corrupt State in the Nation, Mississippi Second, Illinois Sixth, New Jersey Ninth. Retrieved 2012, March 10 from: http://corporatecrimereporter.com/corrupt100807.htm Geis, G. (2006). White-collar criminal: the offender in business and the professions. London: Transaction Publishers. Simpson, S. (2002). Corporate Crime, Law, and Social Control. Cambridge: Cambridge University Press. Part Two: Discussion of both sides of the issue The review of the literature developed in regard to corporate and white-collar crimes leads to the assumption that the effectiveness of the policies used for controlling the expansion of such crimes is rather low, even if the relevant efforts of governments, organizations and individuals are important. In this context, it should be checked whether the existing framework for handling corporate and white-collar crimes is appropriately structured or whether other factors exist that prohibit the effectiveness of measures taken in regard to corporate and white – collar crimes. At a first level, the various aspects of these crimes would be discussed, as influencing the policies adopted by governments and organizations for facing the specific phenomenon. 1.1 Corporate and white – collar crimes within modern societies 1.1.1 Characteristics of corporate and white – collar crimes Corporate and white-collar crimes are quite expanded in modern organizations. Two seem to be the key characteristics of these crimes: the use of professional power for serving own interests and the use of ‘opportunities structures within organizations for personal gain’ (Gottschalk, 2010, p.14). In any case, it is required that an organization’s existing structures are used for promoting personal interests. In other words, corporate and white-collar crime is closely related to business activities. However, it is possible for such crimes to take place independently, i.e. out of business environment. For example, an accountant who uses the information gathered from his customers for personal gains, by making the relevant data available to third persons. It should be noted that in order for the terms of these crimes to be met it is necessary for their actor to have the intention to commit them (Gottschalk, 2010, p.14). Mistakes made in the workplace or by professionals cannot be necessarily considered as corporate or white-collar crimes, even if personal gain could be normally achieved. The person involved in these mistakes has to prove the lack of intention for achieving personal gains. Other requirements of the corporate and white-collar crimes, apart from the intention, are the high educational and social background of the actors (Gottschalk, 2010, p.14). Those individuals, when working in highly prestigious firms, can commit corporate and white-collar crimes by using the organizational infrastructure and customer base in order to promote their interests. It should be noted though that in many cases, the actors of these crimes are not aware of the fact that their actions are against the state’s or the organization’s rules and ethics. In regard to the above, Minkes & Minkes (2008) revealed that individuals who are involved in corporate and white-collar crimes are likely to share similar characteristics (Minkes & Minkes, 2008, p.190). Indeed, it has been proved those white and highly educated individuals are more expected to commit corporate and white-collar crimes when entering an organization, the internal environment of which can support such activities. 1.1.2 Causes of corporate and white – collar crimes At this point, it should be necessary for the causes of corporate and white-collar crimes to be discussed. One potential answer to the above issue would be the following one: corporate and white-collar crimes are likely to be committed by individuals who have specific traits, i.e. personal characteristics, a view highlighted in the study of Minkes & Minkes (2008) presented above. However, such explanation would disregard a key element of the corporate and white-collar crimes: the availability of the existing infrastructure or of the position for the development of such actions. A different view of the development of corporate and white-collar crimes is presented in the study of Nie (2009). According to the above researcher, the development of these crimes has been significantly supported in the past by the lack of knowledge on the nature and the characteristics of the particular crimes. Reference is made to the prior of 1949 era, when the public was not aware of the existence and the forms of white – collar crime (Nie, 2009, p.1). The extensive research developed in that period by Sutherland attracted the interest of criminologists and sociologists who decided to explore the specific issue (Nie, 2009, p.1). As a result, the public was informed on the existence of corporate and white-collar crimes; since then, the efforts of the actors of these crimes to hide their illegal activities had become quite difficult. In other words, the expansion of corporate and white-collar crimes can be related to the confidence of their actors that their participation in such crimes will not be revealed (Nie, 2009, p.1). The lack of fear for being punished for these actions had led to the radical increase of white – collar crimes in the past. Today, similar approach can be used for explaining the increase of corporate and white-collar crimes in certain areas. Even if the public is aware of the problem and even if measures exist for the prevention of the phenomenon it is still possible that the actors of these crimes are not discouraged from participating in such activities in case that the existing measures and schemes have been proved ineffective to identify the particular crimes. 1.1.3 Are corporate and white – collar crimes related just to business? The framework of corporate and white – collar crimes can be made clear by referring to their characteristics. As explained earlier, these crimes are based on two particular requirements: the professional status of the actor and the availability of the infrastructure/ environment for committing such actions (section 1.1.1). In other words, it is possible for these crimes to be independent from business, meaning especially the case that the actors of these acts use their professional status for achieving personal gains which are not justified in the context of the relevant professional code. Potter (2001) notes that it is rather difficult for the exact characteristics and causes of white-collar crimes to be identified due to the following phenomenon: the perpetrators of these crimes avoid giving explanations on their acts. In this way, many aspects of these crimes have not been, yet, revealed. In any case, the potential independency of white-collar crimes from the business environment has been proved in practice through the identification of cases where professionals committed white-collar crimes without being related to a particular business. On the other hand, corporate crimes refer to crimes developed in corporations, i.e. they can be only related to business environment; professionals cannot commit them if they are not members of a particular corporation. 1.2 Pros and cons when handling corporate and white-collar crimes 1.2.1 Existing frameworks for controlling corporate and white – collar crimes The commitment of corporate and white – collar crimes is punished both by the state and the organization. Gruner (2004) notes that top managers are considered as being equally guilty with the employees working in their department in case of fraud, in the sense that the tolerance of criminal activity is of equal value with the commitment of the crime. Moreover, top managers can be considered as having committed corporate crime when they have initiated business practices which are favour the commitment of crimes or promote misconduct, even if not directly (Gruner, 2004, p.1-7). From the same point of view, a top manager is held responsible for committing corporate crime in case that he ignored reports related to a particular misconduct, or if he delayed in responding to the relevant information offering the chance to the perpetrator of the crime to destroy valuable evidence or to further expand his illegal activities (Gruner, 2004, p.1-8). Friedrichs (2009) highlighted an important characteristic of corporate and white-collar crimes: the lack of adequate information for exploring all their aspects. In USA efforts are made so that the latest news on such crimes are published regularly in the ‘American Criminal Law Review’ (Friedrichs, 2009, p.268). According to Friedrichs (2009) corporate and white-collar crimes are related both to the criminal and the civil (tort) law; the former aims to control the harm of the public in general because of a particular crime while the second focuses on the damages caused to the individual or the organization involved in a particular case (Friedrichs, 2009, p.268). Apart from the state’s rules in regard to corporate and white – collar crimes, reference should be also made to the organizational rules related to the specific subject. In most organizations, misconduct is punished through specific forfeitures, which are likely to be differentiated in each organization. For example, in certain organizations corporate crime can be faced by dismissing the employee involved, no matter the level of his participation in the specific activity. In other organizations, a greater tolerance to corporate crimes may exist, under the terms that employees, even at high levels of the organizational hierarchy, are not always liable of crimes developed within organizations. Following orders of superiors or trying to cover an organizational gap that would severely harm the organization without affecting the public can be common causes of corporate crimes in modern organizations. Moreover, corporate crimes are likely to result to severe financial losses for the organization involved; the careful review of reports related to corporate and white – collar crimes is necessary in order to protect the organization from severe damages. 1.2.2 Managing corporate and white-collar crimes, pros and cons Despite the existence of numerous measures and schemes for fighting corporate and white-collar crime, still the control of the phenomenon seems to be quite difficult. Indeed, in many cases, corporate and white-collar crime is committed with no precautions using the media for altering its characteristics, so that it is not identifiable (Brody & Acker 2009). Reference can be made, for example, to the excessive volume of telemarketing advertisements, which, often, promote products, or services, which do not meet the standards, claimed by marketers (Broday & Acker 2009). The promises to the customers that they have gained important amount of money under the terms that they will participate in a particular marketing process is another form of corporate crime, since the infrastructure available in the business is used for misleading the public and achieve personal gains. It is made clear that the expansion of corporate and white-collar crimes can be quite difficult to be prevented. In fact, in a survey developed by the ‘National White – Collar crime Consortium (USA) in 2009’ (Deflem, 2011, p.109) revealed that the public considers the corporate and white-collar crime as one of the key factors for the current economic crisis (Deflem, 2011, p.109). Reference is made to the cases of large corporations, such as Enron, Worldcom and Parmalat (Deflem, 2011, p.109), which severely affected the global economy setting the basis for the development of the 2008 recession. According to the above issues, the responsibility for the development of corporate and white-collar crime should be shared among the individuals, the organizations and the state. It is made clear that even if many laws and organizational rules have been established for preventing the expansion of corporate and white-collar crimes, the above target has not been achieved; the fact that corporate crime offenders are still regarded as of offenders of an exceptional class compared to the offenders of the common criminal law (Lacey, Wells & Quick, 2003, p.328), would be considered as one of the reasons for the current status of corporate and white – collar crimes internationally. References Brody, D., & Acker, J. (2009). Criminal Law. Sudbury: Jones & Bartlett Learning. Deflem, M. (2011). Economic Crisis and Crime. Bingley: Emerald Group Publishing. Friedrichs, D. (2009). Trusted Criminals: White Collar Crime in Contemporary Society. Belmont: Cengage Learning. Gottschalk, P. (2010). White-Collar Crime: Detection, Prevention and Strategy in Business Enterprises. Boca Raton: Universal-Publishers. Gruner, R. (2004). Corporate criminal liability and prevention. New York: Law Journal Press. Lacey, N., Wells, C., & Quick, O. (2003). Reconstructing Criminal Law: Text and Materials. Cambridge: Cambridge University Press. Minkes, J., & Minkes, L. (2008). Corporate and white-collar crime. London: SAGE. Nie, Y. (2009). Re-examining the causes of corporate securities fraud: A criminological approach. London: ProQuest. Potter, G. (2001). Controversies in white-collar crime. Cincinnati: Anderson Publishing. Part Three: Discussion of my own position on the issue The development of corporate and white-collar crimes has been proved to be significant. Of course, emphasis should be given on the fact that the rate of expansion of the problem seems to be rather low, taking into consideration the increase of criminal activity in general. Moreover, the measures taken, both by governments and the private sector for controlling corporate and white-collar crimes can be characterized as only partially successful since they can provide certain benefits in the short term but they are not available for long-term solutions. One of the most important problems of corporate and white-collar crimes is the fact that these crimes are not always easy to be identified. Indeed, in such crimes, the perpetrators are those who have access to the data and information through which these crimes are verified. Therefore, it is always possible for this evidence to be destroyed causing significant barriers in tracing the persons involved in such crimes. In other words, the efforts for facing corporate and white-collar crimes should focus on the early stages of the crimes and not try to impose appropriate punishment. In any case, since these crimes have always taken place it is quite difficult to control their effects, as proved in the case of Enron that severely harmed both the national and the international market. The review of the literature published in regard to this issue leads to the assumption that the measures for facing corporate and white-collar crimes are many but they are more related to the later stages of the crimes and not to their causes. It cannot be doubted that this fact is responsible for the failure of these measures to offer adequate protection from corporate and white-collar crimes. From a similar point of view, reference should be made to the provisions of large corporations for informing their members on corporate and white-collar crimes. Despite the fact that the particular crimes can be quite harmful for corporate activities, leading even to the closure of the organization, still, firms avoid adopting schemes for increasing the awareness of their members on corporate and white-collar crimes. In fact, in many organizations the following perception seems to exist in regard to these crimes: corporate and white-collar crimes are the exception and not the rule; so, employees would need to be informed on these crimes’ aspects just to be informed on the firm’s policies in case that one of its employees is involved in such crime. It is ignored that the effects of these crimes are likely to be significantly higher compared to the punishment imposed on the persons involved. The temporary or the permanent removal of a person from his position cannot restore the damage that the company has suffered due to the particular actions. The control of corporate crimes is depended not only on strict measures for the punishment of the perpetrators but, mainly, on the change of organizational culture which should be clearly opposed to initiatives that violate the rules and the ethics of the state and/ or of the organization. At the next level, emphasis should be given on the readiness of the state to face and, mainly, to prevent such crimes. In certain countries, like USA, existing regulatory framework for the control of corporate and white-collar crimes is detailed, covering all aspects of such activities. However, in most countries the measures developed by the government for the limitation of corporate and white-collar crimes are limited, in certain cases they do not even exist. This fact leads to concerns in regard to the role of the state in the expansion of corporate and white-collar crime. When the scandal of Enron was revealed many people questioned the lack of effective control by the side of the state on the organization. It is actually not clear how certain of the firm’s employees managed to violate their organization’s and the state’s rules without their role to be revealed. Moreover, the practice of the organization to impose on its employees the development of certain practices has been strongly questioned. The issue that should be answered is the following one: when corporate and white – collar crimes take place who is the one to blame, employees, the state or the organization? And how the role of each of these parties in the development of the problem can be identified and evaluated? In most cases it is quite difficult for responsibilities to be attributed. The fact that the cases of corporate and white – collar crimes are not adequately published in order for the public to be informed on their existence and progress, verifies the view that the actors in corporate and white-collar crimes can be many, usually different from those who are accused for having committed these crimes. Read More