The Study of Corporate Crimes: Precepts and Significance - Essay Example

THE STUDY OF CORPORATE CRIMES -PRECEPTS AND SIGNIFICANCE Over the past few decades, corporate crime has emerged to be an insidious social issue in the U.K., U.S. and elsewhere, inciting significant academic and research interest among sociologists and criminologists. It is significant to note that the idea of corporate crime, many a time referred to as 'white-collar crime', has been a subject of study by criminology researchers since the 1940s. However, most of the research focused on white-collar criminals within corporations; the academic study of crimes by corporations and business organisations or corporate criminology as it is referred to, remained largely under developed until the recent years. While many factors including lack of public awareness and concern, the myth that corporate crimes are not serious and/or victimless, absence of broad-based social movement against corporate crime, and the corporate domination of society and academics may have hindered the development of corporate criminology as an academic speciality in the past, the need to address corporate crime as an area of behaviour demanding deep and urgent study by criminologists has been suggested by many researchers.1 The report examines the subject matter of corporate criminology, and attempts to understand the criminological precepts and legal concepts associated with corporate crime. In doing so it shall examine the definitions, classifications and theorisations of corporate criminal behaviour and wrongdoings as well as the implications of corporate criminalisation. The report shall analyse the nature and extent of corporate crimes in the U.K., in understanding the significance of the study of corporate crimes. Corporate Criminology - An Overview Edwin Sutherland's 1940 study, "White Collar Criminality" is understood to be the first attempt to study corporate wrongdoings from a criminological perspective.2 Despite his frequent reference to 'white-collar crimes', Sutherland's main concern, as Kramer observes, was "with the crime of corporations".3 Although Sutherland's work was recognized as an important contribution, his efforts, 'a legacy scorned by its putative beneficiaries,'4 did not leave much interest among criminologists, as corporate crime remained largely outside the purview of criminology until 1970s. Doherty comments that the failure of criminologists to address corporate crimes was not entirely wilful, stating that many obstacles including apparent public ambivalence, lack of assessment and awareness of the seriousness of corporate crime and the absence of a valid and meaningful definition has limited the development of corporate criminology as a concerted study.5 From an academic/theoretical perspective, the issues related to defining corporate crime is of particular significance, as a valid and meaningful definition that demarcates the boundaries of the study needs to be established. Defining Corporate Crime Geis and Meier have observed that defining the concept of corporate crime has been traditionally considered as the 'toughest intellectual nightmare,' facing a corporate criminologist.6 Many researchers studying corporate crime often inconsistently use the term 'white-collar crime' to refer to corporate crime. It may be worthwhile to examine the way white-collar crime and corporate crimes are defined and understood. Sutherland defines white-collar crime 'as a crime committed by a person of respectability and high social status in the course of his occupation.'7 Apparently, his definition focuses on the individual offender; however, Gobert and Punch suggests that his later observation, "the criminality of the corporations, like that of professional thieves, is persistent: a large number of the offenders are recidivists" suggests the inclusion of corporations within the category of these offenders.8 Gobert and Punch suggest that corporate crime, in essence refers to the individual, collective and organisational wrongdoing in a business setting.9 These definitions blur the distinction between white-collar crimes and corporate crimes. The inconsistent usage of terms and the application of traditional criminological perspective to corporate crimes are often confusing to students of corporate crime as researchers tend to focus on traditional crimes committed by white-collar criminals, against corporations, leaving the more serious crimes committed by organisations largely neglected. A criminologist studying corporate crime ought to clearly distinct the two, when attempting to theorise and explain the causes of corporate crime. Corporate crimes have been distinctly defined as "illegal acts carried out in the furtherance of the goals of the organisation,"10 by individual(s) acting on behalf of organisations. According to Paternoster and Simpson the decision to break the law is made by individuals; however corporations can take on the characteristics of acting agents responsible for their own conduct.11 The individuals breaking the law are affected by the characteristics and imperatives of their business organisation. When approached from this perspective, the definition of organisational crime put forward by Schrager and Short seems befitting in defining corporate crime. According to them, organisational crimes may be defined as: Illegal acts of omission and commission of an individual or a group of individuals in a legitimate formal organisation in accordance with the operative goals of the organisation which have a serious physical or economic impact on employees, consumers or the general public.12 The present research shall adopt this definition in demarcating the boundary of corporate criminology; corporate crimes deserves more serious study considering the power of business to inflict catastrophic harm to society and their ability to escape prosecution and sanction,13 as revealed in the later sections. Theorising Corporate Crime The study of corporate crime has been growing in the recent years; however, much of the work in the area is considered 'atheoretical,' focusing on corporate crime as a 'phenomenon.'14 Applying the general theory of crime and precepts of criminology to corporate crimes is challenging to criminologists, as corporate criminal behaviour present complex implications in terms of identifying the offence, punishing the offender and preventing criminal behaviour in future. Unlike in conventional crime and delinquency, criminologists studying and/or investigating corporate crime, may need to examine the source of deviance within the context of the violator's corporate status and make value judgements while applying traditional criminological theories and legal concepts.15 Researchers have attempted to theorise and explain corporate crime in different ways. In this regard it is worth noting that most of the theories applied by earlier researchers -- differential association theory, differential reinforcement theory, subcultural theory etc- essentially focus on the individual acts of delinquency; the organisational aspects of corporate crime are only considered in relation to individual criminal.16 As research progressed, the need for any theory of corporate crime to explore the complex interplay between the corporation and individuals was recognised.17 Consequently a variety of theoretical models have been used to explain corporate crimes and offending; a few the most promising and relevant of these theories may be examined. Anomie Theory - Anomie theory recognises that explanations based on individual motivations are inadequate to figure out corporate offending.18 The achievement of corporate goal, which is to 'make maximum possible profit over a long period' is central to explaining corporate crime. According to Box corporations and individuals faced with obstacles in lawfully achieving the goals often break the law in achieving its goal. Box argues that profit motive renders the corporation inherently 'criminogenic' and at the individual level, the top officials, who regard their own success as being linked to the success of the organisation, are likely to have personal characteristics required to commit corporate crime.19 Braithwaite agrees that corporations and individuals engage in fraud and illegal acts for the achievement of organisational or personal goals, when legitimate means are blocked. 20 Neutralisation Theory - The theory also called drift suggests that corporate criminals apply 'techniques of neutralisation' to justify their deviant behaviour; neutralisation allows offenders to temporarily suspend or neutralise their commitment to societal values, and thus drift back and forth between legitimate and illegitimate behaviours.21 All the five techniques of neutralisation apply to corporate crime -- 'denial of responsibility' possible as a result of shared decision-making; 'denial of the victim' and 'denial of injury' in case of corporate malpractices, 'condemn the condemners' by pointing to political corruption and 'appealing to higher loyalties,' loyalty to company considered more important than obeying the law. 22 Rational Choice Theory-- Cornish and Clarke's rational choice theory assumes human behaviour is 'rational' in character, and that the likely costs and benefits of any action are calculated prior to decision-making. Decisions and factors that affect offender decision-making vary greatly at both the different stages of the offence and among different offences. The rational choice explains corporate crime by using measures of perceived costs and benefits pertaining to corporation and the individual, perceptions of shame, and other characteristics of the organization. 23 The above theorisations of corporate crime suggest that both the acts by a corporation and the corporate actors need to be looked at in order to explain corporate crime comprehensively. While the theories are generally used to explain the cause of corporate crime in a variety of contexts, Gobert and Munch remark that "no all-embracing causal explanation for corporate criminality has emerged."24 Also, factors and strategies that may control corporate deviance have received little attention by scholars. Implications of Corporate Criminalisation Even as there is an increasing awareness of the financial, human and social costs of corporate wrongdoings among academics, politicians, social activists and the public, researchers suggest that there is also a growing appreciation of the difficulties with holding companies accountable for their wrongs. 25 Criminologists have long been challenged as to whether corporate crime would really amount to a 'crime' as laws governing corporate activity are often regulatory in nature and often outside the purview of common law. For this reason violations and offences by corporations in the past have only attracted civil or administrative sanctions, escaping criminal prosecution.26 Criminalisation of corporations presents many challenges from a legal standpoint: As Gobert and Munch suggests since criminal liability is founded on notions of moral blameworthiness, it is often not clear as to how an artificial, impersonal fictional entity such as a company can be said to be "morally" blameworthy. They are of the opinion that the idea of corporate criminal liability also fits uneasily with the traditional legal concepts of mens rea (guilty mind) and actus reus (wrongful act); the failure of courts to adapt the existing criminal law involving natural persons for applying to corporations.27 Their study as well as that by Celia Wells (2001) explains the development of the principles of corporate liability in the U.K.- through the establishment imputed liability, implying vicarious responsibility corporations as 'accessories' for the actions and omissions of its employees through identification doctrine and more comprehensive criminal liability -- organisational fault - implying the company's culpable failure to assess and manage risk and to monitor effectively. Though a detailed discussion of the principles of corporate criminal liability may be beyond the scope of this paper, it is significant to note that criminal liability of corporations is gaining ground in the U.K. and elsewhere as the ingenuity of criminologists, in research, theory and practice are increasingly utilised, though continually challenged. Having understood the general theoretical framework for explaining corporate crime, and the problems and challenges of applying criminological precepts to corporate crime, it may be worthwhile to examine the extent and nature of crimes -malpractices and corporate killing or manslaughter - committed by business organisations to understand the significance of studying corporate crimes. While bulk of the empirical research on corporate crime is of American origin, the present research shall essentially focus on corporate crimes in the U.K. Corporate Crimes in the U.K. In the U.K. the first reports on corporate crimes include corporate malpractices and financial offences, however in the later years research have shifted to instances of corporate violence including manslaughter.28 Corporate malpractices essentially refer to those crimes of economic nature and/or intent including violations of laws and regulations, and include such offences as bribery, corruption, asset misappropriation, accounting frauds, tax evasion, insurance fraud, insider trading, money laundering, product counterfeiting, procurement fraud, and revenue fraud, antitrust activities, environment frauds, labour law violations, political influence peddling etc. While these offences are committed by individuals, the test of corporate liability, as suggested earlier, lies in whether the crimes are committed in furtherance of the organisational goal. The crimes of workplace violence including death and corporate manslaughter refer to those cases caused by the negligent acts of corporate actors, the responsibility of which may be attributed to the corporation. Corporate Malpractices While attempting to analyse the nature and extent of corporate crimes in the U.K., it is important to note that corporate crime by itself a new field of interest, empirical research in the area is limited. It may be terribly misleading to judge the extent of corporate crime by the number of prosecutions or convictions as corporate misconduct has not been made criminal; corporations are often largely successful in negotiating their offences out of the criminal justice system.29 It is also significant to note that reports on the extent of economic crimes in the U.K. largely focus on loss to companies - RSM Robson Rhodes LLP reports that in 2003 UK companies lost 32 billion through acts such as fraud, embezzlement, corruption and money laundering, and spent a further 8 billion seeking to combat the problem.30 These figures obviously suggest the extent of malpractices against companies; those by companies in furtherance of organisational goals continue to be unreported or underreported. A few of the most significant are addressed: In the U.K. the first cases of corporate malpractices, as available research suggests, include the financial offences in early 1980s. Michael Levi reports the investment and securities frauds by financial institutions in the City of London, which eventually led to the collapse of four licensed dealers and one commodity broker. He cites the cases of Bank of Credit and Commerce International and Robert Maxwell publishing empire, which dwarfed the combined costs of all other fraud and most non-fraud crimes. In these cases, people in corporate authority used the investment funds to purchase grossly overpriced investments beneficially owned by themselves, either as a pure rip-off or to keep those other investments afloat, and eventually filed bankruptcy.31 In terms of corporate regulation and violation, Carson's research into the enforcement of factory regulation and functioning of Factory Acts presents revealing cases of corporate malpractice -the case of North Sea oil and gas industry demonstrates how production pressures leads to neglect of safety resulting in high casualty rates in the industry and how the government and economic interests combine with market forces to produce official tolerance to corporate deviance. He claims that the financial interests of the government in exploiting oil sources largely contributed to the unacceptably low compliance with regulatory measures.32 Bribery, political influence peddling etc for organisational benefits have also been reported in the U.K-- The British pharmaceutical giant GlaxoSmithKline is under investigation in Germany and Italy for bribing doctors to prescribe its drugs with everything from cash payments to luxury travel and World Cup tickets.33 Political influence and lobbying by BAE Systems to increase its sales and retain monopoly in British Defence Industry is another case of significance.34 Environmental crime, criminal pollution by dumping of toxic wastes, is another area of corporate malpractice that is gaining significance. The report by the Environmental Audit Committee, which presents a range of environmental crimes committed by businesses, suggests that while some small and medium sized enterprises aren't properly informed about their legal responsibilities, others don't believe that their illegal actions will be discovered. Even when sanctioned, the fines were found to be too low to act as deterrents.35 Corporate Manslaughter Institutional and corporate failures and negligence leading to widespread death of employees at the workplace as well as the general public have contributed to the development of corporate manslaughter. It is estimated that In the UK over 2000, workers and members of the public have been killed in work-related accidents between 1997 and 2003 - including four major train wrecks.36 Some of the most prominent cases of corporate manslaughter reported in the U.K may be analysed. One of the key developments in corporate manslaughter is the case P&O European Ferries, resulting in the death of 192 people when the Herald of Free Enterprise sank off the coast of Zeebrugge in May 1987 after it had left port with its bow doors open. The case was the first to rule that a charge of manslaughter against a corporation was recognised in law; however, the prosecution was ultimately unsuccessful as doctrine of identification and the interpretation of recklessness proved ineffective in establishing culpability of the company and identifying the responsible individual.37 The next case - the Southall rail crash of the Great Western Trains in 1997 in which seven people were killed resulting from the violation of safety regulations-was a major advancement in the recognition of corporate violence. The company was fined a record 1.5m under s. 3 (1) of Health and Safety at Work Act 1974, however, the manslaughter prosecution proved difficult and failed for reasons as in P& O.38 In cases, where corporate manslaughter prosecution resulted in convictions, as in cases like OLL Ltd causing death of three teenagers, the companies were small, effectively one-person companies, in which identification doctrine was effective in attributing responsibility. Work place accidents and deaths resulting from corporate negligence is another area imposing criminal liability on corporations. It is reported that between 1996 and 1998, 510 people died and 47803 suffered major injuries from work related deaths. Of the 739 deaths in construction industry between 1981 and 1985, it is stated that about 70 percent could have been avoided by 'positive action by management.'39 Workplace deaths are investigated by the HSE, who do not have the power under existing law to bring manslaughter prosecutions, as corporations often escape manslaughter prosecutions and conviction. While a protocol has been agreed between the CPS and police, manslaughter prosecutions continue to be rare. In 1996, the firm of Jackson Transport was convicted of manslaughter, when worker died after being sprayed in the face with toxic chemicals while cleaning a tanker. The Crown Prosecution Service handled the case, with the HSE taking on the breaches of Health and Safety regulations involved; one director who imprisoned for 12 months.40 The Law Commission in their 1996 report has attempted to correct the flaws in existing criminal law, by suggesting a separate offence of corporate killing. The report suggests three offences to replace the current single offence of manslaughter - two offences reckless killing and killing by gross carelessness for indicting individual offenders and/or corporations through application of existing identification rules; and offence of corporate killing by gross carelessness, attributable to "management failure."41 While this may present a significant reform to corporate manslaughter prosecution, Wells observes that the question 'who is the company' still remains unclear.42 Answering the question is perhaps the most challenging of all issues in corporate criminology. Tackling Corporate Crime Only a few researchers on corporate crimes in the U.K., have comprehensively addressed the issues related to policing of corporate offenders through investigation, prosecution and sanctioning. Researching on the strategies that can deal with and/or control corporate crime, Paternoster and Simpson suggest that instrumental means, threats of punishment by the enforcement of law, and deontological means of appealing to morality, directed at both corporate organisation and the decision-makers can serve as effective deterrents.43 Research suggests that in the U.K., corporate sanctions are often limited to the imposition of fines44 and many researchers have commented about the inadequacy of fines as a deterrent for preventing corporate crime.45 Reportedly, many commentators on corporate regulation recognise that enforcement against corporations only works effectively when accompanied by action against high-level managers.46 However, the criminal justice system has not been able to address the issue head on though efforts are underway. Conclusion The subject matter of corporate criminology is considerably complex and puts to test the ingenuity of criminologists. Yet, the study of corporate crimes enables and equips criminologists to apply traditional criminology precepts and legal concepts to one of the most menacing evils afflicting modern societies. The fact that the criminal justice system has not been successful in addressing corporate crimes effectively, makes it all the more imperative for criminologists to study corporate deviance and criminal behaviour. Bibliography 1. Author Unknown 2004 Economic crime costs UK PLC 40 billion a year Available at: http://www.cambridgenetwork.co.uk/pooled/articles/BF_NEWSART/view.aspQ=BF_NEWSART_119620 Accessed 17/01/2006 2. Author Unknown 2003 "Corporate Crime Wave: The Facts New Internationalist, 358 (July)Available at http://www.newint.org/issue358/facts.ht Accessed 17/01/2006 3. Box, S. 1983 Power Crime and Mystification London: Tavistock. 4. Braithwaite, J. 1989 "Criminological Theory and Organizational Crime." Justice Quarterly 6: 333 5. Braithwaite. J. 1984. 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Stotland (Eds) White Collar Crimes: Theory and Research. New York: Sage Publications 20. Sykes, G.and Matza, D. 1957 "Techniques of neutralization" American Sociological Review 22 664-70. 21. Wells, C. 2001 Corporations and Criminal Liability 2nd Edition Oxford: Oxford Read More