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Arlen, Jennifer --- "Corporate Criminal Liability: Theory and Evidence" [2012] ELECD 567; in Harel, Alon; Hylton, N. Keith (eds), "Research Handbook on the Economics of Criminal Law" (Edward Elgar Publishing, 2012)

Book Title: Research Handbook on the Economics of Criminal Law

Editor(s): Harel, Alon; Hylton, N. Keith

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781848443747

Section: Chapter 7

Section Title: Corporate Criminal Liability: Theory and Evidence

Author(s): Arlen, Jennifer

Number of pages: 60

Extract:

7 Corporate criminal liability: theory and evidence
Jennifer Arlen*


1. INTRODUCTION

Corporations are subject to a host of laws that criminalize acts that are potentially profit-
able for the firm but harm society. Some of these laws, such as those prohibiting securi-
ties and health care fraud, criminalize intentional wrongdoing. Others, such as many
environmental regulations, use criminal law to encourage firms to invest in measures to
prevent harms that otherwise would naturally occur as part of their operations. Almost
all of these laws are enforced through a combination of individual and corporate liability
imposed on people who commit the wrong. The central policy question facing enforce-
ment authorities is how to structure individual and corporate civil and criminal sanctions
to optimally deter such crimes.
This chapter employs economic analysis to examine the optimal structure of individual
and corporate criminal liability for corporate crimes.1 It shows that, in order to optimally
deter corporate crime, the state generally needs to impose both individual and corporate
criminal liability. It also shows that, for most important crimes, the optimal structure
of corporate liability differs from classic optimal individual criminal liability for purely
individual crimes, as expressed in Becker (1968).2 Optimal corporate liability also differs
in structure from optimal corporate liability considered in the classic economic models
of corporate vicarious liability (Kornhauser 1982; Sykes 1984; Polinsky and Shavell
1993).
Pure individual crimes generally involve an individual seeking to benefit from impos-
ing harm on a third party. The central goal of individual ...