Introduction
As has previously been discussed,[1] the UK Government is looking to amend some of the perceived inadequacies of the common law doctrine of identification in corporate criminal liability. Rather than ascribing the concept of a directing mind to increasingly diffuse and complex corporations which may not be said to have intentions or states of mind, it is looking towards implementing a negligence standard of criminal liability similar to that in Section 7 of the Bribery Act 2010.
In Theory
The “failure to prevent” model used in Section 7 of the Bribery Act is the product of years of debate as to how to equate the intention, state of mind and will of individuals with those of corporations. It is a solution which seeks to avoid this difficult problem by attributing a corporation’s mind to its internal policy rather than to its individual directors or employees:
“The company is treated as a distinct organic entity whose “mind” is embodied in the policies it has adopted. When company policy or corporate ethos leads to the commission of a crime, the company should be liable in its own right and not derivatively.”[2]
The notion behind this is that “companies of sufficient organisational complexity develop over time an intentionality and reasons for acting which exist in a realm separate from the individual intentions and motivations of the individuals currently connected with the company.”[3]
As such, with internal procedures containing specific statements as to its goals, a corporation’s intent is instead attributed to its practices, rules and policies rather than to its individuals.
This sounds great in theory however how an organisation actually operates consists as “much in its informal practices as in its official decisions”[4]. Informal corporate cultures combine with specific institutional priorities which has the potential to create “a climate which discourages obedience to known rules.”[5]
In Practice
So speaking practically, how effective is an approach which fixates on internal policy to model corporate criminal liability? In terms of measuring the deterrence of such an approach, we have little data as yet emanating from prosecutions under the Bribery Act’s Section 7. However, we do have data derived from another source of focus in this consultation – the Respondeat Superiore standard of strict liability used in the United States.
Whilst the U.S. standard does not fixate legally on internal policy in the same fashion as Section 7 of the Bribery Act, it does in practice in the solution it seeks. Standard procedure for such prosecutions is that corporations shall seek to enter Deferred Prosecution Agreements that involve sweeping overhauls to internal compliance procedures (as well as hefty fines) designed to serve as safeguards against this type of behaviour happening in future.
However the sheer scale of recidivism we have seen in such cases does not bode well for internal policy alone: UBS, HSBC, Barclays, Lloyds, AIG, JP Morgan, Wachovia and Credit Suisse – all have incurred multiple Deferred Prosecution Agreements and all have shown a persistent inability to implement internal procedures which prevent future offences.[6]
This is not the only pattern which soon becomes apparent from looking at the data. Professor Brandon L Garrett, having studied some 303 case outcomes, has pointed out that in 66% of cases no individual is prosecuted. Of the outstanding 34%, save for the 15% of cases which do not successfully secure a conviction, sentences are light with a tendency for middle managers and lower officers to suffer punishment in lieu of the superiors.[7]
Is there any relationship between these two trends? A lot of people think so, and not just the general public. After years of seeing this sort of behaviour many journalists, politicians, academics and judges have increasingly echoed the sentiments of commentators like US Federal Judge Red Rekoff. Judge Rekoff has issued an in depth critique[8] on the failings of measures which focus on policy of corporations at the expense of the sheer deterrence offered by prosecuting individuals.
In Tandem
Whilst it has proven difficult to achieve a successful outcome in investigations and prosecutions which focus on an individually-based means of attributing a corporation’s criminal liability (where the corporations in question are sufficiently large) this does not mean models which use internal policy will do the job better.
Instead, by seeking to bypass questions as to how one should bridge the concept of the corporation with that of the individual, they settle for securing convictions at the expense of deterrence by focusing on corporations instead of the individuals.
However, this is not to say that the insight and innovation behind the Section 7 “failure to prevent” offence is not valuable – it is. It is merely to say that simply because, as a corporation expands, its “directing mind” is expressed to a greater degree through its policies does not mean it is no longer influenced by its individuals.
Should we wish to address this issue it should be done first by recognising that duality, instead of trying to dismiss it by resolving corporate criminal liability under one issue. It might instead be seen as a spectrum of influence. The larger a corporation is, the more influential its policy is, and the smaller it is the more influential its individuals are – but with both still seen as influential in forming the corporation’s collective intent.
How this may be achieved is a question for experts and politicians, but the Government should consider increasing the scope of ‘directing mind’ in tandem with policy-based models. It seems worth pointing out that aggregation is a viable option provided it is made permissible to “over-personify”[9] corporate bodies. This would offer a holistic approach to both individuals and policy in addressing corporate criminal liability.
In Conclusion
Corporations are cultures, and like all cultures they have forces which operate from the ground up as well as forces which operate from the top down. Should policy makers wish to influence those cultures effectively, it has to be done through measures which exert pressure in both directions.
Whilst it is tempting to apply measures which seek to escape the question as to how one delineates the relationship between individuals and corporations, its effect may be to sacrifice justice and deterrence for corporate criminality for the sake of expedience. That is not satisfactory.
Since the 2008 financial crisis an anti-establishment sentiment has been developing towards corporations, particularly those involved in financial services, which we now see in full force. Not only corporations, but individuals across the financial service industry played a real part in wrongdoing which inflicted financial and social harm against wider society at its expense. People see perpetrators not only go unpunished but receive bonuses at their expense while many experts told them this was necessary or unavoidable.
Such injustice is socially dangerous not simply because of the harm going unpunished and unrepaired, but because it creates mistrust in institutions and expertise. Should policy-makers wish to earn back the public’s trust it should begin by implementing more sophisticated tools to tackle corporate criminality which include focus on individuals as part of their operation.
Ross Becalick
[1] https://uae.emmlegal.com/news/prosecution-corporate-entities-proposals-reform/
[2] Gobert, ‘Corporate Criminality: New Crimes For The Times’, 1994, Crim LR 722-734
[3] Sullivan, ‘Expressing Corporate Guilt’ 1995, 15 Oxford Journal of Legal Studies 281-293
[4] Colvin, “Corporate Personality And Criminal Liability’, 1955, 6 Criminal Law Forum, 1-44
[5] S Field and N Jorg, ‘Corporate Liability And Manslaughter: Should We Be Going Dutch?’, 1991, Crim LR 156-171
[6] Brandon L. Garrett, ‘The Rise of Bank Prosecutions’, 126 Yale L.J. F. 33 (2016), http://www.yalelawjournal.org/forum/the-rise-of-bank-prosecutions
[7] Brandon L. Garrett, ‘The Corporate Criminal As ScapeGoat’ Virginia Law Review, Vol. 101, No. 7 (November 2015)
[8] http://www.nybooks.com/articles/2014/01/09/financial-crisis-why-no-executive-prosecutions/
[9] Lederman, ‘Criminal Law, Perpetrator And Corporation: Rethinking A Complex Triangle’, 1985, 76, Journal of Criminal Law and Criminology, 285-340
