Companies Behaving Badly: Corporate Criminal Liability

• Author: Dr R. Evan Bell
• Pages: 152-185

5

COMPANIES BEHAVING BADLY:

Corporate Criminal Liability

Introduction

A company is a legal ction with no true physical existence. ‘It has

no mind; it cannot itself act; it cannot itself know; it cannot intend;

nor can it be wicked.’1 Companies perform their corporate activity

through human agents. Ranging from small family companies to those

which wield more power than some governments, companies dominate

the business environment, both domestically and internationally. is

chapter explores the issues surrounding corporate criminal liability. It

also examines what society does to punish corporate nancial crime,

deter wrongdoers, achieve rehabilitation and remove the proceeds of

crime.

e concept of ‘nancial crime’ may be dened in dierent ways.

e Financial Services and Markets Act 2000 denes nancial crime

as including, , fraud or dishonesty, market misconduct and

money laundering.2 e inclusion of money laundering opens up a

connection to a host of other crimes. It includes a connection to ‘white-

collar’ corporate crimes such as market abuse, fraud, corruption and

tax evasion, but also a connection to, for example, drug-tracking,

people-tracking, smuggling and environmental crimes.

Common Law legal systems divide wrongs into two categories:

criminal wrongs and civil wrongs. e traditional view is that crimes

are public wrongs and that the criminal law addresses those who harm

society through morally culpable acts, in order that punishment may

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Companies Behaving Badly

be imposed and potential oenders may thereby be deterred from

committing similar oences. Criminal proceedings are therefore

‘ocially designated ceremonies of guilt designation’3 and the label

‘criminal’ carries with it a social stigma which is not imposed on the

losing party in a civil action. e traditional dichotomy between

criminal and civil proceedings no longer accurately describes the

modern position. e functions and purposes of criminal, civil, and

regulatory proceedings overlap in several respects. Even some procedural

aspects, such as the dierent standards of proof for civil and criminal

sanctions, are not always clearly distinguishable.4 Criminal cases now

often involve civil, or quasi-civil, procedures and some civil litigation

has become quasi-criminal. is ‘signicant disintegration of the wall

between criminal and civil proceedings’5 has occurred on a number of

fronts and is due, at least in part, to the fact that multiple strategies are

now used to deal with crime. Rather than the traditional dichotomist

perspective, legal proceedings are better seen as a continuum, with

distinctly civil proceedings at one end and clearly criminal proceedings

at the other. Between the two ends of the continuum are a range of

possibilities, each of which may be more or less criminal or civil.

In any consideration of corporate nancial crime it is necessary to

distinguish between dierent types of factual situations. Four principal

situations may be distinguished. Firstly, where, unknown to others in a

company, an individual uses his position within the company to commit

crime for his own personal benet. Secondly, where an individual

uses his position, in control of a company, to use the company as a

vehicle for his crime. irdly, where, contrary to corporate policy, an

individual or group of individuals within the company believe they are

acting in the company’s interest and commit crime. Fourthly, where the

policies, practices and culture of the company have resulted in criminal

acts having been carried out by and on behalf of the company. As this

chapter will examine, dierent factual circumstances justify dierent

legal responses.

UK Law on Corporate Criminal Liability

It was originally considered that companies could not commit

criminal oences, particularly those which required a guilty state of

RISKY BUSINESS: Perspectives on Corporate Misconduct

154

mind.6 Companies were viewed as having ‘no soul to damn, and no body

to kick.’7 us a company could neither be shamed nor be imprisoned.

However, as society changed and as companies began to dominate the

business environment, the law evolved, introducing corporate criminal

liability. us section 14 of the Criminal Law Act 1827 provided

that, in the absence of a contrary intention, the word ‘person’ in a

statute extended to corporations. is has subsequently featured in

Interpretation Acts since 1889 and applies to any Act, whenever passed,

relating to any oence punishable on indictment or on summary

conviction. In addition, many pieces of legislation now make specic

provision that a corporate body may be liable for particular criminal

oences. However, in considering whether a company has committed

a criminal oence, a fundamental legal problem is that it is necessary to

prove which acts count as acts of the company. It is therefore necessary

that there should be rules by which acts are attributed to the company.

ese are called ‘rules of attribution’.8

e rst approach for attributing the acts and states of mind of

individuals a corporation employs to the corporation itself is called

vicarious liability. is emerged in the nineteenth century, derived

from the concepts of the master/servant relationship. According to this

approach a company is vicariously liable for the acts of any employee

wherever an individual employer would be so liable. Vicarious liability

was originally restricted to torts carried out by employees. However

corporate criminal liability then evolved in the context of the expansion

of the railway network. In 9 the court rejected the argument that an indictment could

not lie against a company in a case which concerned the failure of the

company to construct safety work. In10 the defendant was convicted in respect of a positive act rather

than a failure to act. Neither case concerned a prosecution for which

 was necessary. Rather these were oences of strict liability

with no requirement to prove any criminal state of mind. Statutes now

frequently impose vicarious responsibility on companies. A corporate

employer will be vicariously liable for the acts of its employees and

agents where a natural person would be similarly liable.11 Normally,

vicarious liability will arise from oences of strict liability. ese

are oences which do not require intention, recklessness, or even