Companies Behaving Badly: Corporate Criminal Liability

AuthorDr R. Evan Bell
Corporate Criminal Liability
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
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
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 designation3 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
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

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