Much of our lives and daily routines are affected by corporate activities. To a great extent, companies provide the food we eat, the water we drink, the necessities and luxuries of everyday living. Such companies generate wealth for the economy and their shareholders and provide employment for much of the population.
However, a good corporate reputation goes hand in hand with corporate responsibility. Just as individuals owe a duty not to harm or injure others in society without justification, companies also owe a duty not to poison our water and food, not to pollute our rivers, beaches and air, not to allow their workplaces to endanger the lives and safety of their employees and the public, and not to sell commodities, or provide transport, that will kill or injure people.
It is often asserted that companies themselves cannot commit crimes; they cannot think or have intentions. Only the people within a company can commit a crime. There has been a debate as to whether a corporation can be held criminally liable.
The nominalist theory of corporate personality view corporations as nothing more than collectives of individuals. An individual first commits the offence; the responsibility of that individual is then imputed to the corporation. According to the realist approach, corporations have an existence which is to some extent independent of the existence of its members.
The argument in favour of a corporate being criminally liable is that in many cases it is the corporation itself, through its policies or practices that has done wrong. Prosecution and punishment should be directed at the real wrongdoer.
In many cases there is no individual who, alone, has committed a crime. It is the conjunction of the practices of several individuals, all acting in compliance with a company’s sloppy or non-existent procedures, that has caused the harm. Alternatively, in many cases companies have complex structures with responsibility buried at many different layers within the corporate hierarchy making it difficult, if not impossible, to determine where the true fault lies. Common law jurisdictions recognize that corporations may be held criminally liable whereas civil law jurisdictions target the individual wrong doer (personal criminal liability).
The procedure to prove corporations criminally liable is complex. The corporation’s fault will be established (vicarious liability) if the corporate’s board of directors intentionally, knowingly or recklessly carried out the wrongful conduct, or expressly permitted the commission of the offence. Second, the corporation’s fault may be established by evidence that a high managerial agent of the company intentionally, knowingly or recklessly engaged in the relevant conduct or expressly, tacitly or impliedly authorized or permitted the commission of the offence.
It is often argued in opposition to corporate criminal liability that the imposition of fines provides no guarantee that delinquent conduct will be deterred. The fines imposed on corporations are often minimal in comparison with the devastating effects of their wrongful acts, and virtually amount to a cost of doing business. But there is also a concern that excessive fines can have perverse effects that may have to be borne by innocent shareholders, creditors, employees or consumers.
One of the main objects of corporate criminal liability is to ensure that companies improve their work practices. If no individual who has committed a crime can be identified and no mechanism for corporate prosecution was to exist, the harmful practices would continue unabated.
Companies should be prosecuted and convicted for the same general offences as individuals and subject to the same general rules for the construction of criminal liability. The law should recognize and give effect to the widely held public perceptions that companies have an existence of their own and can commit crimes as entities distinct from the personnel comprising the company.
Prosecution of companies can provide a significant impetus to companies to improve their practices or can prompt law reform to improve safety standards.
The author is a lawyer