Assessing Corporate Character as a Basis for Criminal Sentencing

What is the purpose or motivation of corporate criminal punishment? What kinds of punishments ought we impose? While such questions may seem lofty, they are important nonetheless. Strict pragmatists who reject the goal of developing penal theory and focus only on policies that might increase corporate punishment blind themselves. They accept that something must be done, but show little interest in the justification for and normative function of corporate criminal punishment.  And they neglect a scholarly history that reflects little imagination and innovation.

Prof. Mihailis Diamantis of Iowa Law School recently brought a fresh idea to theory in corporate criminal punishment in his article, “Clockwork Corporations: A Character Theory of Corporate Punishment” (103 Iowa L. Rev. 507 (2018)). We responded to his idea and offer a few concerns.

Diamantis focuses on “corporate character.” He argues that theories that focus on retribution or deservingness (“desert”) and those that focus on deterring crimes are well-worn. But he says there is a third theory – character theory – that we are neglecting.

Punishment in the mode of character theory is best illustrated by the classic movie and novel Clockwork Orange. Clockwork Orange exemplified an intrusive scheme of rehabilitation, whereby a prison tinkered with the behavioral dispositions of some of its prisoners in order to rehabilitate them. Usually this kind of rehabilitative punishment is rightfully rejected as a way to punish individuals, Diamantis argues, because any criminal justice system centered around such tinkering would be morally abhorrent. But we do not necessarily have the same kinds of worries, he says, about tinkering with the processes, policies, and mechanisms of corporate organization.

If we think of corporations as having character, which leads them to do good or bad — to lie or tell the truth, to break the law or follow the law – we can and ought to make the aim of criminal sentencing the imposition of evidence-based interventions to improve corporate character. If a corporation has an inadequate compliance program that contributes to wrongdoing, for instance, then we can say that the corporation in some sense had a bad character trait. The purpose of corporate punishment under a character theory is to correct that trait as best we can. And so punishment in such a case would not involve the exaction of fees, but rather the rehabilitation of the compliance program itself by court order.

In fact, Diamantis suggests that the corporate criminal law should eliminate fees altogether. Fees are in fact what prevent corporate punishment, says Diamantis, because prosecutors are afraid to exact economic losses upon corporations that are important to various social-economic functions. Prosecutors alternatively would be much more willing to require a corporation to reform some part of its organizational processes. Where fee-based punishment only encourages prosecutors to enter into deferred- and non- prosecution agreements with large companies, character-based punishment would only require them to have the will to fix what is broken. Diamantis asks us to imagine that corporate punishment is all about changing the corporation for the better – about, among other things, prospectively instituting measures to reduce crime going forward. In such a system, there would not only be far more corporate criminal prosecutions, but also less crime.

In our response to his article, we question whether corporate character theory is as distinct as Diamantis claims. He purports to offer a completely new theory of punishment, distinct from retributive approaches (rooted largely in Kantian deontology) and deterrence approaches (rooted largely in consequentialism). Instead, Diamantis argues, we should look to character, the origins of which are in Aristotelian or Humean virtue theory.

But we worry that Diamantis did not take the supposed virtue- or character-theoretic origins of the theory very seriously. His focus seems to be on the reduction of future crime. This is the standard aim of deterrence approaches, which in corporate punishment typically assess ex post fines as supposed disincentives for future crime. Diamantis also wants to prevent future crime, though has a different empirical hypothesis as to what kind of mechanism might work best. Instead of fines, he says, judges should tinker with organizational processes. This is fascinating and compelling, but insofar as Diamantis purports to offer a new theory of punishment, this kind of empirical proposal would not seem to suffice.

What kinds of tinkering specifically Diamantis has in mind, and whether they would have the effect predicted, is an open question. Previous critiques of rehabilitative approaches to corporate criminal punishment have worried about “the forced adoption of overly intrusive, unfair, or socially undesirable settlement terms,” especially if the DOJ pursues an absolutist outlook on the prevention of crime at the expense of overall economic efficiency or associational freedom [1]. Certainly this is a worry that needs to be addressed. But Diamantis does not offer much detail on the proposals that should be enacted, or for that matter a theoretical model that would assuage any public choice-economic worries about misaligned incentives. We argue that vague prescriptions for corporate reform are treacherous in a corporate criminal justice system. In the face of judicial lack of expertise and a pervading lack of evidence-based research on what actually works in preventing corporate crime, the worry is that a move towards character theory means a move towards requiring corporations to instill what are merely cosmetic programs and processes, spending money with the sole goal of insulating themselves from liability.

Our final worry is that all of this, like the doctrine of respondeat superior for criminal culpability, is built on a very questionable theoretical premise. If we do begin to take the virtue- or character-theoretic basis of character more seriously, is there really such a thing as corporate character? Virtue and character have been attributed exclusively to humans. Is corporate character completely metaphorical? Is corporate character just a novel rhetorical strategy fashioned exclusively to provide a merely facial justification for a new regime of deterrence-centered corporate punishment?

We applaud Diamantis for making us think more about the theory of corporate criminal punishment. We just want more reassurance that character theory is something new, something authentic, and something of substance.


[1] Wilson Meeks, Note, Corporate and White-Collar Crime Enforcement: Should Regulation and Rehabilitation Spell an End to Corporate Criminal Liability?, 40 COLUM. J.L. & SOC. PROBS. 77, 103—10 (2006)

This post comes to us from Matthew Caulfield, a PhD candidate at The Wharton School at the University of Pennsylvania, and Professor William S. Laufer at the University of Pennsylvania. It is based on their recent article, “The Promise of Corporate Character Theory,” available here.