The traditional mechanisms for ensuring corporate accountability – civil, regulatory, and federal criminal – are failing. At the same time, industries that generate great economic value are inflicting a great deal of harm.  This moment calls for effective reforms that are insulated from the forces that have hobbled federal oversight.

In a recent article, we examine this federal retreat and propose a revitalization of state criminal law. Where the facts show that a corporation has harmed the public and, in doing so, violated a state criminal statute, prosecutors can and should bring corporate criminal cases under existing state law.  Instead of relying on ineffective fines and monitors or drastic measures like dissolution, prosecutors should require enduring governance reforms, leveraging state chartering authority to align the firm’s profits with the public good.

Collapsing Corporate Accountability

Across varied congressional majorities, Supreme Court majorities, and presidential administrations, every branch of the federal government has expanded corporate rights and curbed regulatory power.  Weakened regulations, judicially created barriers to civil litigation, and amplified corporate political influence have created an environment where essential accountability mechanisms are increasingly compromised or dismantled.

The Supreme Court has erected layers of legal barriers to corporate accountability.  Building on earlier precedents, the Court has opened up corporate political spending, overturned decades of deference to regulatory experts, and heightened pleading requirements for injured plaintiffs.  Those legal developments fueled feedback loops, braiding politics and unaccountability together across powerful corporate sectors.

Recent examples include the fossil fuel industry’s financial engagement in the 2024 election cycle, which was soon followed by a massive federal effort to give that industry every possible advantage.  What just a year ago looked like the beginnings of a real federal effort to address the deadly effects of climate change now appears dead on arrival.

Likewise, large donations have earned big tech companies and the cryptocurrency industry various regulatory and enforcement pauses and rollbacks.  Similarly, structural changes to federal enforcement agencies have depleted enforcement resources, from the fading power of the Environmental Protection Agency, the Securities and Exchange Commission, and the Consumer Financial Protection Bureau, to the closure of the Department of Justice’s Consumer Protection Branch.

This great accountability retreat creates an imperative with few obvious ways forward.

The Resilient Power of State Prosecutors

State criminal law offers a promising path.  State criminal codes prohibit a wide range of corporate conduct that endangers or harms the health and safety of the public.  And, while we do not aim to point fingers at any particular bad actors, major headlines regularly report on deaths and other serious injuries caused by unchecked pollution, technology, and greed.

In contrast to federal oversight, the core authority of states to enforce their own criminal laws remains largely intact and uniquely resilient both to recent decisions gutting federal regulatory power and to preemption.  Furthermore, criminal penalties reflect powerful moral judgments, and they offer opportunities for tailored rehabilitative measures targeting specific criminal conduct, rather than a generally applicable rule for an entire industry.

Proving causation and mens rea beyond a reasonable doubt – especially for diffuse harms – can be a challenge.  But many statutes criminalize reckless endangerment, which lessens the causation burden by shifting the focus from proving discrete harm to proving the disregard of substantial, known risks. Moreover, establishing corporate intent is facilitated by approaches such as the “collective knowledge doctrine,” which aggregates the knowledge of individual employees within complex organizations. The proof challenge ultimately underscores the vital role juries play in our legal system, expressing a public view of the proper allocation of responsibility for corporate harms in that state.

Of course, before getting to a jury, a case must begin with a prosecutor.  Our proposal envisions a coalition of what one might call the “Problem-Solvers Caucus” of state attorneys general and district attorneys.  As society’s problems grow more intractable, that coalition should take up its public duty to enforce the criminal law to promote the public good.

“Punishments” That Promote the Corporate Good

One criticism of our proposal may be that the traditional tools of corporate criminal enforcement – fines, compliance programs, and monitorships—have proven ineffective.  Despite years of corporate criminal charges, harms and incentives are little changed, and what enforcement exists has become part of the cost of doing business.

We propose a different approach that can succeed where other methods have failed: mandatory incorporation of a state-chartered public benefit subsidiary with enforceable commitments relevant to the state’s interests. This would substantially improve on traditional compliance monitorships. A charter change fundamentally alters the corporation’s fiduciary duties and legal mission – a permanent structural change – unlike temporary monitoring. Furthermore, this approach is distinct from voluntary PBC adoption (often criticized as “greenwashing”) because it is a criminally mandated penalty, with detailed enforcement hooks tailored to the specific harm.

As the Supreme Court has said, “[n]o principle of corporation law and practice is more firmly established than a State’s authority to regulate domestic corporations.”  The proposal thus respects federalism, empowering states to exercise their undisputed authority over both public safety and public charters.

Profit and the Public Good Can Co-exist

Our approach builds on the resilience of state criminal and corporate law to respond directly – but also productively and flexibly – to systemic accountability failures.  Whether charges are followed by a trial, a plea, or a deferred prosecution agreement, prosecutors could require a corporation that is criminally liable for causing harm within the state to conduct its future business operations within that state through a newly formed or restructured subsidiary chartered as a public benefit corporation.  Community service has long been a component of criminal sentencing.

Corporate restructuring would target root causes by fixing governance and incentive structures, while preserving value by sparing the company rather than destroying it.  Following the adage that the punishment should fit the crime, a given public benefit purpose could specifically address the harm a given corporate defendant caused (e.g., environmental remediation, consumer transparency, or product safety).  Our article walks through hypothetical examples of how that could work in practice.

Prosecutors are understandably reluctant to squander the significant social and economic value that corporations create and to damage the livelihoods of blameless employees.  But that should not mean turning a blind eye to the real harms corporate conduct can sometimes inflict on people.  When a corporation abuses its state-granted privileges by engaging in criminal activity that inflicts substantial harm on a state’s residents or environment, the state should intervene.

The erosion of federal oversight has created a dangerous vacuum, but it has also created an opportunity. This moment calls for a bold reimagining of corporate accountability, one that revives states’ foundational role in shaping corporate purpose. The path forward lies not in waiting for a defunct federal system to be rebuilt, but in activating the latent power of state criminal law.

Donald Braman is an associate professor, and Theresa A. Gabaldon a professor, at George Washington Law School. Cindy J. Cho is a lecturer at Indiana University Maurer School of Law. This post is based on their recent article, “Reconstituting Corporate Power & Accountability,” available here.