1
Do You Think That The “Corporate Death Sentence” Should Be Available as A
Punishment for Corporations Found Guilty of Serious Criminal Offences?
Student’s Name
Instructor’s Name
Course
Date
Prepare for your exams
Study with the several resources on Docsity
Earn points to download
Earn points by helping other students or get them with a premium plan
Guidelines and tips
Prepare for your exams
Study with the several resources on Docsity
Earn points to download
Earn points by helping other students or get them with a premium plan
Description, earliest dates of use, law
Typology: Essays (university)
2020/2021
1 / 10
This page cannot be seen from the preview
Don't miss anything!
Related documents
Partial preview of the text
Download Corporate death penalty and more Essays (university) History in PDF only on Docsity!
Do You Think That The “Corporate Death Sentence” Should Be Available as A Punishment for Corporations Found Guilty of Serious Criminal Offences? Student’s Name Instructor’s Name Course Date
“Corporate death sentence” is a lawful process in which a court compels a corporation to cease to exist or dissolve completely; it is the revocation of a company’s charter for any severe harm that affects the society^1. The forced permanent termination of corporations incapacitates them from committing crimes in the future by disabling their activities. In my opinion, a “corporate death sentence” should not be available as a punishment for corporations found guilty of serious criminal offenses since it is an exceptionally harsh sanction that is irreversible. The sanction majorly impacts the corporate itself and society at large. Some of the sentence's adverse effects include losing jobs without notice to many innocent employees and completely ruining its reputation. Additionally, the sanction is extreme and can never compare to capital punishment, the death penalty imposed on humans. Since corporations are not live beings, while humans' right to life is their fundamental human right, the two cannot equate. Issuance of the corporate death penalty as a remedy for damages is only an instrument to secure corporate accountability and not thoroughly punish the corporates for their misconduct^2. Effects of the corporate death penalty on shareholder interests An ordinary shareholder is not involved in regular company operations^3 ; they rely on several other parties to safeguard and advance their interests. The other parties may include the corporation’s executives, employees, and board of directors. The shareholders elect the board of directors to govern and oversee the management and make a corporate judgment on behalf of the shareholders. Therefore, the board of directors is responsible for managing and protecting (^1) Diamantis, M. E., & Laufer, W. S. (2019). Prosecution and Punishment of Corporate Criminality. Annual Review of Law and Social Science, 15, 453- (^2) Watney, M. M. (2019). Corporate crime and criminal sanctions: a comparative analysis. (^3) Shashkova, A. (2019). Corporate misconduct in the view of prospective criminalization. Available at SSRN 3505990.
Criminal corporate behavior can cause harm with varying levels of intensity, ranging from material loss to death^7. Criminal corporate behavior is the conduct of employees on behalf of the corporation and is punishable by law. Such behavior includes; security fraud, insider trading, accounting fraud, bribery, embezzlement, tax crimes, criminal anti-competition, and cartel companies. Our lives are greatly affected by the activities of a corporation. Such behavior has consequences; social, economic, emotional, political, and psychological effects. Corporate criminals are hardly recognized; they disguise themselves well since they are the most respectable people of society. The impact of criminal corporate behavior is costly as compared to individual crimes. Consumers, the general public, and employees are the ones who bear the consequences of criminal corporate behavior^8. Businesses suffer when well-publicized scandals raise public awareness. Criminal corporate behavior triggers general frustrations; if the powerful evil prevails, the powerless remain hopeless, which erodes a community. This tendency shows how the harm caused by corporations is more lethal than individual crimes^9. Criminal corporate behavior affects a significant number of people as well as the whole corporation. For example, fraud results in adverse effects on investors' confidence, impacting the economy's growth. (^7) Hong, H. G., Kubik, J. D., Liskovich, I., & Scheinkman, J. (2019). Crime, punishment and the value of corporate social responsibility. Available at SSRN 2492202 (^8) Shashkova, A. (2019). Corporate misconduct in the view of prospective criminalization. Available at SSRN 3505990. (^9) Virk, G. K. (2019). Pervasiveness of Corporate Illegality: The Effects of Board of Directors Characteristics. Journal of Commerce and Accounting Research, 8(2), 59.
Criminal corporate behavior threatens social welfare^10. Corporates influence various community activities; hence, their actions affect a wider part of society than individual crime. A societal market that operates on evil practices eventually results in difficulty to have simple business operations. For example, an organization that evades tax has a lower cost of products, discouraging a genuine business entity from producing higher-cost commodities. Such behavior makes those business operations that do not deserve extra money continue spending illegal money and saving the surplus in countries overseas, negatively impacting the economy. Unsafe products and environmental threats can cause death and injury to the people of society^11. Such consequences result from illegal corporate actions. Using hazardous materials to produce goods increases health risk problems for consumers. Criminal corporate behaviors tend to be labeled as non-threatening since they are committed mainly by the upper class. The stereotypes render people of society vulnerable to criminal corporate behavior. Such behavior is difficult to curb since the elite commits them and the well-educated and remains a threat to society^12. Criminal corporate behavior damages social relations. Violation of trust, societal morals degeneration, and social disorganizations result from such actions. Corporate criminal behavior defers with individual crimes whose impacts on social institutions are much less severe. (^10) Virk, G. K. (2019). Pervasiveness of Corporate Illegality: The Effects of Board of Directors Characteristics. Journal of Commerce and Accounting Research, 8(2), 59. (^11) Cohen, M. A. (2019). Punishing corporations. The Handbook of White‐Collar Crime, 314- (^12) Hong, H. G., Kubik, J. D., Liskovich, I., & Scheinkman, J. (2019). Crime, punishment and the value of corporate social responsibility. Available at SSRN 2492202
alongside the corporation which is unfair. Furthermore, alternative penalties provide for the compensation of victims of a wrongdoing while a corporate death sentence does not. In a nutshell, alternative penalties promote lawful corporate behavior better than corporate death penalty. . Whether incorporation is a privilege or not Incorporation is the lawful process used in the formation of a corporate entity. It is the method that a corporation officially becomes a being and formally organized^15. This legal process involves drafting the “articles of incorporation” listing the purpose of the business, its location, and the number of shares and stock classes to be issued. When a corporation is incorporated, it means that the entity has decided to separate from its owners and members. This separation is the separate legal status^16 ; it is the main reason for companies' incorporation. The doctrine of separate legal status demands that a company is a separate legal entity that differs from other companies in a corporate group. The company becomes a ‘person’ with its rights, which are distinct from its owners’ rights by the law. Limited liability comes as an advantage of incorporation. Limited liability means there is a limit to the shareholders' legal responsibilities; claims against the company, payment is by the company’s assets and not the shares of the shareholders and owner’s assets^17. Limited liability aims to protect the shareholders under the ‘corporate veil.’ The principle of limited liability is how companies assemble capital through the sale of shares having shareholders at risk of (^15) Hern Kuan, L., & Ooi, V. (2020). Genuine Incorporation or Tax Avoidance? The Business Times, 21. (^16) Hessick, F. A., & Fisher, E. (2019). Structural Rights and Incorporation. Ala. L. Rev., 71, 163. (^17) Kashyap, A. K., Jaswani, U., Bhandari, A., & Dixit, Y. S. (2019). An Introduction to Corporate Insolvency Law and Reforms in Australia. In Corporate Insolvency Law and Bankruptcy Reforms in the Global Economy (pp. 107-131). IGI Global.
unlimited liability. In insolvency or liquidation, the owners, managers, shareholders, and directors, the principle of limited liability protects them from personal liability. Incorporation is a privilege because it protects the holders’ assets against any company liabilities. Incorporation helps raise capital by selling stock and receive lenient tax restrictions on operating loss carryforwards. Incorporations also allow the transfer of ownership from one party to another to be more accessible. Additionally, it also achieves low tax rates as compared to personal income. Incorporation creates a corporate veil that shields the company’s directors and shareholders; risks taken for possible growths do not expose the owner’s shareholders and directors to personal financial responsibility from the corporation's original investments. Conclusion The corporate death penalty is currently available to courts for serious corporate offenses. Persistence misconduct of the corporations costs them the forfeiting of their rights to profit and ownership. Therefore, in my opinion, the risk of suffering a corporate death penalty ought to motivate a company to employ good governance mechanisms to protect its investments. However, criminal business activities continue despite the corporate death penalty being in place; companies achieve their evil goals through corrupt means, which causes harm to the environment, people of the society by violating their human rights. I do not think the corporate death penalty should be available as a punishment for corporations found guilty of serious crimes because it may make victims vulnerable. Besides, some alternative sentences that promote lawful corporate behavior, such as hefty fines, may be like a corporate death penalty. However, some of the alternatives like public reporting serve as a tool to promote lawful corporate behavior to prevent damage and loss to both the company and society.