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Corporate Crimes: An Introduction

Article  in  SSRN Electronic Journal · September 2012

DOI: 10.2139/ssrn.2148235

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 Corporate Crimes– An Introduction*
Introduction

The day to day routine activities which we conduct for our well being and livelihood are
impacted by business activities to a large extent. To a large extent businesses make available
groceries, water, necessities and other requirements for everyday living. These companies create
wealth for the economy, their shareholders and simultaneously offer employment for much of the
population. Apart from revolutionary restructuring and political institutions of the country, it is
certain that the power and influence of companies will increase and not shrink in the probable
future.

But with the great power comes great responsibility. It is the duty of any company not to harm or
injure others in the society without justification, not to exterminate water and food, not to pollute
the environment including air, water and soil, not to permit the workplaces to put in danger the
lives of their workforces or the public and not to trade commodities or provide transport that will
endanger harm the people. And if any of the companies do not heed their duties, that company
will be called a corporate criminal.

“In criminology, corporate crime refers to crime, misdeed or wrong committed either by a
corporation, or by individuals that may be identified within a corporation or other business
entity”.1 Corporate crime has a wider and long term effect on society than any other crimes.
Corporate crime damages the society by social, economical and political consequences and gives
a boost to other types of street crimes. “Big companies that are criminally prosecuted represent
only the tip of a very large iceberg of corporate wrongdoing”.2 The ones which are not held
responsible or are not visible and continue exercising their power without any lawful action or
obstruction.

“From misappropriation of funds, stealing of equipment and data, business system and causing
other disturbances at the cause of losing sensitive business information and serious
misrepresentation, organizations have to be careful about and keep a strict check and control on a
large variety of risks. Crimes or frauds by the corporations adversely affect to their own
reputations and create havoc in the society as well.

Today the world is facing a global problem of corporate crimes being committed and it has
become necessary to control such crimes if a company has to sustain itself in a cutthroat
competitive world. It is a big challenge for the justice system as well as the government to
control corporate crimes in the country as it impacts the economy of the country in many adverse
ways, which results in hindering the overall growth. At present almost all the countries are
concerned about corporate accountability as wide range of groups are undertaking and
campaigning on related issues like labour problems, human rights, environment pollution,
economic and social growth and employment.

*Asha B Joshi, freelancer, can be reached at ashajoshi24@gmail.com

1
www.sukip.com/Others/Welcome_to_the_corporate_world - 39k
2
http://blogs.myspace.com/index.cfm?fuseaction=blog.view&friendId=339028226&blogId=402944735
“Corporate crimes committed across the continent include vast range of industrial as well as non-
industrial activities in various sectors which clearly points towards the need for greater control,
monitoring and accountability over these activities”.3

Definition and Meaning of Corporate Crimes

The Oxford Dictionary defines Crime as “An act punishable by law, as being forbidden by
statute or injurious to the public welfare … An evil or injurious act; an offence, sin; especially of
a grave character”.

Corporate crime in general can be understood as any act or behaviour committed by corporates
which is either prohibited or restricted under law. It can result into any form of physical,
economical, mental, social or moral harm to the victim.

Corporate Crime known and identified by several different names like “Corporate Frauds”,
“Business Crime”, “White-collor Crimes”, “Corporate misconduct”, “Corporate misbehavior”.
Corporate Crimes can take a turn out to being harmful to the environment, employees,
consumers or society at large.

This shows that there is no simple definition of crime therein as society is the breeding ground
for criminals. Though crime cannot be completely eradicated from the society its frequency can
be reduced by adequately organizing, detecting, planning and enforcing relevant measures.
Education should be made compulsory and easily accessible and a proper employment plan
should be implemented. In addition, the judiciary should be made fair, quick and impartial so
that effective punishment and sanctions which act as deterrents can be worked out. The media
must realize its role and encourage strong moral values in every class and sector of the society
today.

“The systematic study of the reasons, anticipation, power, and severe reactions to crime is called
criminology. For these intentions, the explanation of crime depends on the speculative posture
taken.”4 The life of crime could be viewed from either an official or normal viewpoint. “A
legalistic description comprises general law or the ruling codified in the laws endorsed by the
superior government”.5 Therefore, a crime is a situation where any wrong, malafied, immoral act
or oversight behaviour is performed which is banned by law and penalized by the State it is
obviously a crime.

A normal definition analysis which considers crime as abnormal behavior against the existing
norms, exclusively, cultural standards and law recommending how humans ought to conduct
themselves. “This approach judged the multifarious realities adjacent the idea of crime and
request to recognize how shifting social, political, psychosomatic, and economic circumstances
may have an effect on the current definitions of crime and the structure of the official, law

3
Corporate Crimes, 2002, Green Peace International, http://www.greenpeace.se/files/1500-1599/file_1587.pdf
4
www.blurtit.com/q288238.html - 59k
5
ibid
enforcement and penal reactions made by the State”.6

The norms which decides whether the act committed is a crime or not come in different forms.
“Potentially criminal acts can be judged against formal moral systems, like religious beliefs
customs and traditions. Alternatively, some legally-defined crimes might not be acceptable when
judged against the norms, codes and conventions of socially-acceptable behavior”7.

Keeping small amount of money found on the road is believed as a good luck; in most of the
offices it is assumed that employees use some of their personal requirement of stationery from
the office cupboard. Thus, corporate crime is left unseen, unidentified and is very difficult to set
out the norms to identify the occurrence of the same.

Categorization of Crime

The Figure 1 below represents corporate crimes divided into main types which are conservative /
traditional crimes include violence for example rape, battery, assault, robbery etc.; where as the
behaviour in occupational or organizational structural crimes is observed as totally different
wherein the crimes committed involves person from high societal background. The occupational
crimes consist of illegal behaviour in a legal set up usually referred as ‘white colour crime’ as it
is committed by individuals doing their duty. Occupational crimes usually are crimes or illegal or
wrong doings by the individuals in a legal business set up to achieve a desired goal by any
means. Usually when we refer to organizational wrongdoings they are committed by persons
enjoying high power and authority.

Figure 1: Categories of Corporate Crimes

Corporate
Crimes

Conventional Occupational Organizational

Crimes Crimes Crimes

Compiled by: Asha B. Joshi

6
www.blurtit.com/q288238.html - 59k
7
http://thejournal.parker-joseph.co.uk/blog/_archives/2008/9/22/3895603.html
“White collar crime may be defined approximately as a crime committed by a person of
respectable and high social status during performing his duty”. 8 White colour crimes are
committed either by an illegal behaviour or by omitting lawful act for achieving beneficial
objectives. There are innumerable types of white colour crimes and schemes prevalent across the
business world which trembles the trustworthiness of the people, doubts the very existence of the
corporation, unsecured investments and creates atmosphere of fear and insecurity. Some of the
fundamental corporate crimes which are registered in business world are briefly discussed below:

Profit-Driven Crime
Corporations many a times embark on malpractices like fake or forging financial statements,
misappropriation of accounts and cash balances, false sales, adulteration, etc. where the focus is
mainly on earning profit or maximization of profit. Criminology always prosecutes the wrong
doer, the individual offender for his wrongful act or behavior. As the individual offenders are
commonly treated alike under the existing criminal law and no specific regulations or sanctions
can be established against them for causing the harm.

Predatory Crimes:
"The term 'predatory' means an act directed at a stranger, or a person with whom a relationship
has been established or promoted for the primary purpose of victimization.9 Predatory crimes
involve redistribution of existing wealth, bilateral and void transfers and declaring false losses.

Market-based Crimes:10
The market driven crimes include offences related to production and distribution of goods or
services illegally. Either the exchange is false, inappropriate or is illegitimate right from the
initial stage. Understanding the market-based offences further it can include wrong doings
encouraged by regulatory restrictions; tax driven and some which result from prohibition.

Commercial Offences:
Commercial crimes involve producing goods and services but the process used to produce is
illegal, these crimes are committed by legitimate entrepreneurs, investors and corporations. Some
examples are insider trading, illegal dumping, discharging toxic waste, violating safely and
health rules, etc. These are crimes which basically intend to increase revenues.

Social Offences: Various kinds of corporate behavior which are noticeably harmful to society
are as follows:

Misleading advertisements: Regularly the newspaper are filled with attractive,

diversified and misleading advertisement to misguide the public and increase the market
share
Environmental Harm by corporations: Corporations are in numerous ways contributing
to polluting and degrading the natural environment. There are several cases of

8
Supt Lim Hong Shuan, 2007, “White-Collar Crime In Malaysia”,
mpk.rmp.gov.my/journal/2005/whitecollarcrime.pdf
9
www.legalappeal.co.uk
10
http://www.justice.gc.ca/eng/pi/rs/rep-rap/2002/rp02_12-dr02_12/p3a.html
 environment pollution where the corporations are proved victims and receive sanction
from the court of law to compensate and restore the environment.
Adulteration and Black Marketing: “products such as food drink and cosmetics that are
dangerous to the health and safety of human beings. The news of using forbidden
materials as well as chemical solutions such as saccharin can be found in the
newspaper”. 11

“Referring to corporate crimes and wrongdoings as all the offenders are treated equally under a
common criminal code, there is least reason to investigate and differentiate between the causes
and consequences of economic wrongdoings and contract killing, smuggling illegal goods, etc.
Yet it is promising to categorize profit-driven crimes into several distinctive economic categories
without any confusion regarding the intention, involvement or the social origins of the
offender”12.

Detection of Corporate Crime

“It is difficult to define the relevant contents causing economic crimes, wherein various
opportunities are disregard under law which are in the interest of the enterprise and are followed
or practiced”.13 Referring to all the available definitions a type of criminality is emerging which
is different from that committed individually by people in business for their own individual
benefit. Corporate crime involves criminal offence by a “legal person” and as corporations is
given a personal legal entity. Currently attempts are being made to include these activities under
criminal offences. If the new regulations are enforced within the framework of the current
thinking about corporate crime it will include investigation, involvement of police and further
jurisdiction problems.

The setting up of laws and regulations pertaining to corporate crimes can be connected to
development of Criminology as law. Corporate crime policing is, nonetheless, a relatively new
activity, especially in present circumstances where we are expecting to impose regulation for
"corporate crime". “Together with this the police are also faced with a fairly new task of dealing
with the most complex part of commercial crime”.14 While dealing with detection and
investigation of corporate crimes the police face many problems like suppressing, limiting or
falsification by which the corporate crime becomes invisible and unidentifiable. This increases
the difficulties in controlling the phenomenon which is not categorized, is conventional and
unidentifiable whereas it has been in existence over several decades.

Seriousness of Corporate Crimes:

Corporate Governance, Ethics and Corporate Culture

Corporate governance can be assessed by the behaviour of the corporate when there is no one to
supervise, control or check. Corporate governance mainly confer with how the corporate is run

11
http://www.aic.gov.au/publications/proceedings/12/soesanto.pdf
12
http://www.justice.gc.ca/eng/pi/rs/rep-rap/2002/rp02_12-dr02_12/p3.html
13
Janez Peèar, 1996, Corporate Wrongdoing policing, http://www.ncjrs.gov/policing/corr299.htm
14
ibid
and whether it is complying with local and international laws, transparency and accountability
requirements, ethical norms, along with the other existing environmental, social and political
code of conduct. Corporates engagement in society with honesty, transparency, innovation, is
looked upon by the business leaders carefully along with social and environmental responsibility.

The values which are to be implemented by the corporations as a part of their responsibility
towards the community and successfully sustaining its existence can be the most prominent
requirement of good corporate governance. “Accordingly to the words of the German
philosopher, Immanuel Kant, “ethical behavior” means an act of an individual inspired not by
fears of punishment or by opportunistic hope of rewards, but rather by his own consciousness,
“in such a way to treat mankind, either himself or the others, as an end and never as a mere
means to achieve an end”.15

When the concept of ethics broadly applied in the field of corporate ethics it can be accounted as
concepts like “Company’s Social Responsibility”, “Corporate Accountability” and “Corporate
citizenship”. Businesses usually take into consideration the basic ethics which includes
autonomy, honesty, justice, mutualism, moral integrity and no harm. All these are to be strictly
incorporated into the functioning of the corporates for maintaining the transparency,
accountability and avoid any disparity. Thus, we can say that corporate ethics should be looked
at as a basic and modern business practice to be pursued by corporations.

Corporate Social Responsibility means the capability to perform its business activities in full
respect for the justifiable interests of its associates, followers, owners and costumers, as well as
in protecting and preserving environmental resources for future generations. The proper
communication of values, norms and morals is important in preventing crimes by stimulating and
discussing the ethical limits, sensitizing for ethical values, alerts about legal limits and evoking
effects of self bonding.

Corporate accountability addresses the issues which are closely beneficial for a sustainable
development of economy as well as ecology. “Corporate crimes committed around the business
world vary from corporation to corporation according to its size, intention, objective, range of
activities, sector wise functioning (e.g. chemicals, forestry, oil, mining, genetic engineering,
nuclear, military, fishing, etc.). As the area is huge and clearly points towards the concern and
need for greater check, control, monitoring and accountability of corporate activities.”16

The Criminal Responsibility of Corporations

All over the world crime committed by an individual is recognized under the criminal law and
adequate sanctions are applied. But, the criminal responsibility for a Corporation is not yet
specified, which needs quick and strict attention, implementation and enforcement. “Clinard &
Yeager (1980) stated that 'a corporate crime is any act committed by a corporation that is
punishable under administrative, civil or criminal law’”. 17The two fundamental assumptions

15
Ethics and Business, 2004.
16
Geeta Narula, “Corporate Criminal Liability In India: An Information Technology Perspective”, www.naavi.org
17
ibid
considered under criminal law are - mens rea i.e. guilty mind and the principle of vicarious
liability where the act by corporation or the agent is done with a guilty mind and intention.

Defining responsibility

Responsibility can be defined as sensitivity, awareness, obligation, power and authority to

manage and organize. By enforcing corporate social responsibilities (CSR) companies
materialize to get connected with stakeholders, but without handing over any additional duty to
them. At present, most of the companies have replaced their ‘duties’ by ‘commitments’ which is
followed mandatory.

“By being responsible the corporations claim credit for positive or simply less harmful actions
without taking on any further obligation. The scope of a company's 'responsibility' is therefore
self-defined and not socially defined”. 18 As the corporate responsibilities cannot be measured, so
the value can be assigned arbitrarily and as per the need and requirement. Corporate Crimes are
either committed by the operating officers’ in charge who enjoy a good position and has powers
and authorities or they are committed by the corporation itself.

In addition, it can be stated that 'corporate crimes are the offences committed by corporate
officials for their corporation and the offences of the corporation itself' (Clinard & Quinney
1973). As mentioned previously, since the enactment of Act no.7/1955, criminal responsibility of
corporations has existed but in practice the Criminal Court has never recognized or applied the
legislation. There has been a tendency to assume that only human beings who handle and
organize a corporation can be viewed as offenders against the stipulations (Reksodiputro 1989).

The reasons for that are

 Referring to the universal principles under the Criminal Code it is strictly believed that
natural human beings who exist on the earth are only capable of committing an offence
and as a corporation does not exists naturally cannot be proved legally sanctioned as an
object of any criminal responsibility;
 The existing legal system is unable to deal with and fix on the controls of the criminal
misbehaviors or fails to address the concerns about criminal responsibility of a
corporation.
 There is no availability of the experts to analyze, research and further provide the
theoretical and practical solutions about corporate responsibility.

Corporate Crime and Law

In the modern day world, the impact of activities carried out by the corporations is tremendous
on society. In their day to day routine activities, they do not only negatively affect the lives of
people but at times also take up unsafe, careless and disastrous practices which can be identified
as criminal behaviour. For instance, the Uphar Cinema tragedy, the oleum gas leak incident, the
Bhopal Gas leak case, the mine explosions, the Chernobyl nuclear disaster or thousands of such
scandals can be within the categories that require immediate concern. “Despite so many
18
Can a corporation be socially responsible? http://www.corporatewatch.org/?lid=2684
disasters, the law was reluctant to impose criminal liability upon corporations for a long time.
This was for basically two reasons that are”:19

 That corporations cannot have the mens-rea or the guilty mind to commit an offence; and
that corporations cannot be imprisoned, the only other remedy being left is that of fine which
merges criminal liability with that of a civil one.20

 Addressing corporate crimes in the court of law and fixing the sanctions and punishments
have always been difficult as it is always confusing whether to take up the trial under the
civil or criminal actions as it is particularly problematic.

Civil actions involve:

1. Immoral actions by one individual against the other;
2. Seeking compensation for the damage or harm caused
3. Processes and strategies require proof of evidence.

Criminal actions involve:

1. State or any of its agency’s act against the individual;
2. loss of life and liberty can be the only punishment
3. High amount of evidence and proofs are required to prove the consequences.

The criminal law jurisprudence has failed to a larger extent in relation to impose criminal
liabilities on corporations and take final decision on the point that corporations can commit
crimes and hence be made criminally liable. The recent financial scam amounting to Rs. 7000
crores at Satyam Computers in India has left various stakeholders trembling and the confidence
of the internal as well as external stakeholders shaken which has left negative impacts on Indian
companies. The court is yet to prove charges against Ramalinga Raju the founder chairman of
Satyam Computers, the head wrongdoer behind the scam even after four months at the time of
writing even after his open admission. This shows a crisis in corporate governance, law
enforcement and inefficiency in audit systems.

A clear understanding as to how and in what ways the corporations can be controlled, held liable,
offences proved is simply portrayed in Figure 2 below and followed by detection, check, control,
strict actions and sanction against the corporations that can be strictly held liable under
prescribed law.

19
Singhvi Angira, 2006, “Corporate Crime and Sentencing in India: Required Amendments in Law”, International
Journal of Criminal Justice Sciences, Vol 1, Issue 2 July 2006
20
www.geocities.com/ijcjs/angira.pdf
Figure 2: Controlling Corporate Criminality

Adverse
Publicity
Orders

Community Rehabilitation
Service and
Remedial
Orders
Orders

Controlling
Corporate
Criminality

Penal
Sanctions
Beyond
Fines Punishment
Penalties
Restraint
Oriented
Sanctions

Compiled by: Asha B. Joshi. Source: webjcli.ncl.ac.uk

Corporate Crime Policing As a New Challenge

“Understanding, explaining and introducing policing has in recent years, in the majority of
contemporary police institutions in post-industrial societies, become one of the major themes of
their operation”. 21 The concept of corporate crime which is theoretically far from being
understood and wherein the application of new "philosophies" are involved frequently which
leads towards further dilemma in the understanding. In the existing social community, the role of
the police is usually observed as altogether inconsistent and doubtable which results in depiction
of inefficiency in solving and handling the issues of crime. Police are viewed by people as
dutiful supporters or as those who provide moral assistance to fight the battle and help them in
seeking justice.

But when it comes to corporate crimes the most problematic area for police is exclusively
identifying and detecting the involvement of individuals committing corporate crimes wherein
many commercial transactions, organized or white collar of criminal nature are involved. It is
problematic especially because it is unreachable and generally unprosecutable as which is also
21
Janez Peèar, 1996, Corporate Wrongdoing policing, http://www.ncjrs.gov/policing/corr299.htm
 the result of the different understanding of corporate crime in different manner by almost all the
countries across the world. Despite the fact that corporate crime has been known in criminology
for more than half a century, attitudes towards it have not yet changed much.

Corporate crime does not include the activities undertaken or committed by lower classes, but
rather it is committed by the special, group interests, involved with the offenders trying to
achieve and maintain the "company's" welfare through illegal methods and at the disadvantage of
others. This circumstance becomes more important and difficult to investigate where there is
greater collective accountability and an individual performs a daring offence. “For this reason,
dealing with corporate crime does not concern only policing but is also a question of justice and
equality of people before the law”.22

According to a well known criminologist Donald R. Cressey, a new kind of policemen known as
‘corporate policemen’ are required to detect and control corporate crimes and other wrong
doings of the corporations. “This is particularly necessary as the corporations are capable of
protecting themselves against the dishonor for offence, and they are able to commit various types
of damaging activities which bring them various advantages - if not net profit, many other hidden
and indirect benefits acquired through using unlawful means”. 23

Corporate crime is an important challenge not only before police but also for the justice system
and other government authorities and departments. This should be treated as important in
particular because of relatively new prospects, concerns and battle against crimes committed by
the corporate elites which are focused on high earnings by ignoring law and misusing corporate
powers. Corporate crimes incur societal and physical costs like death, injuries, accidents, unsafe
working atmosphere, inadequate training and improper safety equipment, etc.

Conclusion

Traditionally the criminal justice system has failed to play its role in sentencing the corporate
misbehaviors. Corporate Crimes critically affects the individual, society and environment and are
more dangerous than street crimes. There should be adequate provisions made under the law to
provide and address the issue of criminal responsibility of corporations. Adequate research work
is required to be undertaken and appropriate provisions and regulations need to be implemented
by active participation of government, judiciary and other departments to prevent corporate
crimes.

The challenge here lies before the criminal justice system in understanding, detecting the
circumstances under which the wrongdoing, misbehavior and businesses interact for incurring
mutual benefits. Adequate amendments must be made and correctly implemented and enforced
for avoiding the further possibilities of corporate crimes being committed. Corporations must
morally adopt follow the theory of global corporate citizenship followed by corporate
philanthropy which adds value for the corporation and practice affirmative action with society at
large.

22
ibid
23
www.ncjrs.gov/policing/corr299.htm

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