Economics Of Corporate Crime And Criminal Liability

It is after the Guide for the Corporate Criminal Trial imposing severe punishment for harmful conduct by corporations was enacted by US government in early 1990s, that the corporate crime and the criminal liability emerged as an economic issue for the first time. Inevitably, it stirred up discussion among jurisprudents and economists. Topics concerned mainly focus on: 1) Given that the immediate offender is not the full beneficiary of the crime, why would the criminal choose to commit that crime in the content of corporate contract series, what factors induce this corporation, but not others, to commit that crime? 2) Given the possibility of corporate crime, what should be included in the measurement of the damages arising from the crime, especially the damages by the corporations or their agents on the society (not just to the victim alone). Particularly, whether the spillover effect exists in the criminal behavior of the corporations or their agents. Were it the case, how to determine damages on the third party. In other words, what would be our view on the externalities of the crime by the corporations or their agents. 3) Given the possibility of corporate crime, or the fact that the crime has already been conducted, who should be the bearer of the punishment. More importantly, punishing the corporation as a whole would probably cause some innocent people to tolerate increased cost. Under such situation, the problem further extends to whether the efficiency base still function. Or, there might be other forms of liability available. 4) Given the fact that the crime has commit, or there is the possibility of corporate crime, which form of liability would achieve the highest efficiency. The forms of liability include: corporate criminal liability, corporate civil liability, managerial criminal liability, managerial civil liability, and other mixed forms of liabilities.Our retrospective documentaries indicate that nobody has solved this issue within the standard economic framework in spite of opinions of jurisprudents and economists from various points of view. On the other hand, the increased of corporate crime in China, along with the ambiguous discussion in the jurisprudence, also necessitates the new approaches as opposed to the traditional jurisprudential theories. Actually, facing such a behavior group as corporate crime, economists should not keep silence even though there is no the excuse to question the ability of jurisprudence. In order to work out the reason for corporate crime and the appropriate legal liability should be attached for the harmful behavior conducted, a unified logical framework should be implemented under the contract theory hypothesis. In the hypothesis, corporation is a contract series; when the contractor does not assume full liability for its criminal behavior, crime is likely to incur. Initially, a legal structure without corporate crime is provided, in other words, law itself will not enforce criminal liability to the corporation. Any harmful conduct by corporation, which would entail wealth transfer, is viewed as a higher risky project engaged by insiders. The transferability of risk through the contract chain constitutes the main incentive for insiders to commit the crime. Then, accounting for the reduction of the contract residual from riskier project, when the contractor realizes that the counterpart would commit the crime, but the corresponding damage would not shrink the contract residual to zero anyway, the contract would not be broken. Such a balance procedure would continue accompanying with the "yields" mechanism.Before proving arid applying this hypothesis, some assumptions have to be made: 1) as a series of contract, difference in economic arrangement exists between the corporation and normal company legal entity, which help us to understand the nature of corporation. In this article, it is argued that the independent contractual position of managerial function as that of other factors, resulting frombeing isolated as an element, is the most important c...