Criminal liability is one of the central aspects of a democratic system, assuring that wrongdoers will be punished for acts committed against the society as a whole. Criminal law has an important role to play in regulating the behavior of individuals, ensuring they abide by criminal law and are criminally responsible for their acts.
As such, a corporation is a legal person and thus criminally liable. This has some negative aspects. Notably, innocent shareholders may bear some cost of the serious criminal offences committed by their company, in that share prices may suffer. Nevertheless, this essay argues that even though holding a company liable for crimes can be costly to shareholders and creates negative externalities, the broader advantages arising from such a policy allows one to say it is efficient.
To demonstrate this statement, this essay will argue that corporate liability is a beneficial policy in the sense that its advantages outweigh its disadvantages. It will then focus on the shareholders to show that even if they suffer from the crime, this burden is legitimate to a certain extent and they are not the only one to bear the cost of the offence. It will focus on the UK context but will also refer to other legal jurisdictions where relevant.
[...] He/She can first suffer from personal criminal liability. But most importantly and more relevant to our subject, he/she will probably suffer from the condemnation of the firm by losing his/her job or being set aside. Thirdly, as briefly mentioned above, a broad range of people is going to be indirectly accountable for the corporate offence. Other constituencies, such as creditors, employees and consumers feel the cost of the corporate crime more critically than shareholders, because of what has been described as an “overspill problem”. [...]
[...] Criminal liability of corporations: A counter-productive policy? Is holding a corporation liable for the commission of a serious criminal offence a counter-productive policy which serves only to punish innocent shareholders? Introduction Criminal liability is one of the central aspects of a democratic system, assuring that wrongdoers will be punished for acts committed against the society as a whole. Criminal law has an important role to play in regulating the behaviour of individuals, ensuring they abide by criminal law and are criminally responsible for their acts. [...]
[...] Mayer and A. Polo, Regulatory Sanctions and Reputational Damage in Financial Markets, Oxford Legal Studies Research Paper No 62/2010 Salomon v A. Salomon & Co Ltd, [1897] AC 22 John C. [...]
[...] Criminal law is especially concerned with these. Indeed, it is the role of the government to set forth strong means to contend with serious offences. As a result, the legal system has to be seen as fighting against harmful conduct. Holding companies liable for serious criminal offences is a way of stressing the importance of fighting against such crimes. It reinforces the confidence of the citizen that the legal system is fair. Thus, criminal policy is seen as being legitimate, making its enforcement easier. [...]
[...] Finally, it has been demonstrated that financial penalties imposed on corporations may sometimes have just limited consequences on the value of the shares. Indeed, such penalties do not always affect the company above the price of the fine itself. Some authors have shown that when the trading partners of the firm are not affected by the wrongdoing, no matter who else is affected, the prices of the shares will not fall abruptly[8]. Thus, the burden of criminal liability on shareholders is sometimes not as important as can be suggested. By contrast, other persons can suffer much more than the shareholders themselves. [...]
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