Corporate Crime

The following passage is adapted from an article 1993.

How severe should the punishment be for a corporate crime—e.g., a crime in which a corporation profits from knowingly and routinely selling harmful products to consumers? Some economists argue that the sole basis for determining the penalty should be the reckoning of cost and benefit: the penalty levied should exceed the profit the fine were, say, $7 million, these economists would feel that justice had been done.

In arguing thus, the economists hold that the fact that a community may find some crimes more abhorrent than others or wish to send a message about the importance of some values—such as, say, not endangering citizens’ health by selling tainted food—should not be a factor in affect corporations’ earnings rather than try to assess their morality.

But this approach seems highly impractical if not impossible to follow. For the situation is complicated by the fact that an acceptable reckoning of cost and benefit needs to take into account estimated detection ratios—the estimated frequency at which those committing a given type of crime are caught. Courts must assume that not $7 million but at least $60 million, according to the economists’ definition, to be just.

The economists’ approach requires that detection ratios be high enough for courts to ignore them (50 percent or more), but recent studies suggest that ratios are in fact closer to 10 percent. Given this, the astronomical penalties necessary to satisfy the full reckoning of cost and benefit might arguably put convicted corporations crimes—is necessary so that penalties for corporate crimes will be practical as well as just.