Vol. 17 No. 1 (January, 2007) pp.29-32

CORPORATE BODIES AND GUILTY MINDS: THE FAILURE OF CORPORATE CRIMINAL LIABILITY, by William S. Laufer. University of Chicago Press, 2006.  216pp. Cloth $40.00/£25.50.  ISBN: 0226470407. 

Reviewed by Benedict Sheehy, School of Law, University of Newcastle, NSW.  Email: Benedict.Sheehy [at] newcastle.edu.au.

William S. Laufer’s CORPORATE BODIES AND GUILTY MINDS is a challenging, thoughtful, insightful and well researched examination of an controversial but important topic – the regulation of corporate activity by the criminal law. His basic thesis is that the control of corporations has been unsuccessful historically and that reforms imposed for the purposes of corporate control will continue to be unsuccessful without corporate criminal law.  He makes his case convincingly, with identification of issues and corporate responses, examples of continual failure of corporations to seriously consider the interests to larger society despite legal sanctions, analysis of the case law, and review of developments in corporate criminal law.

The book is seven chapters long and divided into two parts.  The first part, entitled, “The Law’s Ambivalence,” sets background remarkably well for the discussion which follows.  In the first chapter Laufer divides the development of corporate criminal law into seven phases.  His demarcations, as any such historical divisions, are not uncontroversial or absolute; however, this does not detract from the helpful focus the division creates in drawing attention to the issues – social, economic, political and legal – driving the development.  His broad brush strokes and well chosen, well explained examples provide a clear portrait of the development of corporate criminal law.  This chapter is a noteworthy contribution to the scholarship through its arrangement, analysis of factual material, synthesis of business, and social issues, and identification and classification of legal issues pertaining to the topic of corporate criminal law. 

The second chapter is also noteworthy particularly for corporate lawyers and corporate law scholars in that it returns the corporate personality debate back to the centre of legal and scholarly discussion.  In doing so, Laufer challenges accepted wisdom of the nexus of contracts/law and economics model of the corporation.  He identifies clearly why the issue of personhood cannot be skipped over in silence – and how and why it has been. 

Laufer writes:

That corporations are person’s at the law’s convenience is accepted uncritically.  Legislators and courts seem to struggle with extending the idea of personhood to matters of liability and blame nevertheless watch as it is incorporated without reflection in both prosecutorial and sentencing guidelines.  This dichotomy makes the substantive criminal law look both strange and weak: strange because prosecutors and judges sidestep the substantive law, still grounded in principles of vicarious liability, in favour of ad hoc standards of corporate citizenship, corporate due [*30] diligence, and good corporate governance—much of it cast in terms of postoffense behaviour; weak because the substantive law, in the context of sentencing law, is seemingly unable to conceive of an organization in organizational terms.  (p.49)

Laufer here points out the conundrum that underlies all efforts to develop substantive corporate criminal law.  Without a sense of corporate personhood, there is no corporate liability—only misbehaving individuals.  As he demonstrates, this approach is insufficient to address the issues corporate wrong-doing raises. 

The chapter continues with Laufer’s helpful review of three traditional approaches to corporate fault.  He identifies and discusses “proactive corporate fault,” “reactive corporate fault”, and “corporate ethos,” as approaches and challenges to corporate criminal law development and practitioners, and in particular, prosecutors.  His analysis of the Holder Memo (a prosecutorial directive) is most informative.  However, it marks a shift in the discussion of the work.  From this point forward, the book seems to become less focused.  It moves loosely between discussion of prosecutorial issues, to management issues, and technicalities of criminal law.

As Laufer observes: “there are no theories of corporate criminal liability . . . . Capturing the essence of what makes a corporate crime an organizational crime rather than a crime committed in an organization by an agent” (p.70). This lack of appropriate theory may be the cause of the weakness just discussed.  Despite Laufer’s efforts to impose some order through the use of traditional criminal law doctrines to establish fault, the chapter left this reader confused.  The nature of fault is a highly technical matter in criminal law, and it seems difficult to transpose to the corporation.  Still, the failure to do so provides a significant barrier to understanding the finer points of Laufer’s suggestions.  It is unfortunate, because those sections in which his argument is clearer lead one to believe his contribution here could be significant.

Laufer’s next chapter deals with the constructing fault. This chapter delves into the criminal law with some detail.  The application of the elements of criminal law to corporate bodies left this reader confused. The criminal law seems poorly designed for the corporation, and despite Laufer’s attempts to clarify the issue through constructive fault, he fails to provide a clear convincing framework on how it could be done.  This chapter deals with a wide range of concerns not adequately addressed in either criminal law or corporate law. Laufer is not to be faulted for this, as his attempt to bring some resolution to the situation is made in an impossibly short format. The problems of corporate law identified in the chapter on corporate personhood do not allow the resolution to be put forward in a chapter or two.  Still, a sharper outline of the discussion and more introductory material and summaries would have been helpful.

His chapters “Playing Games” and “Shifting Blame” are both well thought out, well written, and sharply argued.  In Playing Games, Laufer sets out the [*31] carefully crafted strategic responses of corporate counsel and strategists.  He identifies the games as “compliance/risk management,” “corporate governance,” and “corporate social responsibility.”  Importantly he notes the lack of actual connection between failed compliance and failed corporate governance, as well as the conflict faced by the controllers of the corporation where profits and legal obligations often collide.  He observes: “corporate deviance is often tolerated if not tacitly encouraged, by an implicit agenda of top management—where compliance initiatives originate” (p.124).

These problems are not adequately addressed, argues Laufer, by the prosecutorial guidelines, and regulatory initiatives. His use of the work of Fisse and Braithwaite in this regard is excellent. His application of theory to the situation at hand sheds considerable light. 

The chapter dealing with Shifting Blame is a combination of commonsense and rigorous analysis; however, it tends to lose focus in the discussion of prosecutorial discretion.  As well, although one can see the point of discussion on that discretion, it does take away from the main issue addressed—that of shifting blame within the corporation.

The penultimate chapter, “Crafting a Soul,” considers the issues of ethics, Corporate Social Responsibility, and the washing of corporate images.  This chapter delves into the ambiguity intentionally generated by corporations to make it difficult to evaluate their activities vis-à-vis their claims.  Laufer opens the chapter with a discussion of Altira, the parent company of Phillip Morris, and notes how its anti-tobacco campaigns have spurred teenagers to smoke even more.  Laufer’s penetrating analysis is disturbing in that it lays bare the connivance of the consulting industry designed to ensure voluntary compliance, business ethics and self-regulation, are meaningful in perpetrating a fraud on the public. It is an important and necessary contribution to any discussion on the topic.

As seems de rigeur for publishing houses these days, the final chapter is supposed to be an upbeat, optimistic look at the future.  Laufer duly entitles the chapter “The Unmaking of the Pessimist’s Account.”  The chapter fails to fulfill its titled task. It is a mere eighteen pages compared to the approximately thirty pages for each of the preceding chapters. Laufer finds that the only criminal law’s “big gun” will solve the problems associated with corporate wrong-doing, and that the desire to craft and utilize the big gun is lacking. He notes that to operate effectively, it would be necessary for such a gun to be used consistently and widely.  He identifies the real problem as: “What was missing then and now is the motivation. . . the consensus to accomplish necessary reforms, a strong constituency supporting change; and the requisite priority accorded to the most significant and powerful social control of corporations: the criminal law” (p.199).

One main criticism of the work is its focus on prosecution, which is likely the reasonable and expected result of the [*32] lack of substantive corporate criminal law, and which fails to move the discussion of corporate criminal law forward in a meaningful way.  Exploring in greater depth potential reforms to the Model Penal Code which could address the issues of concern would also strengthen the work. While his analysis of the MPC is most helpful in terms of dealing with fault, no significant exploration of potential reforms to the MPC is made following up his suggestion of understanding organizations as criminals. Laufer’s failure to re-conceptualize the matter of corporate criminal law, it would seem at least from his argument, arises from problems of corporate personhood he identifies early in the work.  But, his failure to re-conceptualize seems to be an important consequence of the inadequate design of criminal law.  Hence, it would be helpful if Laufer were to concentrate some further effort in this direction.

Although Laufer at times appears to hint at new directions – for example, he begins with examination of the corporation’s size, activities, and record – he abandons them to return to the more traditional, but less satisfactory approaches identified.  His failure to pursue the creative directions is most unfortunate, as the depth and breadth of his analysis and critique lead one to believe his efforts in new directions would be most enlightening. 

Finally, the work requires the reader to have some technical expertise in two areas of law normally considered quite diverse—criminal law and corporate law.  The book would have been strengthened by providing a bit of an introduction to the areas to make it more accessible to those whose specialization is in the other area. It leaves one at times feeling on the outside of the conversation, which is unfortunate because of the importance of the conversation and the level of insight Laufer has mastered and to which he could certainly introduce the reader.

All in all, this is an important, thoughtful, well-researched book. At times it leaves the reader a bit lost, but there is much there for those willing to make the effort to work through the knots.

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© Copyright 2007 by the author, Benedict Sheehy.