Corporate criminal justice rests on the fiction that corporations possess “minds” capable of instantiating culpable mens rea. The retributive and deterrent justifications for punishing criminal corporations are strongest when those minds are well-ordered. That is when misdeeds are most likely to reflect malice, and sanctions are most likely to have their intended preventive benefits. But what if a corporate defendant’s mind is disordered? Organizational psychology and economics have tools to identify normally-functioning organizations that are fully accountable for the harms they cause. These disciplines can also diagnose dysfunctional organizations where the threads of accountability may have frayed and where sanctions would achieve little by way of deterrence. Punishing such corporations undermines the goals of criminal law, leaves victim interests unaddressed, and is unfair to corporate stakeholders.
This Article argues that some corporate criminal defendants are entitled to raise the insanity defense. Recognizing the corporate insanity defense would better serve victims’ and stakeholders’ interests in condemning and preventing corporate misconduct. Statutory text makes the insanity defense available to all qualifying “defendants.” When a corporate criminal defendant’s “mind” is sufficiently disordered, basic criminal law purposes also support the defense. Corporate crime in such cases may trace to dysfunctional systems or subversive third-parties rather than to corporate malice. For example, individual corporate employees may thwart well-meaning corporate policies to pursue personal advantage at the expense of the corporation itself. In such cases, corporations may seem more like victims of their own misconduct rather than perpetrators of it.
Justice and prevention favor treatment of “insane” corporations rather than punishment. Treatment would be an opportunity for government experts to reform dysfunctional corporations in a way that predominant modes of corporate punishment cannot. Effective reform takes victims seriously by minimizing the chance that others will be harmed. It also spares corporate stakeholders unnecessary punishment for corporate misconduct that could be sanctioned in more constructive ways. This is what the corporate insanity defense offers.Ingenious but unpersuasive.
'Corporate Law Versus Social Autonomy: Law as Social Hazard' by Michael Galanis in (2020) Law and Critique states
This article argues that corporate law has become the legal platform upon which is erected a social process impeding society’s capacity to lucidly reflect on its primary ends; in this sense, corporate law is in conflict with social autonomy. This process is described here as a social feedback loop, in the structural centre of which lies the corporation which imposes its own purpose as an irrational social end, i.e. irrespective of its potentially catastrophic social consequences. The article argues that resolving the conflict between corporate law and social autonomy is impossible, because it presupposes a change of social paradigm towards one where corporate law as business organisation law has no obvious fit. This questions the social legitimacy of corporate law, signifies its non-permanence and thus opens up the field for seeking radical alternatives in the future.Galanis argues
Even the keenest ‘black-letter’ admirer of existing laws would accept that social institutions ought to be open to change, in order to adapt to evolving social goals. However, adaptation is not always possible or at least as straightforward in practice, so that even radical action, such as the recent response to the coronavirus pandemic, may not have a lasting effect or may even exacerbate social hazards. Social institutions and their users can function as forces of inertia, so that society is unable to effectively meet its challenges by redefining its ends. Institutions appear as if they have acquired a dominant agency of their own, even when inertia is socially hazardous.
This article claims that what is currently regarded as standard corporate law has a role in the emergence and persistence of such an inertia problem in our society. Within capitalism, corporate law is a central institutional component of a ‘social feedback loop’—i.e. a self-reinforcing social process—by which the primary corporate purpose, namely wealth accumulation, is amplified and imposed upon society as a supreme and indisputable social end. The mechanics of this loop are fairly simple. Firstly, as an extremely effective device for protecting corporate wealth and for promoting organisational expansion, the basic anatomy of corporate law has found an unprecedented fit with the primary capitalist purpose of infinite wealth accumulation. It has enabled business growth to the extent that economic activity is primarily organised within and between private, manager-controlled bureaucracies. Thus, corporate law is the legal platform for the bureaucratisation of the economy. At the corporate level, bureaucratic organisation tends to suppress the questioning of objectives. Therefore, once these are internally set by management, they are constantly reproduced by a feedback process within the corporate organisation. Secondly, due to its social dominance, the bureaucratic corporation externalises those privately-set objectives so that they are eventually elevated to social ones and this creates a wider social feedback loop. Corporate law is thus a legal structure for this social process which has become so pervasive that it hinders society’s reflective capacity in relation to its objectives. This capacity is the essential basis of social autonomy, since an autonomous society is founded on the recognition that social goals are endogenously fashioned and therefore subject to social scrutiny without predeterminations.
In other words, by providing the legal foundation for the proliferation of the bureaucratised business organisation, the structural core of the feedback loop, corporate law serves as an institution rendering our society essentially heteronomous, i.e. a society founded on the belief that its primary ends are exogenously and eternally determined. This way, material accumulation acquires eternal validity as a primary social end and its consequences are ignored or marginalised. Corporate law is thus inevitably in conflict with social autonomy and therefore it is a socially hazardous institution.
On this basis and drawing from the theory on bureaucracy and Castoriadis’ social philosophy, this article argues that the social legitimacy of corporate law needs critical re-examination. While engaging in a detailed discussion of alternative organisational forms is beyond this article’s scope, the finding that corporate law is socially hazardous is in itself important: it sets the basic parameters for further research on how business organisation law can be radicalised, in order to dismantle the social feedback loop presented here and sustain social autonomy. The discussion will proceed as follows. The next Part will examine the role and organisational impact of corporate law as a vehicle for business. The third Part will analyse the social significance of these organisational changes to argue corporate law is a socially hazardous institution which reproduces social heteronomy by locking social ends within a capitalist frame. The fourth Part will explore the possibility of instituting social autonomy, as a social ideal, but show that corporate law in its current form can have no obvious place in a society organised on this basis. In the light of these findings, the concluding section summarises the basic parameters of future reform for restoring the social legitimacy of business organisation.
