I would like to thank the Manhattan Institute for inviting me to participate in this online exchange on "Criminalizing Corporate Conduct: How Far Is Too Far?" It's my job to open the dialog, so I will do so by answering the question directly. It is all too far. There is no justification for criminalizing any corporate conduct.

Let's be clear about what I am asserting. Plenty of criminal activity takes place within corporations and other business organizations. (Given the extremely broad and amorphous nature many federal criminal statutes, e.g., mail and wire fraud, money laundering, RICO, obstruction of justice, this is almost necessarily the case.) The individuals who perpetrate such crimes are subject to prosecution for any crime they commit. I am expressing no opinion about whether the federal government has overcriminalized such individual conduct (although I have one). What I am asserting is that when individuals engage in criminal conduct within a business, there is no justification for imposing criminal punishment on the business as a corporate entity. There should be no corporate criminal liability.

Criminal law is penal law. Its about punishment. It is not designed to compose disputes, provide compensation to wronged parties, or impose administrative sanctions. It is designed to punish. This means that criminal sanctions may be properly imposed only on those persons and entities that can be deserving of punishment, that is, to those capable of acting in a morally blameworthy way. That's why infants, the incompetent, and the legally insane are excluded from criminal punishment. Thus, moral responsibility is a necessary condition for the application of the criminal sanction.

But corporations are not morally responsible agents. In fact, corporations, as opposed to the individuals who comprise them, are not agents at all. There is no ghostly corporate entity hovering above and separate from the set of individuals that labor for the corporation. There is no corporate brain within which intentions that are distinct from the intentions of these individuals can form. This fact is implicit in the current respondeat superior standard of corporate criminal liability that must attribute the mental states of a business organization's employees to the corporate entity.

Corporate criminal liability is theoretically incoherent because it imposes punishment, which requires morally blameworthy action, on an entity that is not a moral agent.

Perhaps you don't like that argument. Maybe it's too philosophical. OK, ignore it. Assume for the sake of discussion that corporations can be morally responsible for their employees' conduct. There is still no justification for imposing criminal punishment on them. That is because punishing corporations does not serve any of the legitimate purposes of punishment.

Theorists perennially dispute whether the purpose of punishment is retribution, deterrence, rehabilitation, or some combination of these. There is no need for us to speculate about how this dispute should be resolved because punishing corporations does not serve any of these ends.

Retribution can justify punishment only for those who have acted in a blameworthy way. Retribution clearly justifies punishing those who personally commit an offense. But how can it justify punishing a corporation? Corporations, as collective entities, cannot be imprisoned; they can only be fined. When a corporation is fined, it is the owners, i.e., the shareholders, who pay the fine. But the defining characteristic of modern corporation is the separation of ownership and control. The shareholders, who own the corporation, have no control over the actions of the employees who commit the offense. Hence, inflicting punishment on a corporation's shareholders (and its other employees who had no hand in the wrongdoing but may nevertheless lose their jobs) is punishing the innocent. Punishing those who are innocent of wrongdoing cannot be justified on retributivist grounds.

How about deterrence? A major purpose of criminal punishment is to deter wrongdoing. But not by any means; not by punishing the innocent. Much of the crime attributable to teenagers could undoubtedly be deterred by punishing parents for their children's offenses. The Nazis sought to deter acts of resistance by punishing innocent members of the communities in which such acts occurred. Although such measures may be effective, they are not permitted under our system of law. Deterrence as a justification for criminal punishment refers to punishing those who engage in wrongdoing to deter others from similar activities. It does not refer to punishing the innocent to pressure them into suppressing the criminal activity of their fellow citizens. Threatening innocent shareholders (and employees) with punishment for the offenses of culpable corporate employees may be an effective means of reducing criminal activity within business organizations, but it does not constitute the type of deterrence that can justify criminal punishment in a liberal legal system.

Perhaps punishment can be justified for purposes of rehabilitation. I have heard prosecutors argue that corporate criminal liability can be justified on rehabilitative grounds because fear of corporate prosecution will make business people behave better. But consider the nature of this argument. For punishment to be justified on rehabilitative grounds, it must be designed to reform the character of the wrongdoer, or at least, reduce the tendency of the wrongdoer to engage in future wrongful acts. One can rehabilitate only wrongdoers. Threatening those who have not engaged in wrongful conduct with punishment in order to make them "behave better" is not rehabilitation. It is coercing them to act in the way the coercive agent believes they should. "Rehabilitating" the innocent is simply depriving them of their liberty. This form of rehabilitation was familiar in the Soviet Union and Mao's China in which those whose conduct was unacceptable to the government were sent to psychiatric hospitals and "re-education" camps. Threatening to punish shareholders (and innocent employees) in order to make corporate executives behave in ways that prosecutors believe that they should is not a form of rehabilitation that can be countenanced in a liberal system of justice.

I have encountered the argument that punishing corporations for the actions of their employees is not distinct from any other form of criminal liability. After all, criminal punishment always wreaks harm on the innocent. The families and dependents of convicted criminals are inevitably adversely affected by the incarceration or impoverishment of the offender, both materially and emotionally. Hence, criminal liability always punishes the innocent, and corporate criminal liability is no different.

This line of reasoning elides a crucial distinction, however. In the case of traditional criminal liability, punishment is directed solely toward the wrongdoer. The harm that results to innocent third parties is not the intended object of the punishment regime. Such harm is always viewed with regret as an unfortunate collateral effect of visiting punishment on the blameworthy that should be minimized as much as possible. In the case of corporate criminal liability, however, punishment is intentionally directed toward those who have not committed an offense. Punishing the innocent is not a regrettable side effect and is certainly not to be minimized, but is the very object of the punishment regime. It may be true that all criminal punishment wreaks incidental harm on innocent parties, but this fact cannot justify a form of vicarious criminal liability that is intended to punish those who have not themselves broken the law.

This is the one hundredth anniversary of New York Central & Hudson River R.R. Co. v. United States, the Supreme Court decision that created corporate criminal liability. New York Central was a mistake when it was decided, remains a mistake today, and should be explicitly overruled. I make this statement fully aware that advocating for the reversal of a century-old precedent that is the foundation for much of federal criminal jurisprudence and law enforcement policy is quixotic. Few precedents are so deeply entrenched and have been so repeatedly affirmed in subsequent decisions. As the recent decision in United States v. Ionia Management S.A., 555 F.3d 303 (2009) summarily dismissing a challenge to the New York Central standard of corporate criminal liability makes clear, the prospects of the judiciary seeing the light on this issue are not good. Nevertheless, the process by which society determines who or what should be subjected to criminal punishment should not be like jazz, which I once heard defined as the musical form in which one legitimizes a mistake by repeating it. After one hundred years, it is time we stopped repeating the New York Central court's mistake.

I, too, would like to thank the Manhattan Institute for inviting me to participate in this discussion with Professor Hasnas. Having read his first post, I can assure the readers about one thing: I disagree with just about everything John has said so far. So, I have no doubt that this will be an interesting exchange.

I don't intend in this first posting to respond to every argument John has made. I will pick a few of the most fallacious, and will add to my position as the week progresses.

Let's start with the concept of whether corporations are "morally responsible agents." Corporations are, of course, legal constructs; we often refer to them as "legal persons." The primary reasons for their existence are twofold: (1) to allow individuals to pool their resources together to engage in economic activity on a scale that they could not achieve individually; and (2) to limit the liability of such individuals ("investors") should the operation go belly-up. Obviously, a corporation can only act through its "agents," i.e., its board of directors, officers, and employees. When these humans act in their agency role, however, they are not simply a bunch of people with titles doing whatever they want. They are acting on behalf of their principal, the corporation. They have a fiduciary duty to put the interests of the corporation ahead of their own.

As a result of their collective nature, corporations are extremely powerful actors in our economic system. They do a tremendous amount of good - adding trillions to our gross domestic product each year. For example, corporations do medical research, build skyscrapers, transport us by air and automobile, and supply us with endless means of entertainment. But corporations also do some things that are not so good. For example, they occasionally breach contracts and engage in tortuous activity. Just because a corporation acts through human agents, does it make any sense to say that it is not a "morally responsible agent" when its contract breach costs taxpayers millions of dollars or its poorly designed automobile blows up on impact and kills innocent people?

One could take the position that the corporation is not morally responsible for these acts; rather the responsible human or humans behind the corporate veil are. But this is not a satisfactory answer for two main reasons. First, the harm is often if not always an outgrowth of the collective nature of the enterprise itself. One person, for example, can't design, build, and mass-market an automobile. Thus, quite literally, the collective entity is at the root of the wrong - and it should take responsibility for it. Second, if we laid blame for harms caused by corporations solely at the doorstep of individuals, the result would be unworkable: no one person in the organization has the money or insurance to compensate for a contract breach or make victims of a tort whole. The corporation does.

Thus, corporations are undoubtedly morally (and legally) responsible for their contract breaches and tortuous behavior. So the question really is this: is there something different about criminal law that would lead us to a different result? The simple answer is no.

John is right that the aim of criminal law is to punish wrongdoers. We've established that a corporation can be a wrongdoer - it can, through its many agents, dump toxic chemicals or put adulterated food into the stream of commerce. Can a corporation be punished? Once again, I agree with John that the goals of criminal law are retribution, deterrence, rehabilitation, and (one I don't think he mentioned) incapacitation. I will explain later why all of these goals can, in fact, be achieved through corporate criminal liability. Here's a hint: the fact that a corporation cannot be put behind bars is irrelevant.

Unlike Mike, I cannot say that I disagree with everything Mike says in his post. In fact, I agree with much of it. I do disagree with a few crucial points, however. Mike's entire first paragraph seems unobjectionable to me with the exception of one word. Corporate employees acting within their agency role are indeed acting on behalf of their principals. But their principal is not the corporation. Their principals are the shareholders who own the corporation. Their fiduciary duty is to shareholders, not to the corporation, which is a legal construction and not a real entity. This is not a semantic quibble on my part. As long ago as 1935, Felix Cohen was warning us about the danger of reifying abstract legal concepts in general and the concept of the corporation in particular. (See Felix Cohen, Transcendental Nonsense and the Functional Approach, 35 Colum. L. Rev. 809 (1935).) In my opinion, this tendency to treat corporations as real entities is responsible for much of the confusion about and support for corporate criminal liability.

I probably only disagree with one word of Mike's second paragraph as well, in this case, the word is 'morally.' Mike asks, "does it make any sense to say that it is not a "morally responsible agent" when its contract breach costs taxpayers millions of dollars or its poorly designed automobile blows up on impact and kills innocent people?" Yes, indeed it does. It may not make sense to ask whether a corporation is a legally responsible agent for purposes of such contract breaches or torts, but it certainly makes sense to ask whether the corporation is a morally responsible agent. Because it is not.

There is nothing logically offensive about the concept of vicarious legal liability. But there can be no such thing as vicarious moral responsibility. Moral responsibility applies only to intentionally acting agents who are causally responsible for producing certain consequences. Corporations are not morally responsible agents because 1) corporations are not agents, 2) corporations are not causally responsible for the actions of their employees, and 3) corporations do not act intentionally.

Corporations are not agents because they are not real entities. (This is the Transcendental Nonsense stuff again.) We speak as though corporations act rather than human beings because it is convenient and useful to do so. But we should not be misled by our semantic conventions into reifying the corporation. There is no "thing" there. There is only a complex set of relationships among a wide flung group of human beings.

Corporations are not causally responsible for the actions of their employees because corporations do not act, only people do. Corporations can exert causal influences on its employees in the sense that individuals in groups can get each other to behave in ways that none would if acting alone. But this effect is fully explainable in terms of the interior desires and beliefs of the individuals in the organization that lead them to behave as they do. There is no need to postulate "some kind of ghostly organizational spirit that is present in the organization and that somehow exerts external pressures and forces on its members." (See Manuel Velasquez, Debunking Corporate Moral Responsibility, 13 Bus. Ethics Q. 531, 544 (2003).)

Corporations can be said to act intentionally only in a metaphorical sense. We often attribute purposes or beliefs to groups on the basis of a pattern which the activities of its members exhibit. But this does not mean that the group has real intentions in a literal sense. We frequently speak of markets as "trying" to find a bottom, but that does not imply that the market is literally capable of intentional action. With no corporate brain in existence, a corporation is incapable of acting intentionally in a literal sense.

Why make a big deal over moral as opposed to legal responsibility? It makes no difference with regard to the assignment civil liability. As Mike points out, there are quite good reasons for holding corporations liable for breach of contract or tortuous actions. I can easily justify respondeat superior liability in tort. The reason lies in Mike's own question "Is there something different about criminal law that would lead us to a different result?" The simple answer to this is not no, but yes. Criminal responsibility is different in kind from civil liability. Criminal responsibility is concerned with punishment, not the proper adjustment of benefits and burdens among the members of society. And punishment requires blameworthy action. Human being can behave in a blameworthy way. Fictitious legal constructs cannot. Vicarious moral responsibility is an oxymoron. That is why there should be no corporate criminal liability despite the fact that there can be corporate civil liability.

In pursuing this line argument, I am probably doing a disservice to the reader by focusing on such a philosophical point. So, for purposes of our continued exchange, let me abjure further reliance upon it. Even if there were some sense in which moral responsibility could be attributed to corporations, criminal punishment would still be unjustified because it is improper to punish those who are innocent of wrongdoing, and punishing corporations as opposed to the individuals who commit the offenses does precisely that.