Clockwork Corporations: A Character Theory of Corporate Punishment

• Author: Mihailis E. Diamantis
• Position: Associate Professor, University of Iowa, College of Law
• Pages: 507-569

507

Clockwork Corporations:

A Character Theory of Corporate

Punishment

Mihailis E. Diamantis*

ABSTRACT: Retribution and deterrence currently drive the politics and

scholarship of corporate criminal law. Since the potential harms and private

gains of corporate crime are so large, corporate punishment under these

theories must be exacting . . . too exacting. In fact, it is difficult under current

law to punish many corporations formally without killing them. Ironically,

this fact leads to the under-punishment of corporations. Prosecutors—

understandably hesitant to shutter some of the country’s largest economic

engines—increasingly offer corporations deferred prosecution agreements in

lieu of charges and trial.

This Article considers corporate punishment for the first time from the

framework of a third major theory of punishment—character theory.

Character theories of punishment focus first and foremost on instilling good

character and civic virtue. Criminal law scholars have largely marginalized

character theory because it struggles as a suitable framework for individual

punishment. But the practical and moral problems character theory faces in

the individual context do not arise with the same force for corporations. In

fact, character theory offers the possibility of punishing corporations in a way

that preserves and enhances the social value they create while removing the

structural defects that lead to criminal conduct. Along the way, the Article

*

Associate Professor, University of Iowa, College of Law. For invaluable feedback at

various stages, I owe special thanks to Miriam Baer, Rachel Barkow, Lisa Bernstein, Stephanos

Bibas, Michael Cahill, Anthony Deardurff, Anne Estin, Tom Gallanis, Brandon Garrett, John

Hasnas, Josh Kleinfeld, David Kwok, Bill Laufer, James Nelson, Mark Osiel, Lee Otis, Todd Pettys,

Elizabeth Pollman, Daniel Richman, Sarah Seo, Amy Sepinwall, Lynn Stout, Will Thomas, and

participants at the following conferences and workshops: Brooklyn Law School’s Markelloquium,

Cornell University’s Workshop on Corporations as Legal Persons, CrimFest 2016, Georgetown

University’s Institute for the Study of Markets and Ethics, Indiana University’s Big 10 Junior

Scholars Conference, the National Business Law Scholar’s Conference, University of Chicago’s

Legal Scholarship Workshop, University of Kentucky’s faculty speaker series, and Wharton’s

Zicklin Center for Normative Business Ethics Workshop. I am also grateful to my research

assistant, Nathan Golden.

508 IOWA LAW REVIEW [Vol. 103:507

defends some heterodox proposals, including abolishing the corporate fine and

allowing sentencing judges to balance the need to punish against non-

criminal aspects of a corporate defendants’ “character.”

I.INTRODUCTION ............................................................................. 509

II.THE RETRIBUTION RATCHET ........................................................ 516

III.THE DISTORTIONS OF DETERRENCE ............................................. 518

A.DETERRENCE THEORY DEFINED ................................................ 518

B.THEORETICAL PROBLEMS WITH DETERRENCE ........................... 520

1.Punishing the Innocent ................................................ 520

2.Pricing Crime ................................................................ 524

3.Inevitability of Over-Punishment ................................. 525

IV. PROBLEMS IN PRACTICE: DPAS AND NPAS ................................... 527

V.CORPORATE CHARACTER .............................................................. 533

A.DESCRIPTIVELY INADEQUATE? .................................................. 536

B.PROBLEMATIC FOR INDIVIDUALS ............................................... 538

C.CHARACTER THEORY FOR CORPORATIONS ................................ 539

VI. CULTIVATING CORPORATE CHARACTER THROUGH

PUNISHMENT ................................................................................. 544

A.FACTORS TO CONSIDER IN WEIGHING THE NEED FOR

PUNISHMENT .......................................................................... 545

B.PUNISHMENTS CHARACTER THEORY WOULD NOT

SUPPORT ................................................................................. 548

1.Fines ............................................................................... 549

2.License Revocation and Debarment ............................ 549

3.Reputational Penalties .................................................. 550

C.TECHNIQUES FOR REFORM ....................................................... 551

D.SOME LIMITING PRINCIPLES .................................................... 557

E.ENTER THE JUDGES: BENEFITS OVER PROSECUTION-LED

REFORM .................................................................................. 559

F.POTENTIAL CONCERNS ............................................................ 562

1.Cost to Innocent Third Parties ..................................... 562

2.Expertise of the Judiciary ............................................. 563

VII. CONCLUSION: SOMETHING FOR EVERYONE .................................. 565

A.DETERRENCE AND PREVENTION ................................................ 565

B.RETRIBUTION AND EXPRESSION ................................................ 568

2018] CLOCKWORK CORPORATIONS 509

“[H]ow about this new thing they’re talking about? How about this new like

treatment that gets you out of prison in no time at all and makes sure that

you never get back in again?”1

I. INTRODUCTION

It is actually not so new. Though unpopular for the last few decades,

punishing criminals by reforming them was once the predominant approach.2

Anthony Burgess poignantly described one prominent concern that led to its

demise: Coerced reform risks turning people into “clockwork toy[s] to be

wound up by . . . the Almighty State.”3 Forcefully changing character and

personality is an affront to the self-defining freedom that is the root of human

dignity.

While generally marginalized today, punitive reform is undergoing a

resurgence for a different kind of “person”—the large, publicly traded

corporate criminal. Prosecutors are at the forefront of the movement. In the

deals they cut with corporate suspects, prosecutors often require programs of

reform.4 Implicit in how prosecutors now treat corporate defendants is the

recognition that their fundamentally different nature allows for a different

approach to punishment. Burgess’s complaint loses all its force in the

corporate context. Corporations are not, and cannot be, free, self-defining

loci of dignity.

Scholars and lawmakers are still behind the curve. While prosecutors

have been experimenting with reform-as-punishment, the dominant

academic and political discourses on corporate crime still focus on deterrence

and retribution.5 There is the seed of a third path in what prosecutors are

doing. This Article seeks to uncover the implicit logic behind corporate

prosecutors’ decisions. In its present form, prosecutorial practice is focused

on reform and rehabilitation. Were the logic of the practice pushed and

perfected as an approach the entire criminal justice system could take toward

corporate punishment, an organizing theory that is different from deterrence

and retribution emerges—character theory. As argued below, character

theory opens new conceptual space for solving some of the most persistent

problems in corporate criminal law.

1. ANTHONY BURGESS, A CLOCKWORK ORANGE 69 (2012).

2. See infra Part V.B.

3. BURGESS, supra note 1, at 2.

4. See Anthony S. Barkow & Rachel E. Barkow, Introduction to PROSECUTORS IN THE

BOARDROOM: USING CRIMINAL LAW TO REGULATE CORPORATE CONDUCT 1, 3 (Anthony S. Barkow

& Rachel E. Barkow eds., 2011) (Using deferred prosecution agreements, “prosecutors impose

affirmative obligations on companies to change personnel, revamp their business practices, and

adopt new models of corporate governance.”). Some scholars, though, question whether

prosecutors really care about reform. BRANDON L. GARRETT, TOO BIG TO JAIL: HOW PROSECUTORS

COMPROMISE WITH CORPORATIONS 75 (2014) (“These data suggest that prosecutors are not tak ing

structural reform seriously.”).

5. See infra Parts II–III.