DECISION MAKING MODELS, DEVIL'S ADVOCACY, AND THE CONTROL OF CORPORATE CRIME

• Published date: 01 September 1990
• Author: MICHAEL B. METZGER,CHARLES R. SCHWENK
• DOI: http://doi.org/10.1111/j.1744-1714.1990.tb00833.x
• Date: 01 September 1990

DECISION MAKING MODELS, DEVIL’S ADVOCACY,

AND THE CONTROL

OF

CORPORATE CRIME

*MICHAEL

B.

METZGER

**CHARLES

R.

SCHWENK

“The mind is slow in unlearning what

it

has been long in learning.”

Seneca:

Troades

633

“It

is impossible

for

a man to learn what he thinks he already

knows.” Epictetus:

Discourses

I1

INTRODUCTION

The above quotations identify one of the eternal obstacles to human

progress; the learning disabilities that seemingly afflict our species.

Whether this phenomenon

is

biological in its origins,

or

is

instead

attributable to the unusual power some ideas have proven capable

of

exerting over

us,

is debatable. What is not debatable

is

that

throughout history some notions about human nature and institutions

have been remarkably impervious to assault by either reason

or

experience. Contemporary events in eastern Europe and Latin Amer-

ica,

for

example, highlight the current desuetude of socialism, but

does anyone truly believe that these events will trigger a similar

abandonment of the socialist ideal among

our

clergy and in the groves

of

academe? One need not look

far

for evidence that it will not.’

Professor of Business Law, Indiana University.

I

See for example renowned scientist Stephen Jay Gould’s glowing review of

environmentalist Barry Commoner’s new book,

Making

Peace

With

tL

Planet,

in

which

Commoner offers world socialism as an antidote to global environmental problems,

despite the appalling environmental record

of

the

Soviet

bloc.

Gould.

It’s

Not

Too

Late,

If

We’re

Not

Crazy.

N.Y.

Times Book Review, April

22,

1990,

at

15-16.

++

Professor

of

Management, Indiana University.

324

I

Vol.

20

I

American

Business

Law

Journal

Unfortunately, the current controversy over two proposals

for

corporate sentencing guidelines2 circulated by the

U.S.

Sentencing

Commission3 illustrates the continuing vitality of another bad idea

-

that monetary sanctions are the most efficacious means of punishing

and deterring corporate offenders. Virtually all attention has focused

on a proposal prepared by members of the Commission’s staff that

treats monetary penalties as

the

primary sanctions against convicted

organizations and that calculates such penalties according to the

following formula:

Sanctions

=

[(Offense Losses)

x

(Offense Multiplier)]

+

Enforcement

Costs4

“Offense losses” equals the total harm

or,

in some cases, the risk of

harm, caused by

the

~ffense.~ The “offense multiplier” is

a

factor

calculated to reflect the probability that a defendant will be appre-

hended and convicted: and “enforcement costs” are the costs of

detecting and prosecuting the defendant? Predictably, the private

sector and its defenders have criticized the proposal for allowing

excessive finess while some corporate critics have argued that it

treats business too leniently?

The second proposal circulated by the Commission is the product

of three law professors and focuses on corporate probation as a

promising supplement to financial penalties.l0 This proposal has lan-

guished in relative obscurity,ll even though it

is

far

more responsive

’

U.S.

SENTENCING COMMISSION, DISCUSSION MATERIALS

ON

ORGANIZATIONAL SANC-

TIONS

(1986)

reprinted.

in

10 WHITTIER L. REV.

1

(1988) [hereinafter cited as DISCUSSION

The Commission is charged with promulgating sentencing policy

for

the Federal

justice system.

S.

REP.

NO.

225, 98th Cong..

1st

Sess.

161-62 (1983).

DISCUSSION MATERIALS,

supra

note

2.

$

8Cl.l. This proposal plainly reflects

current economic thinking on crime control.

For

the seminal effort in this area, see

Becker,

Crime and Punishment: An Economic Approach,

76

J.

POL.

ECON.

169 (1968).

See also

Posner,

An Economic Theory

of

the

Criminal Law,

85 COLUM.

L.

REV. 1193

(1985).

MATERIALS].

DISCUSSION MATERIALS,

supra.

note

2,

$

8Cl.l.

Id.

Id.

See.

e.g.,

Pestal,

Be

Tough

on

Corporate Criminals-but

Justify

It,

Wall

St.

J.,

Dec. 12, 1988, at A12; Wermeil,

Sentencing Plan Likely to Upset Business Lobby,

Wall

St.

J.,

Jan.

15.

1990,

at

B1.

O

See, e.g.,

Farber,

Corporate Punishment,

THE NEW REPUBLIC, Dec. 26. 1988,

at

16:

Labaton,

Cwporate Penalty Plan Stirs Debate.

N.Y.

Times, Oct. 10, 1988,

at

21, 25.

Coffee, Gruner,

&

Stone,

Standards

for

Organizational Probation,

in DISCUSSION

MATERIALS,

supra

note 2,

$

8D2.1.

‘I

It

has not escaped criticism,

however.

See, e.g.,

Shenon,

The Case

of

the

Criminal

Corporation,

N.Y.

Times, Jan. 15, 1989, at 28 (quoting Commissioner Michael

Block,

1990

I

Devil’s

Advocacy

I325

to the numerous criticisms that have been made of monetary penalties12

and the model of organizational decision making such penalties pre-

suppose.13 Most recently, the Commission

is

said to be considering

a

third option that reportedly would reduce fines, grant organizations

greater credit for good faith attempts to avoid violations, and reduce

the instances in which corporate probation would be imposed.14

However the Commission ultimately resolves its charge, the debate

surrounding its deliberations affirms the need to engage once more

in the Sisyphean task of attempting to get people to unlearn what

they “know” about corporations and about

the

most efficacious means

of controlling their misbehavior. In furtherance of that purpose, we

will examine the numerous shortcomings of financial penaltiesI5 and

the view of organizational behavior they reflect.I6 We will then discuss

some alternative decision making models which in some cases may

more

accurately depict organizational realityI7 and the corporate

control implications of those models.1B Included in this section is a

discussion of a new model, the Organized Anarchy model, which to

our knowledge

has

heretofore not been treated in the legal litera-

ture.I9 Finally, we will discuss corporate probation as an alternative

sanction to financial penalties, noting the advantages it affords over

such penaltiesm We conclude by proposing a process called Devil’s

Advocacy

as

a

potentially effective component

of

a corporate control

strategy emphasizing probation.21

PROBLEMS

WITH

FINES

AND

INDIVIDUAL

LIABILITY

Throughout this century, the United

States

has increasingly turned

to the criminal law in its attempts to control corporate behavior.22

an advocate

of

fines,

as

saying that “[tlhe history

of

the courts running markets

or

firms is not very sanguine, and we ought to avoid that

at

almost all

costs”);

Wermeil.

supra

note

8

(quoting a vice president

of

the National Association

of

Manufacturers

as saying that under supervisory judicial probation judges “would be almost literally

sitting in the board

room”).

See inpa

notes

29-56

and accompanying text.

la

See infra

notes

111-93

and accompanying text.

I‘

See, e.g..

Strasser.

Lighter

Corporale

Sentencing?,

NAT’L

L.J.,

Apr.

9, 1990,

at

3;

Wermiel

&

Cohen,

Proposed Rules

on

Corporate

Sentencing

Are Sojlened,

Wall St.

J.,

Mar.

30, 1990,

at

B2.

See infra

notes

29-56

and accompanying text.

See

infra

notes

111-93

and accompanying text.

I7

See infra

notes

198-243

and accompanying text.

See

infra

notes

248-61

and accompanying text.

See infra

notes

231-43

and accompanying text.

See

infra

notes

291-315

and accompanying text.

See infra

notes

316-29

and accompanying text.

22

See

Friedman,

Some

Refictions on the Corporation

as

Criminal

Defendant,

55