Corporate Illegality Research Articles

Public Support for Getting Tough on Corporate Crime

The recent wave of corporate wrongdoing has raised the issue of whether the public is concerned about the control of lawlessness in the business world. Using a national probability sample, we explore whether Americans want to enact stricter regulations of the stock market and advocate more punitive criminal sanctions for corporate executives who conceal their company's true financial condition. The findings reveal that Americans generally favor getting tough on corporate illegality. The analysis also indicates, however, that group differences exist in public support for punitive corporate crime control policies. Although liberals and conservatives equally support punishing corporate criminals more harshly, African Americans are more likely than Whites to endorse more restrictive and more punitive policies toward corporate criminals. We conclude that punitive attitudes are socially constructed beliefs that reflect the dynamics of conflicted class and racial relations.

The Escalation of Deception in Organizations

Drawing on a number of recent high-profile cases of corporate corruption, we develop a process model that explains the escalation of deception in corrupt firms. If undetected, an initial lie can begin a process whereby the ease, severity and pervasiveness of deception increases overtime so that it eventually becomes an organization level phenomenon. We propose that organizational complexity has an amplifying effect. A␣feedback loop between organization level deception and each of the escalation stages positively reinforces the process. In addition, moderators are proposed that will halt escalation at various stages. By conceptualizing corporate deception as a social process, the paper contributes to a growing body of research that looks beyond 'bad' individuals for the causes of corporate illegality.

The Hypocrisy of the Milberg Indictment: The Need for a Coherent Framework on Paying for Cooperation in Litigation

The indictment of the Milberg, Weiss firm and two of its named partners for allegedly illegal payments to lead plaintiffs stands at the intersection of important recent developments in both the expanding criminalization of corporate conduct and the federalization of corporate law. Many have noted the irony and hypocrisy of the Milberg firm's alleged use of illegal tactics to prosecute corporate illegality. However, the more important hypocrisy is that Milberg's prosecutors are essentially paying the same witness - Vogel - that Milberg is being prosecuted for paying. This case illustrates the need to need to develop coherent standards regarding payments to litigants and witnesses. These standards should take account of the incentive effects of the payments, rather than being based on a desire to discourage or encourage particular types of actions.

Re-imagining crime prevention: controlling corporate crime?

While the discourses and practices of crime prevention are of increasing salience, few criminologists have sought the inclusion of corporate illegalities on such agendas. Relatedly, within criminology, there has been a diminished tendency to think in idealistic, utopian and emancipatory terms. This paper is one small attempt to think in precisely such terms.1 But it is not an exercise in pure imagination. In particular, the paper makes extended reference to Finland, where recent experience suggests that corporate crime prevention may be feasible, under certain conditions, albeit subject to certain limitations. Thus we consider both the desirability and the feasibility of corporate crime prevention intruding upon the generally narrowly constructed terrain of ‘crime prevention’. We begin with a critique of some of the key aspects of crime prevention discourses – at both theoretical and practical levels – with a particular emphasis upon the extent to which these are both more appropriately and usefully applied to corporate crime prevention, before going on to discuss corporate crime prevention ‘in action’, through a focus upon recent developments in Finland. In a concluding section, we consider various aspects of both the desirability and feasibility of corporate crime prevention.

EXAMINING REGIONAL VARIATIONS IN PUNITIVENESS FOR SAVINGS AND LOAN INDUSTRY CRIME

ABSTRACT There is little argument that the crisis in the savings and loan (S&L) industry of the 1980s was one of the most significant economic calamities of the twentieth century. While much data exists on the factors leading to the crisis, its impact on the American economic and financial systems, and its import for criminological theories of corporate and organizational illegality, there has yet to have been an attempt to investigate regional variations in sentence length for S&L offenders. This study found evidence of regional variations among sentencing for white-collar offenders with the Southwest being significantly more punitive than all the other regions while controlling for fine and the defendant's position within the institution. Implications for further research oh how regional variations apply to offenders convicted of white-collar crimes other than those studied here are considered.

From the streets to the suites: researching corporate crime

At the end of last year, one of a seemingly endless stream of introductory textbooks in criminology, designed to feed the growing number of students studying the subject across universities in the UK (see Hillyard, this edition), caught our attention. Sandra Walklate's Criminology: The Basics was different to many other such texts: one of its chapters was devoted to what she termed ‘Crimes of the Suites’, and introduced readers to the routine and large-scale killing of workers, passengers and consumers, to corporate fraud, to environmental devastation, and so on. Though not unique, it is certainly extremely rare for an introductory text to cover corporate crime. For criminological research in general has historically looked down at the relatively powerless rather than upwards at the powerful, and has thus marginalised the study of corporate illegalities. And this despite overwhelming evidence that the social and economic impacts of corporate crimes massively exceed the corresponding impacts of conventional crimes (Slapper and Tombs, 1999).

Ethical Compliance Programs and Corporate Illegality: Testing the Assumptions of the Corporate Sentencing Guidelines

This paper analyses the ethical performance of foreign-investment enterprises operating in China in comparison to that of the indigenous state-owned enterprises, collectives and private enterprises. It uses both the deontological approach and the utilitarian approach in conceptualization, and applies quantitative and econometric techniques to ethical evaluations of empirical evidences. It shows that according to various ethical performance indicators, foreign-investment enterprises have fared well in comparison with local firms. This paper also tries to unravel the effect of a difference in business culture and competitive market forces on ethical performance by comparing the behavior of foreign-investment enterprises with that of the indigenous state-owned enterprises and collectives on the one hand, and with that of the indigenous private enterprises on the other.

Ultra Vires Lives! A Stakeholder Analysis of Corporate Illegality (With Notes on How Corporate Law Could Reinforce International Law Norms)

Ultra Vires Lives! A Stakeholder Analysis of Corporate Illegality (With Notes on How Corporate Law Could Reinforce International Law Norms)

Ultra Vires Lives! A Stakeholder Analysis of Corporate Illegality (with Notes on How Corporate Law Could Reinforce International Law Norms)

This paper argues that a remaining vestige of the ultra vires doctrine sets off illegal activities as beyond the power of corporations. Though largely unnoticed and unexamined until now, this part of the doctrine has been retained because none of the important corporate stakeholders has an interest in authorizing the corporation and its managers to commit illegal acts. From an ex ante perspective, the principal stakeholders in the corporate contract would want the corporation and its management to forego illegalities as a way to increase the value of the firm. Any of the stakeholders would be a potential victim of the corporation's lawbreaking and would want to receive assurances that they would not be harmed by such conduct. Even for the shareholders, the difficulties inherent in distinguishing in the corporate contract between profitable and unprofitable unlawful acts would either be insurmountable or quite costly to resolve. On the whole, the risks of corporate or managerial illegalities would be too great, and the potential rewards too tenuous, to expect anything other than a corporate contract that would prohibit such acts. As evidence that this stakeholder analysis reflects positive law, the paper points to state incorporation statutes and individual companies' articles of incorporation, which almost invariably charter corporations only for lawful purposes. The continuing (though limited) existence of the ultra vires doctrine has important implications. First, because unlawful acts are ultra vires, such activities become subject to the enforcement powers of corporate law, in addition to the enforcement powers of whatever governmental or private entity is charged with enforcing the underlying, substantive legal requirement. Corporate law thus provides shareholders the right to sue to enjoin corporations' continuing unlawful activities. Because the ultra vires doctrine is alive in a form that makes general law compliance an enforceable obligation within corporate law its continuing life also has implications for the duty of corporations and their managers to maximize profits. If corporations must obey the law, then such obedience must come at times when it is not profitable to do so. This notion is in contrast to the views of those scholars who have written that corporations should, with only some small exceptions, seek to maximize profits even when it requires the firm to break the law. Finally, that the obligation to obey the law is at the heart of the corporate contract means that corporate law cannot be thought of as concerned only with the internal governance of the firm. The remaining vestige of the ultra vires doctrine imports into corporate law a concern about general law compliance, and the lawfulness that matters is not merely the laws of the incorporating jurisdiction. In this view, a corporation is required under its charter to act lawfully wherever it does business, whether in Delaware, California, or in a foreign jurisdiction. State corporate law would thus have something to say about a shoe company's compliance with minimum wage laws in Vietnam or an oil company's use of slave labor in Burma.

CORPORATE GOVERNANCE AND CORPORATE ILLEGALITY: THE EFFECTS OF BOARD STRUCTURE ON ENVIRONMENTAL VIOLATIONS

This paper examined the effects of corporate governance structures on the incidence of corporate illegality by analyzing the relationship between environmental violations and several dimensions of corporate board structure. Results demonstrated that the value of stock owned by corporate officers and directors was positively and significantly associated with serious environmental violations. Outsider dominance, joint CEO‐Chairpersons, social responsibility committees, and attorneys on boards were not significantly related to corporate illegal behavior. The control variables of size, industry profitability, firm profitability, and industry concentration were all significantly related to environmental violations. The findings involving board structure cast doubt on the efficacy of many popular corporate governance reform proposals.

Motive, Opportunity, Choice, and Corporate Illegality

Research on corporate illegality spans several distinct literatures and defies ready integration. This article helps to overcome those problems. Analysis of data from 80 U.S. industrial organizations indicates that lower industry profitability is associated with higher frequencies of detected serious violations of federal environmental laws. Organizational profitability, industry concentration, organization size, structural complexity, organizational decentralization, and ethical climate join this variable in statistical interactions also associated with detected instances of serious environmental violations. However, none of those variables are found to be associated with the incidence of detected nonserious violations. These results provide qualified support for a model of corporate illegality in which illegal behaviors are attributable to the interactive effects of motive, opportunity, and choice. They suggest that illegal corporate activities resist simple explanation, and that future research on corporate illegality should concentrate on further development of multivariable models.

Paying The Piper: An Empirical Examination Of Longer-Term Financial Consequences Of Illegal Corporate Behavior

Longer-term performance effects of corporate illegality were investigated. Results show that firms experience lower accounting returns over five years and slower sales growth in the third through f...

PAYING THE PIPER: AN EMPIRICAL EXAMINATION OF LONGER-TERM FINANCIAL CONSEQUENCES OF ILLEGAL CORPORATE BEHAVIOR.

Longer-term performance effects of corporate illegality were investigated. Results show that firms experience lower accounting returns over five years and slower sales growth in the third through f...

Corporate Governance and Corporate Illegality

Corporate Governance and Corporate Illegality

Stock market reactions to announced corporate illegalities

Extending the work of Davidson and Worrell (1988), we further investigate the stock market's reaction to announced corporate illegalities. We examine a sample of 535 announcements of corporate crime and obtain an overall insignificant stock market reaction. However, when the sample is divided by type of crime, we find that the stock market reacts significantly to announcements of bribery, tax evasion, and violations of government contracts. We also find a significantly negative reaction to announcements of corporate crime when the company had been previously accused of other illegal activity. For companies accused of crime in the 1970s, 51% of them were accused again in the 1980s.

Pressure, Opportunity and Predisposition: A Multivariate Model of Corporate Illegality

Corporate illegality researchers often maintain that wrongdoing occurs when factors pressure a firm to behave illegally, leading managers to make a rational decision to commit wrongdoing. Yet, corporate illegality results also from conditions of opportunity and predisposition, and it may be an unintended outcome of corporate actions. A multivariate model of corporate illegality is proposed, in which situational factors-conditions of pressure, opportunity, or predisposition-lead to unintentional and intentional illegality. The model distinguishes between intentional and unintentional illegal activities, and it recognizes that intentional illegality results from a decision to engage in wrongdoing, so characteristics of the individual decision maker affect the likelihood of wrongdoing. Implications of this model for researchers and managers are discussed.

Pressure, opportunity and predisposition: A multivariate model of corporate illegality

Corporate illegality researchers often maintain that wrongdoing occurs when factors pressure a firm to behave illegally, leading managers to make a rational decision to commit wrongdoing. Yet, corporate illegality results also from conditions of opportunity and predisposition, and it may be an unintended outcome of corporate actions. A multivariate model of corporate illegality is proposed, in which situational factors—conditions of pressure, opportunity, or predisposition—lead to unintentional and intentional illegality. The model distinguishes between intentional and unintentional illegal activities, and it recognizes that intentional illegality results from a decision to engage in wrongdoing, so characteristics of the individual decision maker affect the likelihood of wrongdoing. Implications of this model for researchers and managers are discussed.

SAVINGS AND LOAN FRAUD AS ORGANIZED CRIME: TOWARD A CONCEPTUAL TYPOLOGY OF CORPORATE ILLEGALITY*

This paper proposes a classification scheme for distinguishing “organized crime” and “corporate crime” based not on the occupational position or social status of their perpetrators, but on the motives and methods of the offenses themselves. Using government documents, interviews with FBI investigators and thrift regulators, as well as a variety of secondary sources, it documents patterns of crime in the savings and loan industry and demonstrates that these conspiracies more closely approximate organized crime than corporate crime. Included in the discussion is a brief exploration of the other forms of corporate illegality to which this broader typology can be applied. The paper concludes with a discussion of the theoretical and policy implications of applying the organized crime model to certain forms of white‐collar crime and argues that with the proliferation of financial fraud, it is imperative to replace traditional ad hominem assumptions about corporate illegality with more analytically useful distinctions based on the modus operandi.

European Arms Industries in the 1980s: A Study in Corporate Crime

U.S. scholarship on corporate and governmental illegality has often drawn examples from the U.S. defense industry, but comparative and international examples have not been widely used. European defense corporations have likewise been involved in extensive abuses and criminal activities, which have often involved the illegal export of weapons to prohibited destinations. This is illustrated by the massive sanctions violations perpetrated by arms manufacturers during the Iran-Iraq War of 1980-1988, when a clandestine corporate network emerged to meet the illicit demand for weapons. This study considers the economic and political roots of the widespread corporate deviance that was apparent in those years and further emphasizes the parallels between that situation and instances of organized or syndicate criminality.

Book Review: Controlling Corporate Illegality: The Regulatory Justice System

Book Review: Controlling Corporate Illegality: The Regulatory Justice System