What is corporate crime?

Organizational crime, also known as corporate crime, is a white-collar offence committed by employees in their legitimate fields for the benefit of their employer. Such individuals are generally unaware that what they are doing constitutes a crime. Professional white-collar offenders, on the other hand, are people who identify with criminality and make it their livelihood. These professionals commit professional white-collar crimes for personal gain or profit without regard to how they may be perceived by others or whether they are legal or moral.

The idea of corporate misconduct is beginning to take hold.

The origins of the idea of corporate crime can be traced to Edwin Sutherland’s 1939 presidential address to the American Sociological Association, in which he defined white-collar crime as “a felony committed by a person with high social standing and good reputation in his professional career.”

The 1949 publication of White Collar Crime, by Gordon Sutherland, is a good example. It was one of the first books to focus on both the powerful and downtrodden in society. Sutherland later released a book with the same name (1949), which concentrated almost exclusively on corporate crime.

He discovered that all 70 of the businesses he looked at over 40 years had violated at least one law or had an unfavourable decision made against it for false advertising, patent misuse, wartime trade infractions, price-fixing, fraud, or planned manufacturing and sale of defective products.

This gang was the largest and most dangerous of them all, with over 150 convictions between them. This group included many recidivists (repeaters) with an average of eight unfavourable decisions handed down for each member. Sutherland noted that while “crime on the streets” made headlines, “crime in the suites” went unnoticed. While white-collar misconduct was considerably more costly than street crime, the majority of incidents were not even tried under criminal law, but rather as civil or administrative infractions instead.

Organized crime and business enterprises

White-collar crimes are divided into two types by most criminologists: business crime and occupational crime (criminals who commit their offences for their benefit while engaged in a legal profession). The majority of corporate offenders do not consider their activities to be criminal since the breaches are usually part of their occupational setting. Corporate offenders remain steadfast members of society, rejecting criminality. Their improper actions are frequently socially tolerated by occupational or corporate subcultures.

However, it was not until Sutherland’s study that the white-collar version received much attention, with American criminologists Marshall Clinard and Peter Yeager publishing Illegal Corporate Behavior, 1975–1976 in 1979. The research included a comprehensive examination of administrative, civil, and criminal actions filed or completed by 25 federal agencies against 477 of the country’s largest wholesale, retail, and service businesses.

Even though Sutherland’s findings were later debunked, most of his patterns have been confirmed. The same patterns that had previously been discovered by Sutherland persisted, with 60% of major businesses having at least one lawsuit filed against them and 8% of firms—the most deviant—committing over half of all infractions (52 per cent of all illegal acts). Almost half of all offences were committed by corporations. Corporations that broke the law received little punishment.

How does corporate crime translate into modern law?

The issue of corporate criminal liability has been a highly discussed point in recent years, with many participants expressing concern that the existing legal framework does not sufficiently penalize business organizations for economic crimes.

Supporters of the change argue that the existing legislation is unsuitable and point to, among other things, the “identification principle” (which requires a prosecutor to show that those responsible for the misconduct represent the “directing mind and will of the business”) as an example.

In early 2017, the government announced that it had started a review of the legislation to determine whether changes should be made to hold businesses accountable more effectively as a result of public and political pressure. The Government’s Call for Evidence generated “inconclusive” findings (which were published three years later, in November 2020) and prompted the Government to request that the Law Commission investigate further.

The Law Commission is holding several webinars as part of its consultation process. There have been two webinars thus far this month: the first was used as an introductory session to launch the consultation and publication of the discussion paper2, and the second focused on potential reform of the “identification principle.”

In the first webinar, Lisa Osofsky, the head of the Serious Fraud Office, reaffirmed the SFO’s stance that there is a need for change to “level the playing field.” She believes that not only is the current “identification principle” making it difficult to prosecute businesses, but it also puts small firms at a disadvantage relative to larger ones in which decision-making is more likely to be decentralized throughout middle management.

The present Director, as well as her predecessors, has long lobbied for the “failure to prevent” approach, which underpins the corporate bribery offence under section 7 of the Bribery Act 2010 and tax evasion facilitation charges under sections 45 and 46 of the Criminal Finances Act 2017. She advocates extending this approach to other types of economic crime (including fraud, fraudulent accounting and money laundering). A company would be held liable for economic crimes committed by any of its associated people under a law based on this model, lowering the threshold for successful prosecution.