The Corporate Insanity Defense

111 J. Crim. L. & Criminology __ (forthcoming 2020)

U Iowa Legal Studies Research Paper No. 2020-02

88 Pages Posted: 23 May 2020

Date Written: February 27, 2020

Abstract

Corporate criminal justice rests on the fiction that corporations possess “minds” capable of instantiating culpable mens rea. The retributive and deterrent justifications for punishing criminal corporations are strongest when those minds are well-ordered. That is when misdeeds are most likely to reflect malice, and sanctions are most likely to have their intended preventive benefits. But what if a corporate defendant’s mind is disordered? Organizational psychology and economics have tools to identify normally-functioning organizations that are fully accountable for the harms they cause. These disciplines can also diagnose dysfunctional organizations where the threads of accountability may have frayed and where sanctions would achieve little by way of deterrence. Punishing such corporations undermines the goals of criminal law, leaves victim interests unaddressed, and is unfair to corporate stakeholders.

This Article argues that some corporate criminal defendants are entitled to raise the insanity defense. Recognizing the corporate insanity defense would better serve victims’ and stakeholders’ interests in condemning and preventing corporate misconduct. Statutory text makes the insanity defense available to all qualifying “defendants.” When a corporate criminal defendant’s “mind” is sufficiently disordered, basic criminal law purposes also support the defense. Corporate crime in such cases may trace to dysfunctional systems or subversive third-parties rather than to corporate malice. For example, individual corporate employees may thwart well-meaning corporate policies to pursue personal advantage at the expense of the corporation itself. In such cases, corporations may seem more like victims of their own misconduct rather than perpetrators of it.

Justice and prevention favor treatment of “insane” corporations rather than punishment. Treatment would be an opportunity for government experts to reform dysfunctional corporations in a way that predominant modes of corporate punishment cannot. Effective reform takes victims seriously by minimizing the chance that others will be harmed. It also spares corporate stakeholders unnecessary punishment for corporate misconduct that could be sanctioned in more constructive ways. This is what the corporate insanity defense offers.

Keywords: Corporate Crime, White-Collar Crime, Criminal Theory, Insanity Defense, Corporate Governance, Philosophy of Law, Law and Psychology, Compliance

Suggested Citation

Diamantis, Mihailis, The Corporate Insanity Defense (February 27, 2020). 111 J. Crim. L. & Criminology __ (forthcoming 2020), U Iowa Legal Studies Research Paper No. 2020-02 , Available at SSRN: https://ssrn.com/abstract=3545428 or http://dx.doi.org/10.2139/ssrn.3545428

Mihailis Diamantis (Contact Author)

University of Iowa - College of Law ( email )

Melrose and Byington
Iowa City, IA 52242
United States

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