Is the Notion of Corporate Fault a Faulty Notion?: The Case of Corporate Mens Rea

Abstract

The imposition of liability, whether civil or criminal, on corporations evokes heated debate and continuing controversy. One of the more theoretically perplexing and practically challenging areas of corporate liability are the provisions in the law that require a corporation to possess a state of mind, such as intent, before it is made liable. The apparent incongruity of requiring a corporation to have a state of mind, when it has no mind per se, should encourage us to ask why we have laws that require corporations to possess mens rea - why not simply make corporations liable on a strict liability or negligence standard. There appears to be no deterrence-based answer to this question. This Article undertakes to fill this gap. The Article compares the various corporate mens rea standards against strict liability and negligence to ascertain when, if ever, corporate mens rea is socially preferable to its alternatives. The analysis suggests that corporate mens rea is indeed problematic and that, unlike mens rea requirements for individuals, corporate mens rea rarely proves to be preferable to its alternatives. Furthermore, even in those rare instances where corporate mens rea is the preferred alternative it is better to make corporate mens rea a matter only relevant to increasing the sanction, not a matter determinative of a corporation's liability. Consequently, it is socially desirable to replace corporate mens rea standards with strict liability or negligence that allows for mens rea to be made a matter influencing the magnitude of the sanction when appropriate. Developments in the law seem to be moving in this direction and the analysis in this paper adds further support for them.

Keywords: Corportate & Securities Law, Criminal Law, Law & Economics