Measuring Deterrence: How Big a Fine Will Deter Corporate Crime?

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3 Responses

  1. Yuliya says:

    Subjecting corporate directors to personal criminal liability seems to be the only viable way to enhance the battle against corruption. Not only may it have a great positive affect on the general welfare of consumers, and indirectly supplement job market, it will also exhibit the extent of liability to other latent “violators”.
    Piercing of corporate veil should be more frequently extended to corrupt, criminal actions of the officers and directors, as well as partners and principals and the “pierce” should not be limited by civil liability, but criminal.

  2. Phil Feigin says:

    Along the same lines, I have argued for close to 30 years that fines are an awful enforcement tool, at any level. If you leave someone in business who has been fined, who do you think will actually pay the fine? My answer is, “directly or indirectly, the public they serve.” The viability of deterrence is highly questionable. In my career, I have dealt with probably thousands of people, including many “professionals,” who committed investment fraud. The most premeditated scammers thought they were smarter than the jerks who got caught. Those who sort of worked their way into a scam thought they were smart and skilled enough to work their way out of it.
    In my view, deterrence works on those who would never commit fraud in the first place. The only things that prevent those with the predisposition to commit fraud from succeeding are: (i) internal and regulatory supervision and oversight; (ii) well designed systems (including the most important of all–placing customer funds in the hands of independent, third party custodians); (iii) skilled vigilance: and (iv) the fortitude to respond promptly and competently when suspicious facts are presented.

  3. Bruce W. Bean says:

    It is futile to levy fines on corporate entities.

    That money is not management’s money. It is, as everyone should understand, the shareholders’ money.

    Is this so difficult to see? just consider how easy it is to say, reluctantly, of course, “OK we’ll pay your billion dollar fine,” while thinking the stock market will not penalize us and the shareholders have never figured out that we get away scot-free and only they lose.

    Corporate liability has not worked. Individual responsibility occasionally does.