Journal of Criminal Law and Criminology Volume 58 | Issue 4 Article 7 1968 Penology and Corporate Crime Leo Davids Follow this and additional works at: https://scholarlycommons.law.northwestern.edu/jclc Part of the Criminal Law Commons, Criminology Commons, and the Criminology and Criminal Justice Commons Recommended Citation Leo Davids, Penology and Corporate Crime, 58 J. Crim. L. Criminology & Police Sci. 524 (1967) This Article is brought to you for free and open access by Northwestern University School of Law Scholarly Commons. It has been accepted for inclusion in Journal of Criminal Law and Criminology by an authorized editor of Northwestern University School of Law Scholarly Commons. TnE JOURNAL OF CRIMINAL LAW, CRIMINOLOGY AND POLICE SCIENCE Vol. 58, No. 4 Copyright 0 1967 by Northwestern University School of Law Printedin U.S.A. PENOLOGY AND CORPORATE CRIME LEO DAVIDS The author, who received his M.A. at the City College of New York in 1961, is Lecturer in Sociol- ogy at Hunter College. He has taught Criminology and juvenile Delinquency at various campuses of The City University of New York, and has also published in the area of Family Problems. He is cur- rently preparing his doctoral dissertation at New York University. Mr. Davids' article considers crime by major corporations in the light of the penal sanctions now available to control it. Statistical data and case-history information are joined with sociological analy- ses to support the thesis that present law is inadequate to cope with problems of commercial crime. Suggestions for a realignment of the pertinent legislation with current realities in this field are pre- sented. The principal business of penology is neither an known treatises of Sutherland, Clinard, Jaspan, historical task of discovering what societal reac- and Cressey, 3 we find that they cover a number of tions to crime have been in various times and different things. It is Sutherland's classic, which places, nor the providing of systematic details of deals mainly with illegal acts by corporations prison administration, but rather the evaluation of against external entities (other corporations, the what happens after conviction in terms of prevent- government or the general public) that is relevant ing recurrence of the same acts.1 The main criterion here. We will only tangentially be concerned with by which we can judge our "sanction law", as crimes against the corporation by its own person- Arens and Lasswell discuss it,2 is whether society nel, or with individual crimes which are of a routine tends to be safer after its application than before. business character and are folk-legitimized by the By such a test, clearly, much of our present system great principle "Everybody's doing it". These of justice in the United States is a disturbing and other categories will be dealt with here only as they costly failure. contribute to our consideration of corporate crime There is no need for a discussion of ordinary, in Sutherland's sense. individual crimes and the deterrent effect of the It should be clear that our approach herein is usual penalties that our courts prescribe; this has sociological as well as legal, so that our material been abundantly done by other writers. What is to will be channelled both by social science concep- be examined here is corporate crime in relation tions and by jurisprudential ones. Hence, we will to the societal apparatus intended to control it. not restrict ourselves, again following the lead of It will become clear that there is a pronounced Sutherland and others, to officially-designated discrepancy, a sort of cultural lag separating crimes dealt with by criminal tribunals, but shall the ongoing reality of illegal activities by orga- also look at actions penalized or prevented by civil 4 nized human associations from the laws and pro- and administrative action. cedures now institutionalized against those activ- ities. NATURE OF TIIE CORPORATION Before we can look at this penal lag, a number of Let us see why Wilbert E. Moore calls the cor- definitions and distinctions are in order. We must poration "that singular organization". 5 A cor- focus on our topic by pointing out the things that poration is the result of the creation of a new "legal we shall not be looking at, as well as making sure that the units in which we deal are specifically 'SUTHERLAND, WHITE COLLAR CanIE (1949); understood. Let us begin with the obviously- CriNARD, THE BLACK MARKET (1952); JAsPAN & BLACK, THE THIEF IN THE WHITE COLLAR (1960); appropriate concept of "white collar crime". CRESSEY, OTHER PEOPLE'S MONEY (1953). Although libraries may place together the well- 4 The procedural systems are often interchangeable. See Cressey's "Foreword" to WHrTE COLLAR CRIME, ' Cf. SUTHERILAND & CRESSEY, PRINCIPLES OF CRIMI- op. cit. supra pp. iv-ix. NoLooy 259--60 (5th ed. 1955). -MMOORE, THE CoNDucT OF THE CORPORATION vii 2 ARENS & LASSWELL, IN DEFENSE OF PUBLIC ORDER (1962). He and we are speaking of large business firms, (THE EMERGING FIELD OF SANCTION LAW) (1961). not of family stores or non-profit organizations. PENOLOGI AND CORPORATE CRIME TABLE I REPRESENTATIVE MAGNITUDE DATA or FOUR MAJOR AmERCAN CoRPoRATIoNs (as of Dec. 31, 1965) Name Amer. Tel. & Tel. Con. Edison Gen. Motors Gulf Oil Corp. Output units 75,866,254 tele- 4,367,020 meters in 7,278,131 vehicles 2,082,121 bbl. daily phones in service I service sold in 1965 average Employees 795,294 23,863 734,600 55,200 Total assets $32,818,689,000 $3,387,006,500 $11,478,546,590 $5,210,833,000 2 Gross revenue $11,061,783,000 $ 840,240,274, $20,733,982,295 $4,185,253,000 1965 Percentage in- 40% 28% 63% 32% crease of gross ($7,920,454,000) ($655,812,826) -($12,735,999,681) ($3,212,205,000) revenue1960 since 1 Source .Annual Report, Annual Report, Annual Report, Annual Report dated dated Feb. 16 dated Feb. 23, dated Feb. 14 March 16 '66 pp. 2, 1966 pp. 25-28 1966 pp. 26-31 1966 pp. 28, 36-37 34-35 (Percentage of Increase figures computed by author.) person", somehow independent of its founders, who individual interests. This thinking and deciding can obtained the necessary charter. The corporation only be dealt with and traced into effects and 7 often outlives its founders, and the British "lim- repercussions on the collective level. ited" shouts the fact that its obligations and those Another structural strength, as we have noted, of the men involved in it are two separate things. is the existence of a transitive-executive corps that, The historical-legal article by Laski shows how once informed of the authorized will of the cor- uncertain the Anglo-American law was about the poration's thinking parts (management), puts these exact status of corporations until recently, and in into effect without independent questioning and other sources we also find how perplexing is the evaluation of the decision. Obviously this is so, and tracing of financial or criminal liability in dealing must be; what emerges, however, is an issue of with such collectivities.' It is nowadays recognized responsibility/culpability identical to that so that corporations do accomplish meaningful acts highly publicized by defense counsel at the Nurem- that cannot be attributed to any individual man berg trials. but have to be laid at the organization's door. A quite different virtue-turnable-into-vice of the As Weber and other analysts of bureaucracy corporation is the great volume of work in its have taught us, bureaucratized corporations pos- specialty that it can accomplish. Through extensive sess various structural advantages. Among these division of labor and careful management to co- strengths is the superior scope and power of the ordinate its various branches, the corporation is fused thinking of many people who are experienced able to produce and distribute staggering quanti- and competent to deal with a limited range of ties of goods and services. For some actual data on recurrent problems, and whose rational decisions corporate magnitude, we need but select a few are promptly and thoroughly translated into figures from the latest annual reports of our major action. This means that a board of directors, or corporations. If we settle for slightly older sta- other legitimate groups constitutive of the cor- tistics, we can use Fortune's Annual Directory of poration, can arrive at decisions which neither the largest corporations. could have been thought through as thoroughly by In 1964 the United States had 55 industrial the individuals involved, separately, nor serve their corporations with over $1 billion of annual sales. 6Laski, The Personalityof Associations originally in The rest of the world had 21 such firms. The top 29 HARv. L. Rnv. 404, reprinted as selection 21 in 500 U.S. manufacturers totaled 10,464,383 em- HENSON (Ed.), LANDMARKs or LAw 321-38 (1960). See, also, INBAU & Sowim, CRnMNAL JusTicE 486-92 (2d ed. See ETzloNI, MODERN ORGANIzATIONs 29-30, 51- 1964); and MOORE, op. cit. supra note 5 at 53-6 and 55 (1964); HunrF, SOcIAL AsPEcTs or ENTERPRISE IN 86-7. TUiE LARGE CORPORATION 100-104 (1950). LEO DA VIDS [Vol. 58 ployees, an average of some 21,000 people each. appear to develop for behavior which devi- 0 There were also 25 insurance companies and 40 ates from accepted norms. commercial banks in the U. S. with assets exceeding Descending from the cultural to the psycho- Furthermore, hefty percentage increases $1 billion. logical level, we can find the same trends charac- in sales and profits were registered by every manu- terizing contemporary American life expressed not facturing industry except Tobacco.8 as summary comments on the value system, but One of the central consequences of the foregoing an terms of The Organization Man or the "other- magnitudes is the substantive nullity of little directed" rat-racers of so many recent critics;" disturbances or added cost in management deci- Cressey has woven this theme into his study of since they can be entirely ignored when sions, embezzlement.12 These writerg have shown the increases of overhead can be subdivided onto the impact of modem, and especially big, business on selling price of millions or billions of product-units.