Corporate Criminal Liability: Developing a Legislative Model of Attribution

• Author: Conor Davis
• Position: LL.B. (Dub.), BL Candidate The Honorable Society of King's Inns
• Pages: 122-147

© 2017 Neil Murphy and Dublin University Law Society

CORPORATE CRIMINAL LIABILITY: DEVELOPING A

LEGISLATIVE MODEL OF ATTRIBUTION

CONOR DAVIS*

Introduction

As a fundamental principle of the common law, a company is a legal

person. An entity distinct of its owners and controllers, it possesses

significant powers; with the ability to buy and sell property, to enter,

bind, and be bound by contract, and to effectively act as an individual in

commercial matters.

1

Corporate personhood attributes a corporation with some, but not

all, of the legal rights of a natural person; affording the benefits of limited

liability, a veil which protects its members from suit, and perpetuity

beyond the lives of its founders. A company need only have concern for

its stockholders, as distinct from its stakeholders and the wider

community. The inherent differences between the legal person and a

natural person in effect creates an entity more powerful than any

individual. When provided with a veil of obscurity, immortality, and a

lack of either moral consciousness or conscience, the law renders

criminal acts of corporations more devastating to our society and less

likely to be held to account. This article analyses corporate criminal

liability, as referred to by the Law Reform Commission (the

‘Commission’) in its Regulatory Enforcement and Corporate Offences

Issues Paper.

2

Part I introduces the concept of corporate criminal liability and

considers the necessity of finding corporations criminally liable for their

actions, as distinct from those individuals in management positions.

Drawing upon examples of corporate malfeasance, this article details the

difficulties States have had in imposing criminal liability on corporations.

Part II outlines the appropriateness and utility of enacting a statutory

* LL.B. (Dub.), BL Candidate The Honorable Society of King's Inns. The author would like to

thank Niall Mulligan for his comments and suggestions on an earlier draft of this article.

Finally, the author would like to dedicate this article to his parents, Frank and Bernadette,

for their unending support and encouragement.

1

Salomon v Salomon & Co [1897] AC 22.

2

Law Reform Commission, Issues Paper on Regulatory Enforcement and Corporate Offences

(LRC IP 8-2016) 69.

2017] Corporate Criminal Liability

123

provision in Irish law to determine the criminal liability of corporate

entities. Furthermore, it shall analyse the vicarious liability,

identification, and organisational models of attributing criminal liability

to corporate entities, demonstrating the difficulties associated with each.

Part III recommends that a mixed model of attribution, derived from the

organisational doctrine is the most appropriate method of imposing a

statutory provision of criminal liability to corporations. It will outline a

test of attribution, the factors necessary for assessing corporate culture,

and the standard of liability that would be applicable. In a practical

application of the proposed model, Part III further considers the

constitutional implications of such a provision. This article also seeks to

ask whether applying a mixed model of attribution would effectively

prevent the type of corporate behaviour that contributed to the post-2008

Irish financial crisis.

I. The Best Interests of the Company – Shareholder

Supremacy, Profit Maximisation and Cost-Benefit

Analysis

A company is created by law,

3

its purpose as set out in its constitution;

However, with the growth in size and complexity of corporations over

the twentieth century the structure of these organisations has similarly

grown in size and complexity.

Shareholders delegate the running of the businesses that they own

to an executive board. It is this dissonance between the owners and

managers that creates a mistrust. In The Wealth of Nations, Adam Smith

acknowledged that the separation of ownership and management could

lead to inefficient management. Since executive managers could not be

trusted to manage property and capital with the same anxious vigilance

as the owners themselves, the law compels company directors to act in

the best interests of the company.

4

The case of Dodge v Ford Motor Co

5

stated that the purpose of a

corporation is to make a profit for its shareholders. Two investors sought

to have their dividend reinstated when Henry Ford, for arguably

altruistic purposes, had consistently reduced the cost of Ford Model-T

cars and paid Ford’s employees an above average wage.

6

Reinstating the

3

Companies Act 2014, s 17.

4

Adam Smith, The Wealth of Nations (London 1776) 575.

5

(1919) 170 NW 66.

6

ibid.