Sutherland argued that poverty could not be seen as the main cause of crime and hat crime could also be found in good neighborhoods (Warning, Chatty, 2001). Despite Sutherland fascination in the area of corporate crime, William (2014) states that it has been the most understudied area in criminology and suggests that criminologist tend to focus more on street crime ignoring the fact corporate crime has been proven to be twice as harmful and costly than street crime.
In this literature review the key focus will be on corporate crime and its causes. First, I will in detail describe the causes of corporate crime using the strain theory and rational choice theory. Secondly I will examine the regulation of police corporate crime and explain how it fails. Thirdly I will analyze the beneficial relationship between corporate crime and politics. Lastly, I will use the Enron Scandal to show the harm that corporate crime causes and also to show the limited response it received from the police.
If we are able to understand the causes of corporate crime and the flaws in regulations, then we will be able to implement policies to deter corporate crime. Corporate crime and the Strain Theory Wang and Helicopter (2012) argue that there is a link between corporate crime and he strain theory. They argue that industry-level strains increase the motivation of corporations to commit crime (Wang and Helicopter 2012). In addition they suggest that all corporations are pressured to pursue increasing profit and explain that the pressure is not limited to failing companies, but also those with growth.
In essence, the authors state that corporations that are declining in growth by legitimate means are pressured to stabilize growth through illegitimate means (Wang and Helicopter 2012). In comparison, Carl Kane (1993) agrees that financial strain plays a major role n corporate crime. He proposes that the survival of a corporation depends on their financial performance and pressure to maximize profits; in explanation he states that when there is a decline in financial performance it results to a great strain to submit to illegal act (Kane 1993).
Kane (1993) also points out that corporate illegality that results from financial strains usually involves administrative violations such as “non compliance with order from a court, labor violations, occupational safety, health hazard, and unfair labor practices”. Moreover, Kane (1993) suggest that companies experiencing greater financial loss are more prone to committing corporate crime. In the same manner, Wang and Helicopter (2012) indicate that in some industries, profit minimization through illegal means is presented more than in other industries because of the limited legitimate opportunities.
Furthermore, the authors explain that corporations and some industries are more tolerant of illegality than others. Throughout corporations presented with illegal ways of maintaining growth, Wang and Helicopter (2012) suggest that they must learn techniques of offending, along with values, motives and rationalization. The authors present four hypotheses, which explain the causes of corporate crime in corporation and industries with strain being the primary influence (Wang and Helicopter 2012).
In their first Hypothesis, they state, ” corporation-level strain will increase corporate crime” (Wang and Helicopter 2012). In presenting this hypothesis, Wang and Helicopter (2012) explain that profitable corporation is subjected to strain for maximum growth especially those with failing performances. In addition, they state that a number of studies established that low rates of growth led to illegal corporate behavior (Wang and Helicopter 2012).
In their second hypothesis they suggests “corporate crime will be greater in strained corporations that are characterized by higher level or organizational complexity’ (Wang and Helicopter 2012). They explain that in strained corporations, there has to be opportunity presented for illegality for corporate crime to take place (Wang and Helicopter 2012). The fourth Hypothesis stated by Wang and Helicopter (2012) is ” the effect of corporation-level strain will be greater in financially strained industries”.
They suggest that corporations with a decline in their financial growth ill partake in corporate crime (Wang and Helicopter 2012). Finally, Wang and Helicopter (2012) intend to fill the research gap between corporate crime and strain theory, by examining how strain causes corporation and industries to result in illegal behavior, whiles Kane (1993) focuses on the financial aspects using it as a direct strain. Corporate Crime and Rational Choice Theory In the area of corporate crime, rational choice theory is believed by scholars to be one of the useful tools in understanding corporate crime (Pique and Simpson 2005).
Many scholars have tested this approach in examining corporate crime including Pique and Simpson (2005), who argue that rational choice is integrated with corporate crime. In explaining this integration, they suggest that the offender of corporate crime use rational choice to outweigh the benefits over the cost before committing the crime (Pique and Simpson 2005). Similar to Pique and Simpson (2005) view, Paternoster and Simpson (1996) agree that rational choice theory is useful in understanding corporate crime and take the same individualistic approach as well.
Paternoster and Simpson (1996) explain that decisions to commit corporate crime are made by individuals. They outline that offender’s decisions are made by balancing both cost and benefits of offending (Paternoster and Simpson 1996). Moreover, they state that that corporate offenders decision-making process is affected by the risk and benefits they perceive for themselves and risk and benefit they perceive for their firm (Paternoster and Simpson 1996).
In order words they explain that when the individual uses rational choice; they may envision the cost in a corporation to include a regulatory, civil and or criminal sanction; they also examine that the negative outcome could lead to a reduction in revenue and diminished restive for the corporation (Paternoster and Simpson 1996). Paternoster and Simpson (1996) also propose that employee’s decision to commit corporate crime is based on the moral climate of organization where offenders are more likely to commit these practices when it is a common practice.
In comparison, Pique and Simpson (1996) indicate that corporate offenders are also influenced by their organization to commit crime where there are “grey areas”, where the law is unclear and when there are significant violations. In other words, Pique and Simpson (2005) inform that an offender’s decision to commit corporate crime may be affected by the resistance of an organization, where as employees commit corporate crime when the organization is more tolerable to misconduct.
In Contrast to Paternoster and Simpson (1996) article, Pique and Simpson (2005) article point out that corporate offenders are not only affected by their organizational characteristics in making rational decisions, but are also influenced by their personal characteristics (Pique and Simpson 2005). They put forth the term of “desire for control” (DC), which they define as a wish to be in control of everyday life events.
In using the term, they suggest that the desire for control relate to corporate offenders behavior, in which influences their decision making process (Pique and Simpson 2005). They explain the characteristic of an individual with DC is inclined to have the tendency to force their environment to adjust to their expectations (Pique and Simpson 2005). In further analysis, Pique and Simpson (2005) add that DC personality traits affect the rational decision making process of corporate offenders and that individuals with high DC are more likely to resort to corporate crime.
In addition, he also suggests that individuals who offend on behave of corporations; do not offend primarily for their self-gain (Pique and Simpson 2005). Both Pique and Simpson (2005) along with Paternoster and Simpson (1996) articles agree that rational choice theory is used to explain the causes of corporate crime. Harms of Corporate Crime Since 2000, billions of Us dollars has been invested in fighting street crime, where as, less attention is placed on corporate crime (Oinks Pappas, 2005), when in fact corporate crime is a major harm against society (Rebecca S.
Katz 2012). In this section, harms caused by corporate crime will be analyzed. In Pass’s (2005) article, he argues that the malpractices of corporations negatively impacts society. In explaining his point he explores the physical, financial and environmental harms of corporations (Pappas 2005). He uses the tobacco company as an example of the physical harms; he reports that the death toll of 4 million people per year is a result of tobacco company profits (Pappas 2005).
He also adds that there is a long list of diseases caused by smoking and that 50,000 non-smokers die due to second hand smoke and the fires caused by cigarettes (Pappas 2005). In the same fashion, Katz 2012) illustrates that cigarettes have a damaging effect on the environment where pollutants such as sulfur dioxide is disposed; she explains that cigarettes also affects the air quality and causes lung cancer. Skate’s (2012) main argument is that corporate pollutions increase the rates of cancer.
She explains that, “scientific evidence links industrial waste, fossil fuel extraction and processing nuclear, power plant operation, nuclear waste disposal, and the production of a variety of consumer products have resulted to increased cancer rates and cancer mortality’ (Katz 2012). She reports that large number of polluting industries including Du Pont, Ford, Union Carbide and General electric are responsible for increased cancer rates (Katz 2012). She also points out that breast cancer has been linked to chemicals produced by cosmetic companies and other personal care products (Katz 2012).
Apart from Kart’s argument, Pappas explores the other element of physical harms linked to corporate industries (2012). He suggests that the firearm industry has made profit through international sales of weapons, which has kill 32, 436 Americans in 1992 (Karat 2012). He also focuses on the pharmaceutical industries where they use third world entries as a laboratory with Guiana pigs for drug testing; he explains that these testing take place because in third world countries there are less regulations and that civil law suits are unlikely (Karat 2012).
Pappas (2005) suggest that the pharmaceutical companies get their first approval from the third world countries in which they sell these products in the third world markets before getting the final approval from the regulated western agencies. Regulations and policing of Corporate Crime Over the course of history, we have seen the war against drugs, alcohol prohibitions ND tough sentencing against street offenders, however we have also seen the failure of regulation for corporate crime. This section examines the regulations of corporate crime and why they fail.
Versatility S. Khan (2004) explores the reasons as to why regulating agencies struggle to respond to corporate crime. First, he notes that there have been regulation put in place for deterrence of corporate crime due to the ongoing scandals; an example which he gives is the Sardines- Solely act of 2000, which is estimated to cover over 300,000 violations and is also broad in terms of overdoing areas from environmental to banking in corporations (Khan, 2004). Khan argues that despite newly regulations, corporations somehow seem to benefit from them (2004).
He proposes that corporate crime legislation may benefit larger corporation, in the sense that it raises competitors costs for entering and remaining in business; however, he also claims that these legislations seem to treat smaller corporations better as they would receive lesser fines that larger corporations (Khan, 2004). To draw distinction, Paul Larsson (2012) argues that larger corporations get away with offending, while the smaller firms are prosecuted. He also mentions that when corporate misconduct is discovered, if the act does not have a serious impact on society, then a warning or fine is given (Larsson, 2012).
Moreover, Khan (2004) shares the same views as Larson (2012), as he states that when corporate crime becomes visible to the public, then that is when actions are taken. He also details how corporate crime legislation is enacted, by suggesting that it begins with a public outcry followed by the response from congress, where they have the options of either enhancing corporate criminal or civil liability (Khan, 2004). He totes that when legislation focuses on increasing criminal liability it is actually in favor of the corporations (Khan, 2004).
He makes further analysis explaining that it terms of criminal liability, it is less enforced than civil liability (Khan, 2004). He expands his argument by addressing how criminal liability is weaker than civil liability of the fact that it receives limited enforcement budgets and also due to the strong criminal procedural protection (beyond reasonable doubt) (Khan, 2004). Likewise, Harry Glassless (2002) agrees with Khan (2004) and further explains the allure of corporate criminal liability regulations.
He explains that investigators and prosecutors face many difficulties when prosecuting corporations and states that for corporation to be held criminally accountable, prosecutors must find someone who is the guiding mind and must prove that they engaged in criminal conduct (Glassless, 2002). In addition, he explains that it is very difficult for prosecutors to find an individual responsible for criminal conduct in large corporations (Glassless, 2002). Glassless (2002) also suggests that corporations should not be regulated by criminal awe, which seems to be beneficial to large corporations.
In relation, Khan (2004) agrees by reveling the civil liability is more harmful for corporations and is a better deterrence than criminal liability. He makes a case that civil liability has a greater enforcement where there is a greater likelihood of penalizing offenders and that is not subjected to protective procedural protections; in addition, civil liability are handled by private litigants, which are like government agents that receive direct financial gain from prosecuting offenders (Khan, 2004).
He also expresses that rapports liability has lesser vulnerability to lobbying power as to criminal liability where corporations give incentives to congress make legislation in their favor (Khan, 2004). Glassless (2002) also exposes further weaknesses of corporate criminal liability in reporting that corporations prefer criminal liability of the reason that the courts are more likely to hold the ” corporation” accountable for offending, rather than the mangers of the corporation.
In opposition to Glassless and Khan views, Larson (2012) argues that penal sanctions are the least effective way in ejaculating corporate misconduct, however; he agrees with the other authors that criminal laws are ineffective in deterring corporate crime. Larson (2012) explains that a fine and prison sentence is not a risk for corporations, but what is more risky is for a corporation is a ruined reputation and a loss of license. Thus, the laws that regulate corporate crime are weak and are seen to benefit corporations (Larson, 2012).
In order to deter corporations from offending we need tougher regulations and according to Larson (2012), ” A loss of licenses is like a death of the company’; so why is that not the case? Enron Scandal Throughout the 21 the century there has been countless scandals of corporate crime from the Opinion scheme to the World cases. The focus here will be on the Enron Case as an example of corporate crime. Gray, Fried and Clark (2005) show a detailed step-by-step analysis Enron’s involvement in corporate crime in 2001.
They explain that Enron’s manager used off balance sheets, to hid huge company losses and when the losses appeared, the company manager sold millions of dollars in company stock while prohibiting their employees from selling their stocks (Gray, Fried and Clark, 2005). In Particular Andrew Fast was mentioned, they stated that he made a special partnership with LLC Common where they purchased assets from Enron (Gray, Fried and Clark, 2005).
The authors exposed Factors scheme explaining that he created the two partnerships to engage in billion dollars of complex transactions with Enron involving company assets and millions of shares of Enron’s stocks (Gray, Fried and Clark, 2005). The authors report that ELM was not a separate company from Enron, however; Enron was selling its assets to itself and the phony sales made by Enron reported growing revenues and profit to investors when Enron was actually losing millions of dollars (Gray, Fried and Clark, 2005).