LSAT 158, Section 1, RC Passage 4, Corporate Criminal Sanctons

Paragraph Summaries

1. Criminal punishment for corporations is well established, but some theorists say that corporations should be held civilly instead of criminally liable for wrongdoings. Civil litigation is cheaper and can better determine damages.
2. But civil litigation needs an identifiable victim with resources to begin litigation. Criminal liability is a stronger deterrent since it involves enforcement powers and sends the message that society rejects wrongful conduct.
3. Other theorists say that individuals rather than corporations should be held criminally liable. This places responsibility on the people who commit crimes, and avoids hurting shareholders.
4. But that approach is misguided since corporations can nominate scapegoats, and the real villains get away with it. Also, the fact that criminal penalties hurt shareholders financially is good: Shareholders are thus motivated to pressure companies not to break the law! Thus the most effective way is still to hold corporations criminally responsible.

Analysis

Right from the start, we can see that the author likes criminal penalties for corporations. In the first sentence, the author says that such penalties are “well established”. You have to pay close attention to any opinion words in RC, and them amp them up 100x, because RC authors are subtle. If the author says “well established” they actually mean “really really good and sensible”.

Knowing from the get go that the author likes criminal penalties helps orient you through the passage. The main point will be that penalties are good, and all of the critics are wrong. So, the rest of the passage is basically argument ➞ rebuttal between critics and the author.

First critics: Civil liability better

1. Civil liability can better determine damages
2. Civil liability is cheaper for government and  prosecuting companies is expensive
3. Criminal penalties hurt company reputations, which raises the cost to corporations. This raises prices for all of society.

Rebuttal of first critics

1. Author admits criminal prosecution is expensive, but this comes with extra power, and this power is a deterrent.
2. Civil lawsuits require a victim to start the lawsuit and have money to do so. In many cases no victim is powerful enough to start a suit, so there’s no deterrence.
3. This is good, because the main role of criminal law is to show that criminal behaviour is wrong. Civil lawsuits are no good at this.

Point 2 is especially powerful. In a lot of cases, there would not be a civil lawsuit, as no one can afford it. The government is the only one who can hold companies to account.

As for the critics’ other complaints, the author doesn’t think they’re persuasive. The author doesn’t disagree that criminal cases raise prices or that such cases are more expensive for the government. But everything has a cost, and their view is these costs are worthwhile in that they let us deter corporations from doing anything wrong in the first place, and show society that such wrongdoing is not acceptable by punishing it when it does happen.

Second critics: punish people, not companies

The second set of critics seem more persuasive. They’re not against criminal punishments.

1. They want to only punish the people who commit commit the crimes.
2. You can’t jail a company or make a company lose its job, but individual corporate executives fear both of those things.
3. When you punish a company, you cause collateral damage: shareholders lose money, employees lose jobs, the public pays higher prices.

Rebuttal of second critics

First off, the intro phrase “This approach is also misguided” is the clearest statement of author’s opinion you’ll get: the author thinks both sets of critics are wrong. Here are the reasons the second set of critics are wrong:

1. You can’t tell which individual executive did the crime. Responsibility is spread out throughout the company.
2. The company can make one person a scapegoat, and pay them rewards to compensate. So Stan goes to jail, takes all the blame, and gets $5 million from the company in exchange, for example. Meanwhile the company faces no penalty and isn’t punished.
3. It is actually a good thing that shareholders risk losing money if companies are prosecuted. This means shareholders will be motivated to pressure companies they own not to commit crimes, thus deterring crime.

Deterrence vs. Cost

One interesting point in this passage is that the author and the critics never really address each others’ points on one issue: deterrence vs. cost to society.

The critics both emphasize that society pays higher prices when companies are criminally charged. That’s us, we pay the price! The author never acknowledges this.

On the other hand, the critics never mention deterrence. The author rightly implies that we need to deter and blame companies when they do bad stuff. One implication is that if we don’t punish crimes, we get more crimes, and society pays for that too.

Like everything else in life, there is a tradeoff here. The issue is left unresolved, because the author and critics never directly address each other on this point.

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