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Corporate fines are imposed on companies and geared to, and meant to hit, the company, not the acting managers. While corporate fines leave the simultaneous enforcement against individual managers by fines (or other sanctions) unaffected, their size tends to move them in the foreground of law enforcement: Law enforcers, public treasurers and media are attracted by large figures. In addition, under EU law the Commission can impose fines, notably fines for EU competition law infringements, on companies only, not on individual managers. Over the last years, the amounts of national and EU corporate fines have increased steadily and indeed come to reach orders of magnitude relevant to the public treasuries to which these monies flow. However, economically speaking, corporate fines are borne by the shareholders. They are also meant to be borne by the shareholders. This is underscored where, as in most EU countries, domestic law denies companies to seek recourse against the managers for fines even where managers can be demonstrated to have been responsible for the illicit conduct, and even where the managers have circumvented the company’s compliance barriers. Yet, the purpose of EU corporate fines is to act as deterrent and thus to influence the conduct of companies. However, conduct can be influenced in human individuals only. A company, in contrast, is a legal person and, physically speaking, a mere pile of paper filed with the company register. A pile of paper cannot be “deterred”. This entails the question whether such fines unduly encroach upon the fundamental rights of those who are effectively hit by corporate fines, that is, the shareholders. The EU Charter of Fundamental Rights protects their property (including property in shares) and their econonomic freedoms. According to the ECJ, restrictions of fundamental rights must be proportionate: They must not be “manifestly unsuitable” to reach their purpose and they must “strike the right balance”. The author has submitted elsewhere that corporate fines, analyzed in the framework of corporate, D&amp;O and insurance law, fail to meet these standards and thus, for legal reasons, violate the fundamental rights of shareholders: Shareholders are usually not responsible for the illicit conduct, and under corporate law they are typically unable to prevent recidivism. Against that background, this article analyzes the findings of recent empirical studies on the causes for law infringements committed in a corporate context. These findings show that managers engaging in illicit conduct are driven by factors detached from corporate fines. Hence, the studies, from an empirical perspective, support the view that corporate fines are a disproportionate restriction of shareholders’ rights and thus unlawful. The article thus submits that major revisions in today’s corporate fine practice are called for. This holds particularly true about the EU’s mushrooming fines.

european criminal law review

EU Corporate Fines Hit the Wrong and Fail their Purpose: Empirical Considerations and their Consequences from the Perspective of Shareholders‘ Fundamental Rights