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Theories of punishment and empirical trends in corporate criminal sanctions
Author(s) -
Cohen Mark A.
Publication year - 1996
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/(sici)1099-1468(199607)17:4<399::aid-mde769>3.0.co;2-g
Subject(s) - sanctions , punishment (psychology) , harm , context (archaeology) , empirical research , criminology , corporate crime , economics , principal (computer security) , empirical evidence , liability , law and economics , law , political science , sociology , psychology , social psychology , accounting , computer science , computer security , paleontology , philosophy , epistemology , biology
Economists who have studied crime and punishment have long advocated imposing an ‘optimal penalty’ equal to harm divided by the probability of detection. Recent theoretical advances have augmented this theory in the context of corporate crime, by examining the role of individuals within an organization convicted of crime. This revised theory takes into account the principal‐agent relationship inherent in the employer‐employee contract. This paper reviews optimal penalty theory as it applies to corporate crime, and derives its testable implications. These empirical implications are then tested against a sample of organizations convicted of federal crimes in the USA. It is shown that current prosecutorial and sentencing practice is consistent with optimal penalty theory to the extent that it calls for (1) increased sanctions with increased harm, and (2) increased individual liability when the organization cannot afford to compensate for the harm imposed. Several other empirical issues are examined, including the penalty for going to trial and the ‘deep pocket’ effect.