Corporate Criminal Liability: Definition & Examples

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  • 0:03 What Is Corporate Crime?
  • 3:11 Corporate Criminal Liability
  • 4:38 United States V. Park
  • 5:53 Lesson Summary
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Lesson Transcript
Instructor: Kat Kadian-Baumeyer

Kat has a Master of Science in Organizational Leadership and Management and teaches Business courses.

Corporations, just like individuals, can be tried and convicted of committing crimes if managers, directors or even ordinary workers commit the crimes. There are two types: strict liability and vicarious liability.

What Is Corporate Crime?

You may have heard the term 'white collar crime' in the news. Well, corporate crime is just that. A crime committed by any person through the venue of his employment that benefits the business. This means that if an employee does something illegal to benefit the organization, the corporation itself can be held liable for the employee's actions.

That might sound counterintuitive. You may be scratching your head thinking, 'as a manager, how can I be responsible for the actions of every employee?' Believe it or not, as a business owner, you are.

Here are a few ways in which an employee can get into a corporate crime pickle:

  • Bribery
  • False claims
  • Embezzlement
  • Insider trading
  • Violation of environmental laws

Bribery involves offering to take or taking money from someone to influence them to do something they would not ordinarily do, like offering a city official money to approve a building permit.

When a company makes false claims, they are making statements that are not truthful to customers. These claims are especially damaging in advertising. Imagine ordering a low fat shake day after day only to find out the company falsely claimed its calories and fat to be much lower than they really are. Repeated purchase of this product under these false pretenses could potentially lead to health problems, weight gain or even death.

One of the most devastating corporate criminal acts is embezzlement because it hits the pockets of innocent people. This is when money or other valuables are converted into personal or corporate gain by a person whom others trust.

Let's say the purchasing agent at a company accepts kickbacks from a vendor in order to ensure their continued business. These kickbacks may be in the form of money or gifts, like vacations or even jewelry. The employee, by accepting the kickbacks, is personally benefiting from the vendor on the side. This is illegal because assets are being withheld from the company and only benefiting these two individuals.

Insider trading is a very serious crime. It involves buying and selling stocks based on non-public information. This is such a serious crime because those in a position of trust hold information that the general public does not have access to. With the information, only a certain few can enter into lucrative stock purchases or sales earlier and stand to gain more.

Our natural surroundings are something most people hold precious. But some companies do not feel the same way. Violating environmental laws by polluting the air and water or destroying trees and wildlife holds devastating effects on everyone's health and welfare. A chemical spill due to negligence in the ocean, for example, can kill seabirds and destroy their natural habitat for years to come. It should be pretty clear that someone will be in trouble if this sort of thing happens.

Now that we learned a few ways corporate crime occurs, let's see what liability a corporation holds to crime.

Corporate Criminal Liability

Corporate liability simply means the extent to which a corporation is responsible for the actions of its employees. There are two ways in which a corporation can be liable:

  • Strict liability
  • Vicarious liability

Strict liability is compulsory when an act causes damage, injury or death, even in the absence of criminal intent. This is used as a way of forbidding the act from occurring again.

Think about a restaurant serving food that has expired. While the chef may have the owner's best interest in mind by serving expired food rather than throwing it away, he is potentially subjecting diners to food-borne illness, sickness or death. The chef did not intend to do anything illegal. But in the end, if a customer were to fall ill, the owner would be liable for the chef's actions.

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