What is corporate crime? Corporate crime, sometimes called white-collar crime, is crime committed by individuals on behalf of a business. The corporate crime definition indicates clearly that corporate crimes are committed by individuals to benefit the companies that employ them, although the individuals involved may themselves profit from such acts.
Criminologists have proposed several theories of corporate crime. The first formal explanation for corporate crime was put forward by criminologist Edwin Sutherland in 1939. His Theory of Differential Association suggests that criminal behavior occurs when individuals associate with others who view criminal acts in a positive light. Sutherland also claims that criminal behavior occurs only if individuals are in an environment where most associates do not view criminal behavior in a negative way.
Some criminologists have criticized the Theory of Differential Association, noting that it fails to consider other causes such as depression and drug abuse. Sutherland's theory also fails to account for differences among individuals.
Corporate Crime Examples
Corporate crime examples are plentiful and take many forms. Violation of environmental laws, bribery, false claims, and corporate fraud are a few examples of corporate crime; types of white-collar crimes are limited, of course, only by the criminal's imagination.
- Individuals who violate environmental laws designed to protect the environment typically do so to increase corporate profits. Although the company may benefit from failing to abide by environmental regulations, in this type of case the individuals who instigate the crime likely expect to benefit indirectly as well through corporate bonuses, increased salary, or higher stock prices. An example of this type of crime can be found in a case involving Royal Caribbean Cruises Ltd. In 1999, the company was ordered to pay a record-breaking 18 million dollar fine for routinely dumping waste oil, a widespread practice that occurred throughout the company's fleet. Representatives of the company also lied to the Coast Guard regarding oil disposal by submitting falsified oil logs.
- Bribery occurs when an individual offers something of value to another person to influence the recipient's actions. In 2014, Rite Aid Corporation was ordered to pay a 2.99 million dollar fine for offering gift cards to Medicare and Medicaid patients to influence them to transfer their prescriptions to Rite Aid pharmacies.
- In the 1980s, Beech Nut settled a case that showed the company had made false claims when it claimed its apple juice was 100% fruit juice. In fact, the product was shown to consist of primarily sugar water with only a small amount of apple juice.
- Corporate fraud involves the intentional misstatement of facts about the company's financial situation or its corporate actions. This kind of misrepresentation is intended to mislead the public or increase company profits. In the largest case of corporate fraud at the time, WorldCom, a Mississippi-based telecommunications company, was found to have overstated its earnings to drive up stock prices. These actions led to the company's bankruptcy and a 25-year prison sentence for WorldCom's CEO.
History of Corporate Crime
Criminologist Edwin Sutherland, author of the Theory of Differential Association, is an important figure in the history of corporate crime. Sutherland was the first to use the term corporate crime in 1939, although the practice has been occurring since corporations were recognized as business entities in the 14th century.
Some criminologists speculate that the roots of corporate crime can be found in competitive business environments in which the goal is to crush competitors in the quest for higher profits. This is not always the case, however, as some instances of white-collar crime have been executed simply to keep a business afloat. In any case, the many varieties of corporate crime are always propelled by a human criminal actor who devises, oversees, or participates in a criminal act involving a business.
Causes of Corporate Crime
What are the causes of corporate crime? Greed, desperation, and opportunity in the corporate environment can lead to corporate crime. Many factors can lead to white-collar crime, including:
- Inadequate training can lead workers to commit crimes if they do not understand the legalities of their tasks.
- Inadequate technology may fail to prevent some types of corporate crimes and in some cases may actually contribute to criminal acts.
- Inadequate risk management systems are sometimes a component of corporate crime.
- Cost-cutting measures, typically designed to increase a company's profitability, may lead to corporate crimes as well. CEO Joe Smith of Joe's Widget Factory, for example, may determine that his company's profits would increase if he could reduce payroll. In the past, Joe's Widget Factory had employed a safety officer to ensure employees were not injured while building widgets. Once Joe fires the safety officer to cut costs, company profits increase. In a further attempt to increase the profits he can take from his business, Joe stops ordering necessary safety equipment. His salary increases, but so do employee injuries.
- Without legal protection for whistleblowers, those who witness corporate crimes may be reluctant to report such incidents.
- When regulations are inadequate or regulators are underfunded, certain activities such as environmental crimes may increase.
- Some corporate lawbreakers may view their acts as victimless crimes, but even corporate crimes affect others in the company.
- Corporate criminals typically calculate the risk and benefits of illegal activity. They may, for example, weigh the risk of penalties, imprisonment, and social stigma against potential benefits.
Corporate crime is crime committed by individuals on behalf of a business. Corporate crimes can occur in a variety of ways: violations of environmental law, bribery, false claims, corporate fraud, and other methods. Typically, individuals are looking for personal financial benefits that may be available as a result of higher company profits. Even well-known companies such as Royal Caribbean Cruises, Rite Aid, Beech Nut, and WorldCom can find themselves embroiled in criminal activity.
The first formal theory of corporate crime called the Theory of Differential Association was proposed by Edwin Sutherland, who also coined the term corporate crime. Corporate crime, according to Sutherland, flourishes when individuals associate with others who view criminal acts in a positive light. There are many other theories about corporate crime, as well. There are also a myriad of factors that can contribute to corporate crime: inadequate training or technology, inadequate risk management systems, cost-cutting measures, lack of whistleblower protections, and inadequate regulations. Many corporate criminals view their acts as victimless crimes, but many suffer when employees violate the law. Those who perpetrate these acts typically weigh the benefits of the crime against the risk of discovery and punishment.
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What are some examples of corporate crime?
One example of corporate crime involved Royal Caribbean Cruise Lines practice of dumping oil, a violation of environmental laws. Another example occurred when Beech Nut made false claims regarding the ingredients in its apple juice.
What is the most common crime committed by corporations?
Environmental crimes are the most common type of corporate crime. It is important to remember, however, that individuals rather than companies initiate crimes. They may do so on behalf of a corporation, but a human hand is always involved in corporate crime.
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