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Towards a Rational Theory of Criminal
Liability for Corporations in Nigeria
NAU.JCPL Vol. 6(1) 2019
~Umejiaku NO & Uzoka CN
126 | Nnamdi Azikiwe University Journal of Commercial and Property Law Vol. 6(1) 2019
TOWARDS A RATIONAL THEORY OF CRIMINAL LAIBILITY
FOR CORPORATIONS IN NIGERIA
Umejiaku, Nneka Obiamaka PhD* and Uzoka, Chisom Ngozi, LLM*
Abstract
There is an increasing focus globally by prosecuting and regulatory agencies in
bringing corporations to account directly for their actions. This paper will attempt to
present the problems involved in the concept of corporate criminal liability, followed
by an analysis of the approaches taken by different legal systems. It will consider the
underlying principles of such liability so as to justify the imposition of criminal
liability on corporations. The crimes corporations commit, if any, the mitigating
factors thereof and the type and level of sanctions to be imposed will also be
espoused. The paper is geared towards determining to what extent these sanctions
can deter corporate criminality. The methodology adopted in this paper is doctrinal
while the approach is narrative and comparative. The result indicated that there
seems to be no specific liability theory for determining the corporate mensrea. Most
relevant Nigerian legislation and case laws do not recognise that a corporation can
have mensrea. In addition, there is lack of adequate corporate sanctions in Nigeria.
This paper discovered that the extant laws on corporate criminal liability are
deficient. Thus, it is recommended that the corporate fault theory of determining
liability should be adopted in Nigeria.
Keywords: Criminal liability, corporations, corporate homicide
1. Introduction
It is worthy to note that the criminal liability of corporations has been controversial.
While several jurisdictions have accepted and applied the concept of corporate
criminal liability under various models, other law systems have not been able or
willing to incorporate it. This is based on their particular historical, social, economic
and political developments. Based on these developments, each country finds it
*By Dr. Nneka O. Umejiaku, Lecturer, Department of Commercial and Property Law, Faculty of
Law, NnamdiAzikiwe University, Awka, Anambra State, Nigeria. E-mail, nnekaumejiaku@gmail.com
08033809219
*Ngozi C. Uzoka, LLM, LLB, BL, Lecturer, Department of International Law and Jurisprudence,
Faculty of Law, NnamdiAzikiwe University, Awka, Anambra State, Nigeria, Phone:
08063212174. E-mail: nc.uzoka@unizik.edu.ng or chisongozi@yahoo.com
Towards a Rational Theory of Criminal
Liability for Corporations in Nigeria
NAU.JCPL Vol. 6(1) 2019
~Umejiaku NO & Uzoka CN
127 | Nnamdi Azikiwe University Journal of Commercial and Property Law Vol. 6(1) 2019
appropriate to respond to the criminal behaviour of companies in different ways. In
the common law world, following standing principles in tort law, English courts
began sentencing corporations in the middle of the last century for statutory offences.
On the other hand, a large number of European continental law countries have not
been able to or not been willing to incorporate the concept of corporate criminal
liability into their legal system
1
. The legal fiction of treating corporations different
from those who run their daily operation has created certain limitations. As a result
many courts and legislatures have resorted to make regulation of corporate behaviour
more effective by creating criminal liability for both the corporation and the
individual officers and executives of the corporation. However, it proved difficult to
punish the corporation for lack of adequate sanctions. Over time, the English courts
followed the doctrine of respondent superior or vicarious liability in which the acts of
a subordinate are attributed to the corporation
2
. However, vicarious liability was only
used for a small number of offences and later on replaced with the identification
theory. Under the identification theory, subject to some limited exceptions, a
corporation may be indicted and convicted for the criminal acts of the directors and
managers who represent the directing mind and will and who control what it does
3
.
This concept has developed over decades.
There are several difficulties to the traditional approach of imposing liability on a
corporation based on identification and vicarious liability theory from a prosecutorial
perspective. It provides for ‘derivative liability’ in the sense that corporations can
only be culpable if the liability of an individual is established. From a practical
perspective, it can be very difficult to identify the employee who committed the
wrongful act or had the culpable state of mind. From a conceptual perspective, this
approach does not reflect the complex interactions between human actors and the
corporate matrix. Recently, some jurisdictions have contemplated a new basis for
criminal liability ‘organizational liability’ that has the potential to address this
1
C Kaeb , ‘The Shifting Sands of Corporate Liability under International Criminal Law’ (2017) The
GeorgeWashington International Law Review, vol. 49 Available at <http://www.gwilr.org>
Accessed on 10 July, 2017.
2
This doctrine prescribes that the master is responsible for the acts carried out by the servant in the
course of the servant’s employment. It was justified because the master acquires the benefits and
should therefore also carry the burden for wrong doings. See G Ferguson , ‘Corruption and
Corporate Criminal Liability’paper presented at Corruption and Bribery in Foreign Business
Transactions: A Seminar on New Global and Canadian Standard. February 1999,Vancouver,
Canada p 4 - 5.
3
C M V Clarkson , H M Keating & S R Cunningham, Clarkson and Keating Criminal Law: Text and
Materials (London: Sweet & Maxwell, 2007) p.48.
Towards a Rational Theory of Criminal
Liability for Corporations in Nigeria
NAU.JCPL Vol. 6(1) 2019
~Umejiaku NO & Uzoka CN
128 | Nnamdi Azikiwe University Journal of Commercial and Property Law Vol. 6(1) 2019
interaction more squarely
4
. Australia, in particular, has introduced provisions holding
corporations directly liable for criminal offences in circumstances where features of a
corporation, including its “corporate culture’ directed, encouraged, tolerated or led to
the commission of the offence
5
.
2. Statement of Problem
In recent years, there has been an increasing focus on the ways in which corporate
policies and conduct interact with the environment, government and communities, as
well as the lives and rights of individuals. In particular, many countries have
examined whether and how corporations can be held criminally liable directly for
wrongful conduct. However consideration of the basis on which corporations may be
criminally liable is also relevant to other laws and norms, including those protecting
human rights. The key problem of corporate criminal liability is forging a coherent
link between the corpus of criminal law, which has been developed in the context of
natural persons, and to reflect the psychology of human beings and the realities of the
corporate form, which is a complex fabric of human actors, on one hand and corporate
hierarchies, structures, policies and attributes on the other hand.
In a legal sense, the question is whether, and to what degree, particular acts,
necessarily committed by human beings, may constitute crimes committed by
corporations in Nigeria. In most legal systems, criminal offences have a physical
element and a mental or fault element otherwise known as mensrea and actusreus.
Generally, the physical element of offences can be imputed fairly easily to a
corporation. The real difficulty arises in relation to the mental/fault element which is
the guilty mind (mensrea). When can the state of mind of particular human beings be
imputed to the corporation, such that the corporation itself may be said to have the
state of mind-knowledge or recklessness for example (together with the physical
element) that constitutes an offence? It is not known whether the corporation can have
a fault element in its own right in Nigeria.
While there is a substantive law on Criminal Act and Companies Act, there is no law
on Corporate Manslaughter, Corporate Homicide and/ or holding Corporations
directly liable criminally particularly murder cases in Nigeria as is obtainable in other
climes. Thus, it is not known through research if the laws and regulation guiding
4
A Robinson , ‘Corporate Culture, As a Basis for the Criminal Liability of Corporations’ Available at
<http://www.business-humanria.org> Accessed on 20 July, 2017.
5
Ibid.
Towards a Rational Theory of Criminal
Liability for Corporations in Nigeria
NAU.JCPL Vol. 6(1) 2019
~Umejiaku NO & Uzoka CN
129 | Nnamdi Azikiwe University Journal of Commercial and Property Law Vol. 6(1) 2019
corporate criminal liability in Nigeria are adequate. Additionally, it seems not to be
clear which of the models of corporate criminal liability that the courts apply while
determining the criminal liability of corporations in Nigeria. Notwithstanding the
different models/theories of determining criminal liability of corporations, there
appears to be no clear cut model used by Nigerian courts in determining the corporate
criminal liability. Hence, this paper espouses the different theories adopted by
different jurisdictions in determining corporate liability.
3. Corporate Criminal Liability under the Common Law
Corporate criminal liability draws from the concept of separate legal entity of
corporations. It is looked at from the point of view of the origin of the separate
identity of a corporation and the need for such a distinction along with the capacity
and liability of a corporation. Corporations were not initially held criminally
responsible for corporate activities. A corporation was considered to be a legally
fictitious entity, incapable of having the mesrea necessary to commit a criminal act.
Thus, the liabilities of a company were to be treated as separate and distinct from the
shareholders.
Corporate criminal liability as a concept was absent in Britain before the advent of
industrialisation. The rationale behind the same was based on the traditional
understanding of criminal law, where a person was convicted if he had a guilty mind
(mensrea)
6
and the concept of victimisation. Thus, if corporations didn’t have a soul,
they couldn’t be held criminally liable.
7
Similarly, they could not be sued for treason
since treason was the offense of disloyalty, which sprang from the violation of the
oath of fealty.
8
Since corporations cannot take oaths, they cannot commit treason.
9
It
must be noted that this traditional concept of the lack of corporate criminal liability
was infused by canon law.
10
The church had insisted that as a corporation
(universitas), it was distinct from the individual persons constituting it, who might
commit wrongs and sins. At the same time, it was itself a merely fictional entity, a
personal ficta incapable of wrong and sin.
11
The roots of the so-called
6
M D Dubber, ‘The Comparative History and Theory of Corporate Criminal Liability’, (2015) vol 16,
no 2, New Criminal Law Review, 203-240.
7
R v Birmingham & Gloucester Railway Co., (1842) 3 Q B 223, 114 E R 492, Evans & Co. Ltd v
London County Council, (1914) 3 K B 315.
8
W Blackstone, Commentaries on the Laws of England.(1765) vol. 1 at 464.
9
F Pollock & F W Maitland, The History of English Law Before the Time of Edward, ( London: Sweet
and Maxwell,1898) 2ndednvol 1 at 502-504.
10
Ibid.
11
Ibid.
Towards a Rational Theory of Criminal
Liability for Corporations in Nigeria
NAU.JCPL Vol. 6(1) 2019
~Umejiaku NO & Uzoka CN
130 | Nnamdi Azikiwe University Journal of Commercial and Property Law Vol. 6(1) 2019
mensrearequirement in English criminal law have often been traced back to canonical
origin that explains the lack of corporate criminal liability.
12
However, this stress on the requirement of mens rea reduced considerably with the
advent of the industrial revolution.
13
The development of strict liability offences did
away with the concept of a guilty intent altogether (e.g bigamy)
14
and
mensreabecame a tool of statutory interpretation
15
rather than a mandatory
requirement.
16
With an unprecedented rise in corporations, there was little respect for
the required standard of care, making it only prudent to issue strict liability standards
to protect human health and deter corporations from getting away with any crime
committed. The 19th century saw a gradual shift in the rules applicable to corporate
criminal liability, the courts finally held corporations liable for the actions of their
agents, acknowledging that doing otherwise would lead to “incongruous” results
17
.
Thus, the concept of vicarious liability was borrowed from tort law to justify the
same. However, there were still limitations. English courts repeatedly rejected the
idea that respondeat superior theory should apply as a blanket rule to criminal acts.
Thus, corporations could still not be held liable for “moral” crimes such as rape and
murder owing to the restricted personification of a company.
18
In layman’s terms, the doctrine of corporate criminal liability is essentially the
doctrine of respondeat superiorwhich has been imported into criminal law from tort
law. This doctrine states that a corporation can be made criminally liable and
convicted, for the unlawful acts of any of its agents, provided those agents were acting
within the scope of their actual or apparent authority.
19
4. Corporate Criminal Liability in Nigeria
12
R Sethia, ‘The Development of Corporate Criminal Liability in the Common Law- An Overview’,
(2016) International Journal of Law and Legal Jurisprudence Studies, 212.
13
F P Lee, ‘Corporate Criminal Liability’, (1928) 28 Columbia Law Review 1, 4.
14
Ibid.
15
M D Dubber, ‘Policing Possession: The Waron Crime and the End of Criminal Law, (2002) Journal
of Criminal Law and Criminology 829, 915-961.
16
J F Stephen expressed the same view in R v Tolson (1889) 16 Cox C C 629 at 644.
17
R Sethia,’ The Development of Corporate Criminal Liability in the Common Law-An Overview’,
(2016) International Journal of Law and Legal Jurisprudence Studies< https:www.ijlljs.in.wp-
content.com> Accessed on 22 November, 2017.
18
A Weissmann, ‘Rethinking Criminal Corporate Liability’ (2009) Indiana Law Journal, 82 (2).
19
A Mahesh, ‘Corporate Criminal Liability’, Available at <http://www.lawctopus.com accessed on 20
November, 2017.
Towards a Rational Theory of Criminal
Liability for Corporations in Nigeria
NAU.JCPL Vol. 6(1) 2019
~Umejiaku NO & Uzoka CN
131 | Nnamdi Azikiwe University Journal of Commercial and Property Law Vol. 6(1) 2019
The Nigerian Criminal jurisprudence recognises the offence of involuntary
manslaughter which may result from an unlawful act (constructive) manslaughter, or
gross manslaughter which results from a breach of a duty of care. Criminal liability
for the former involves an unlawful act in itself which results in death, while liability
for the later arises where the defendant’s conduct though lawful, is carried out in such
a way that it is regarded as grossly negligent and therefore a crime.
20
It is this second
aspect of involuntary manslaughter that companies are often liable for, that raises
concerns. In circumstances where a company’s conduct could be regarded as grossly
negligent and therefore a crime, the present law in Nigeria, requires the invocation of
the provisions of the general criminal law so as to prove either the offence of
manslaughter (under the Criminal Procedure Act) or homicide (under the Criminal
Procedure Code).
21
However, corporate criminal liability intersects both company law
and criminal law, and problems have traditionally arisen in imposing liability on an
artificial legal construct such as a company. This has been reiterated in a plethora of
cases. In the case of Armah v Horsfall,
22
the Supreme Court made it clear that a
company has no soul or body through which to act, it can only do so through human
agents, but which acts they cannot be personally held liable. Mainly, the challenge is
that legal concepts such as actusreus,mensrea and causation, designed with natural
actors in mind, do not easily lend themselves to inanimate entities such as companies
which are distinct and separate from their owners.
23
As a former British colony, the Nigerian legal system was modeled after the English
legal system; hence the common law position represents the law in Nigeria. In
Nigeria, corporate criminal liability is a recent development and as a result, the cases
are quite few. In Ogbuagu v Police,
24
the appellant was the proprietor and publisher of
a newspaper in Jos, Northern Nigeria. When leaving Jos, he instructed the man he left
in charge not to publish the paper while he was away. The man, however, published
the paper, which contained a seditious libel in one issue. Here the court refused to
impute the state of mind of the employee to the proprietor of the newspaper.
However, in R v African Press
25
, a case with nearly the same facts as Ogbuagu, the
article was written by and under the responsibility of the editor and the court held
20
S Erhaze& D Momodu, ‘Corporate Criminal Liability: Call for a New Legal Regime in Nigeria’
(2015) Journal of Law and Criminal Justicevol 3 no 2, 63-72.
21
Ibid.
22
[2015] All F.W.L.R Pt 912, p. 709.
23
C E Enem and P Uche, ‘A New Dawn of Corporate Criminal Liability Law in the United Kingdom:
Lessons for Nigeria’ (2012) African Journal of Law and Criminology, 2(1) 86-98.
24
(1953) 30 NLR 139.
25
(1957) WRNLR 1.
Towards a Rational Theory of Criminal
Liability for Corporations in Nigeria
NAU.JCPL Vol. 6(1) 2019
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both the defendant company and the editor jointly liable since the article was written
by and under the responsibility of the editor. In R v. Zik Press,
26
a corporation was
found quality of an offence of contravening Section 51 (1) (c) of the Nigeria’s
Criminal Code. Similarly in Mandilas&Karaberis v COP,
27
a corporation was
convicted of the offence of stealing by conversion under Section 390 and 383 of the
NigerianCriminal Code. While in A.G. Eastern Region v Amalgamated Press of
Nigeria Ltd,
28
the preliminary objection raised by the defense counsel on the ground
that an offence could not be committed by a corporation in the absence of
mensreawas overruled by the court.
However, there are certain ‘human crimes’, to which a corporation has not been held
criminally liable in Nigeria. For example, a corporation cannot be charged with the
offence of personal violence or with offences for which the only punishment is
imprisonment. But in Nigeria, the notion of holding corporations directly criminally
liable being a recent development, cases are rare and there are yet no known cases of
corporations being charged for the offences of manslaughter or murder. There is no
doubt that as a former British colony, the principle of corporate criminal liability in
Nigeria is still governed by the old common law doctrine.
29
Accordingly, under the
Nigerian law, a corporation cannot be convicted of the common law offence of
involuntary manslaughter except a separate conviction is also sustained against an
individual who was part of the company’s directing mind and will
30
.
Under the current law in Nigeria, the task for the prosecution pursuing a possible
charge of corporate manslaughter or homicide is twofold: they must prove the
actusreus of gross negligence on the part of the corporation, second, and more
challenging, they must prove mensrea, and in this regard, they must show that the act
of an individual or group of individuals is attributable to the corporation, for the later
to be held criminally responsible
31
. These burdens are no doubt very difficult if not
impossible to discharge. It becomes very pertinent to revisit our laws on corporate
manslaughter and homicide.
26
(1947) ENLR 12.
27
(1958) WM LR 147.
28
(1956) FSCN.
29
N Cavanagh, ‘Corporate Criminal Liability: An Assessment of the Models of Fault’ (2011) Journal
of Criminal Law, 75(5), 422-435.
30
G Slapper, ‘Corporate Punishment’, (2010) Journal of Criminal Law, 73 (4), 181-184.
31
S Erhaze& D Momodu, op cit.
Towards a Rational Theory of Criminal
Liability for Corporations in Nigeria
NAU.JCPL Vol. 6(1) 2019
~Umejiaku NO & Uzoka CN
133 | Nnamdi Azikiwe University Journal of Commercial and Property Law Vol. 6(1) 2019
It is worthy to note that the Nigerian central legislature has been making effort to
bring into law a bill that seeks to criminalise the actions or inactions of a corporation
and penalise same accordingly where death of a person results or a breach of such
duty of care designated as “relevant duly of care”. The bill specifically disregarded
any rule of the common law that has the effect of preventing a duty of care from being
owned by one person to another by reason of the fact that they are jointly engaged in
unlawful conduct. It is worthy to note that the proposed legislation is a welcomed step
in the right direction. As corporations continue to enjoy all civil rights including the
enforcement of their fundament human rights, yet they continue to elude some
legislative control and accountability for criminality.
5. Theories of Corporate Criminal Liability
It’s true that the principles of criminal law were developed in the traditional times to
punish the guilty and to deter the wrongdoing of an individual. The widely accepted
common law basis of corporate responsibility where the courts and legislations of
these countries have used many theories like the theory of vicarious liability of a
company and the likes of identification theory to establish the guilt of the corporation
for the criminal offences that it undertakes as an extension of the nominalist view
only.
32
For the regulatory offences, legislation makes the imposition of corporate
liability easier. Complexity arises with providing culpability of corporations in
mensrea offences. Several theories have been advanced to tackle this challenge.
The principles adopted by different countries to interpret the concepts and principles
of corporate criminal liability have been established by certain theories.
a. Identification or Directing Mind Theory
This is also known as the ‘organic theory’ as the corporation is viewed as a body with
various organs with the directors being the brain
33
. Under this theory, the principle
basis on which a company is responsible for a criminal act is that a person whose is
the directing mind and will of the company and who control what it does has
committed an offence in the course of the company’s business. Such a person is
treated in law as being the company. Lord Reid stated the principle in Tesco
Supermarkets Ltd v Nattrass,
34
thus; a living person has a mind which can have
knowledge or intention or be negligent and has hand to carry out his intention. A
32
E Colvin, 'Corporate Personality and Criminal Liability'. (1995) 6 Criminal Law Forum 1, p 1-2.
33
E Lederman, ‘Models for Imposing Corporate Criminal Liability: From Adoption and Imitation
Toward Aggregation and the Search for Self-Identity’, (2002) 4(1) Buffalo Criminal Law Review
641 at 655
34
(1972) AC 155 at 170.
Towards a Rational Theory of Criminal
Liability for Corporations in Nigeria
NAU.JCPL Vol. 6(1) 2019
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134 | Nnamdi Azikiwe University Journal of Commercial and Property Law Vol. 6(1) 2019
corporation has none of these: it must act through living persons though not always
one or the same persons. Then the person who acts is not speaking or acting for the
company. He is acting as the company and his mind which directs his act is the mind
of the company… he is an embodiment of the company, or one could say, he hears
and speaks through the persona of that company within the appropriate sphere and his
mind is the mind of the company. If it is a guilty mind, then that guilt is the guilt of
the company. Also in the case of M.M.A Inc. v National Marine Authority,
35
the
Supreme Court reiterated that a company is only a juristic person; it can act through
an alter ego, either its agents or servants. It may in many ways be likened to a human
body. It has a brain and a nerve center which controls what it does. It also has hands
which hold the tools and act in accordance with directions from the center. Some of
the people in are mere servants and agents who are nothing more than the hands to do
the work and cannot be said to represent the mind or will. Others are directors and
managers who represent the directing mind and will of the company, these managers
are the state of the mind of the comp-any and are treated by the law as such.
Lord Pearson also added that some officers are identified with the company as being
or having its directing mind and will its centre and ego, and its brains.
36
This directing
mind theory was a reaffirmation of the principle laid by Viscount Haldane in
Lennard’s Company Co. Ltd. v Asiatic Petroleum Company,
37
the theory equates the
corporation with certain key personnel who may be considered the directing mind
includes directors, the managing director or the person to whom the particular
functions had been delegated so that they may be performed without supervision,
independently and without instruction from the board of directors.
38
The theory has been criticized on several grounds. It was criticized as unduly
restricting corporate criminal liability to the conduct or fault of directors and high
level managers, thereby creating a discriminatory rule in favour of large corporations
where the range of persons who will possess the relevant characteristics to make the
company liable will inevitably be a small percentage of its work force.
39
The theory
35
(2013) All F.W.L.R Part 678, p.796. See also Igwem& Co. Ltd v Igwebe (2010) All F.W.L.R Part
540, p. 1293.
36
Tesco Supermarkets Ltd v Naltrass (1972) AC 153 at 190.
37
(1915) AC 705 at 713.
38
See Lord Hailsham of St. Marylebone (ed) Halsbury’s Laws of England (4thedn, Butterworth & Co.
(Publishers) Ltd, 1976) 451.
39
J Gobert, ‘Corporate Criminality: Four Models of Fault’, (1994) 14 Legal Studies 393 at 400 and B
Fisse, ‘Attribution of Criminal Liabilities to Corporations: A Statutory Model’ (1991) 13 Sydney
Law Review 227.
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Liability for Corporations in Nigeria
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also fails to recognize that offences committed on behalf of large organizations often
occur at the level of middle or lower tier of management.
40
When in fact many
decisions of large corporations are made at the level of branches or units, the
identification theory insulates corporations form liability for decisions made at those
levels.
41
The identification theory has also been criticized as too broad and perhaps
too simplistic in that it automatically attributes the actions of certain individuals to the
corporation. Prior efforts by the company to prevent illegal activity by senior
employees may not count much.
42
The identification theory has to grapple with the concepts of acts reus and mensrea as
they are transposed (or not) from individual criminal onto the corporate body. The
theory is widely applied in common law jurisdictions, but Canadian courts had
extended it by locating the ‘directing mind’ at much lower levels in the corporations
than the English courts were willing to.
b. Vicarious Liability Theory
The first obvious attempts at ascribing criminal liability to corporations were done on
the back of the established civil law doctrine of vicarious liability; Criminal vicarious
liability naturally has its origins in the civil law agency concept. It is often
rationalised on the basis of the proximity of relationship between the corporation and
its individual human actor. Vicarious liability concept has been borrowed from tort
law wherein there is automatic liability for the offences committed by officers acting
within the scope of their employment.
43
Criminal vicarious liability may arise because
some statutory offences may expressly or impliedly impose vicarious liability on all
employers and principals for the act of employees or agents, especially for offences of
strict or absolute liability. It may also arise because some countries by statutes
expressly subject companies to vicarious liability for the conduct of its officers and
directors (such as in Australia though the defense of reasonable care is permitted), and
lastly, it may arise because some Jurisdictions embrace vicarious liability as a general
principle for corporate liability even for mensrea offences. Compared to the
identification theory, it extends liability to cover criminal wrongs committed by even
lower level officers.
40
Ibid .
41
Canadian Dredge and Dock Co v The Queen (1988) I. S. C. R. 662.
42
D Markus , ‘The Comparative History and Theory of Corporate Criminal Liability, New Criminal
Review’(2013) International and Interdisciplinary Journal. Vol 16, No 2 240.
43
J D Greenberg and E C Brotman, ‘Strict Vicarious Criminal Liability for Corporations and
Corporate Executives: Stretching the Boundaries of Criminalization’, (2014) American Criminal
Law Review, Vol 51.
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In respect of corporations, vicarious liability may be justified because it is directed to
ensuring more internal policing.
44
The deterrence inherent in vicarious liability
revolves round greater shareholder and corporate officer attention to the selection of
officers and subordinates. As a model of liability, it certainly has utilitarian value in
obviating problems of ascribing liability where the wrong is committed by the lower
level official.
45
Because liability transmits through the wrongdoer to the corporation,
individuals need not be prosecuted.
46
That may not be a good precept on which to
operate in all circumstances; there will be many instances where the individual should
rightly be prosecuted in addition to the corporation. Vicarious liability may also be
justified on the basis of criminal law's chief aim of prevention and on the legitimate
criminal goal of compensation. While an additional deterrent effect might be gained
by applying respondent superior to all crimes of corporate agents, no characteristic
peculiar to corporations demands exceptional measures.
Justification for the application of the vicarious liability is on basis of deterrence as
corporations may undertake much more rigorous internal policing and greater
shareholder and corporate officers’ attention is paid to the selection of officers and
subordinates. Besides, the employers engaged the employees for economic gain.
Therefore it is fair for the law to demand that the employer bears the losses (in this
case usually fire) occasioned because of the employment relationship, for it is the
employer who is going to reap the benefits of the relationship. Courts generally hold
that a corporation is subject to strict vicarious liability for a criminal act by one of its
employees if the later acted within the scope of his employment and intended at least
in part to benefit the corporation.
47
The relationship between vicarious liability and identification doctrine has been
described as one in which the identification doctrine is actually a modified and limited
version of vicarious liability theory. Identification doctrine holds the corporation
liable only for the faults of senior employees or officers (the directing mind) rather
44
L H Leigh, The Criminal Liability of Corporations In English Law, (1969), at p 75; see also James
and Sons Ltd v Smith [1954] 1 QBD 273 per Lord Parker at p 279.
45
A J Duggan, 'The Criminal Liability of Corporations For Contraventions Of Part V Of The Trade
Practices Act',1977 5 Australian Business Law Review,222.
46
J S Parker, 'Criminal Sentencing Policy For Organization’s’, (1989) 26 American Criminal Law
Review 523
47
United States v Ionia Mgmt. S. A., 555F.3d 303, 309 (2d Cir. 2009) see also U. S. Department of
Justice, United States Attorney’s Manual 9-28. 200 (b) (2008) <http://www.justicce.govaccessed
on 18 September, 2017.
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than for the fault of all employees as occurs under vicarious liability.
48
Again the
identification theory is used to attribute mensrea to the corporation itself, whereas in
the case of vicarious liability, no distinct or separate ‘corporate’ mensrea by those
who control or run the corporations is required.
49
Vicarious liability theory has been criticized as unfair as it subjects a corporation to
criminal liability when a single rogue employee engages in misconduct, even if the
misconduct directly violate corporation’s policies and the violation occurred despite a
rigorous compliance program.
50
Vicarious liability theory treats responsible
corporations the same as corporations that fail to take reasonable efforts to prevent
misconduct. The two are not similarly situated, however, insofar as a corporation can
be blameworthy, a corporation that has implemented a robust compliance policy is
less deserving of blame than a corporation which failed to adopt a compliance policy.
Yet strict vicarious criminal liability treats the two equally.
51
It has also been argued that vicarious criminal liability reduces corporations’
incentives to implement rigorous and effective compliance policies as the absence of
such polices has no effect on whether a corporation is subject to vicarious criminal
liability for its employees’ criminal acts. Indeed, vicarious criminal liability may
actually deter corporations from having robust compliance policies. When a
compliance policy yields information about criminal acts, that information can end up
being used by the government to indict the corporation.
52
Corporations may decide
that they are better off without compliance policies that could produce evidence that
would support holding the corporation vicariously criminally liable. Finally, when the
employee who committed the misconduct is convicted of a crime, convicting the
corporations as well results in duplicative liability. This is inconsistent with the
doctrine of respondeat superior that underlies vicarious corporate criminal liability.
53
c. Aggregation or Organisation Theory
The aggregation model of corporate criminal liability extended the identification and
vicarious liability doctrines by aggregating into one criminal whole the conduct of
48
S Idhiarhi, ‘An Examination of the Scope of Corporate Criminal Liability in Nigeria;
<http://www.researchgate.net/publication/31521270 70 accessed on 18th September, 2017.
49
Ibid.
50
J Arlen, ‘The Potentially Perverse Effects of Corporate Criminal Liability, (1994) 23 Journal of
Legal Studies, 833.
51
Ibid.
52
D R Fischel&A O Sykes, ‘Corporate Crime’, (1996) 25 Journal of Legal Studies, 319,335.
53
Ibid.
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two or more individuals acting as the company (or for whom the corporation is
vicariously liable) in order to impose corporate criminal liability on the corporation
where the acts combined establish that liability but each act is in itself insufficient to
do so.
54
Aggregation of employees’ knowledge means that corporate liability does not
have to be contingent on the individual employees satisfying the relevant culpability
criterion.
55
American courts developed the aggregation model, sometimes referred to as the
doctrine of collective knowledge. In United States v Bank of New England,
56
in a
charge of willfully failing to file report relating to currency transactions exceeding a
certain statutory amount, the direction to the Jury was: “ the bank knowledge is the
totality of what all of the employees know within the scope of their authority, so if
employee A knows one facet of the currency reporting requirement and B knows
another facet of it, and C a third facet of it, the bank knows them all… the Court of
Appeal affirmed the decision. Thus:
A collective knowledge is entirely appropriate in the context of corporate
criminal liability… corporations compartmentalize, knowledge, subdividing
the elements of specific duties and operation into smaller components. The
aggregate of those components constitute the corporation’s knowledge of a
particular operation. It is irrelevant wither employees administering one
component of the operation knew the specific activities of employees
administering another aspects of operation.
57
The aggregation model is rejected in common law,
58
and there is on-going debate
whether the principle apply to and is an adequate test of liability in those forms of
corporate crime that require proof of will or intent.
59
The idea of aggregation has
found the greatest favour where negligence is at stake and a decision has to be made
about whether a collective failure to exercise reasonable care was culpable or about
how great the measure of culpability was.
54
E Colvin, ‘Corporate Personality and Criminal Liability’ (1995) 6 Criminal Law Review, 1
55
Ibid.
56
(1987) 821 F. 2d 844.
57
Ibid at 856.
58
Gobert, op cit.
59
R v P & O European Ferries (Dover) Ltd (1991) 93 Cr. App. Rep 72: Here a seaman, Captain and
five other crews failed to close the main Loading doors on a cross channel ferry. The ship sank and
several hundred persons drowned. The court refused to follow the aggregation doctrine, holding
that in the circumstance of the case there was insufficient evidence that the ‘controlling mind’ of
the company had been reckless and the judge directed the Jury to acquit them.
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It must however be noted that whereas knowledge may be capable of aggregation,
emotions (tied to intents) may not be equally capable of aggregation. Also the
aggregation model fails to lift the corporate veil. It ignores the reality that
corporations has a duty to put in place measures to ensure that not only must
individuals be prevented from committing offences but it must put in place polices in
order to prevent commission of crime by a group of persons. Under the aggregate
theory more junior officials and other servants of the company can form part of the
collective knowledge or mind of the company, secondly, the aggregation theory has
appeal where no single individual within the company is in possession of all the facts
or individual.
60
Only by aggregating knowledge class the fuller picture energy.
One of the consequences of this approach may be that the sum of the knowledge may
be greater than the parts.
61
Another worrisome question is ‘whose knowledge should
be aggregated? Would the court adopt the directing mind theory and simply view
senior executive as the individuals whose mind could be aggregated to form the
necessary mensrea? In many respects such an approach mistakes the perceived benefit
of aggregation as a model of criminal liability.
62
Another critical argument against
this theory is that it might lead to the conviction of legal bodies under far reaching and
absurd circumstances claiming that ‘the trend allows the conviction of a corporation
by piecing together the conduct of different agents so as to form the elements of one
offence is the result of over personification of corporate bodies.
63
The real merit of
aggregation theory lies in the somewhat more collectivist approach than either
vicarious liability or the identification theory. Nevertheless, in common with those
approaches, it suffers from the fact that it is but another search for the essence of
corporate liability rooted in and routed through, the individual within that
organization.
64
d. Corporate Fault Theory
All of the foregoing three theories suffer from limitations; they are atomistic rather
than holistic. They rest on the premise of designation of individuals whose acts and
mental states can be attributed to the company. Corporate criminal liability is in all
60
Gobert, Corporate Criminality: Four Models of Fault, (1994), 14 Legal Studies 395.
61
Ibid, p 405.
62
Ibid.
63
Ledermna, ‘Criminal Law, Perpetrator and Correlation: Rethinking a Complex Triangle’, (1985), 76
Journal of Criminal Law and Criminology 288.
64
R May, ‘Towards Corporate Fault as the Basis of Criminal Liability of Corporations’; Mountbatten
Journal of Legal Studies<http://www.ssudl.solent.ac.uk.accessed on 20th September, 2017.
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three a derivative form of liability.
65
All three theories suffer from the linkage of
individual liability to corporate liability through the concept of juristic person. It is
because of these limitations and from the desire to have an equitable premise for
corporate criminal liability extendable to all forms of corporate criminal activity that
scholars have considered ‘corporate fault’ as a model. The perception is that the
attribution of fault or blame in corporate crime more properly requires focusing on
collective corporate blame, rather than via the blameworthiness of individuals. If fault
underlines individual liability, why should it not precede corporate liability? The
nexus between the corporations and the individuals within them needs to be broken
or, in any event, redefined. These models have limited success in providing a juristic
basis of liability for corporations’ criminal acts. It is dissatisfaction with all three that
has led commentators to offer a fourth basis on which criminal liability can be
attributed to the corporate form.
The theory of corporate fault is one essentially based on collective fault. The company
as a whole has liability not by the actions or intentions of individuals within but rather
through expressions of the collective will of the company. The most obvious place for
such expressions of intent to be found is in company policies and procedures. This
model attempts to discover a touchstone of liability in the behavior of the corporation
itself rather than in the attribution to the corporation of the conduct or mental states of
individuals within the corporation. That Touchstone is the blameworthy
‘organizational conduct (the ‘fault’) of the corporation such as failure to take
precautions or to exercise due diligence to avoid the commission of a criminal
offence. In other words, the determination of liability focuses on the role that a
company’s structure, policies, practices, procedure and culture (corporate culture)
play in the commission of an offence.
66
Corporate fault is then a conceptually
different approach to corporate criminality:
The company is treated as a distinct organic entity whose ‘mind’ is embodied in the
policies it has adopted. Corporate policy is often different from the sum of the inputs
of those who helped to formulate the policy, and typically is the product of either
synthesis of views or a compromise among competing positions. Policy may reflect
the company’s corporate ethos. This ethos which is often unwritten may have been
forged by founders of the company who are no longer actively involved in its day-to-
65
Gobert, op cit, 407.
66
Ibid.
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day affairs. When company policy or corporate ethos leads to the commission of
crime, the company should be liable in its own right and not derivatively.
67
This model recognizes that corporations have distinct public personae and possess
collective knowledge. The model advocates a fundamental shift in the conception of
corporate criminal liability as a ‘transition from derivative to organizational liability’,
because of the increasing acceptance of the notion that corporations are moral and
responsible agents.
68
A major assumption of this model is that a corporation,
especially a large one, is not only a collection of people who shape and activate it,
but also a set of attitudes, positions and expectations, which determine or influence
the modes of thinking and behavior of the people who operate the corporation.
69
This model was justified on the ground that is better equipped to regulate the modern
corporation, especially a large one, which is typically decentralized. It was observed
that harm from corporate crimes may have, in many situations, little or less to do with
misconduct or incompetence of individuals, but more to do with systems that fail to
address problems of risk.
70
The attraction of this approach is that it takes away from
the actusreus/mensrea problem. It also has appeal in the fact that it moves away from
the application of conventional criminal liability to the corporate form. It will also
take away the problems associated with the courts attempts to squeeze corporate
square pegs into the round holes of criminal law doctrines which were devised with
individuals in mind.
Under the corporate fault model the focus would be on the creation of risks likely to
lead to the occurrence of serious harm. If the harm in fact materialized, the company’s
liability would be for the failure to prevent harm rather than for the substantive crime
itself. The company has the obligation to prevent crime under this model. In practice
this means their development of policies and their implementation and the
establishment of corporate ethos. As Gobert argues ‘Mensrea is one way, but not the
only way, of getting at the issue of blameworthiness’.
71
The defence for a company
facing criminal liability under the corporate fault model would be that of due
67
Gobert, ‘Corporate Criminality: New Crimes for the Times’, (1994), Criminal Law Review, 734.
68
Lederman, op cit. p 686.
69
J Gobert, and E Mugnai, ‘Coping with Corporate Criminally some Lessons from Italy (2002)
Criminal Law Review 621.
70
N Cavanagh, ‘Corporate Criminal Liability: An Assessment of the Models of Fault, (2011), The
Journal of Criminal Law Available at <http://www.journals.sagepub.com accessed on 20th
September, 2017.
71
Ibid, p 729.
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diligence. The burden of proving due diligence should fall on the corporation. In
satisfying the test of due diligence, the courts should adopt a test which clearly has its
origins in health and safety law, with a balance being struck between the risk created
against social utility of the activity weighed against the cost and practicability of
eliminating the risk. Due diligence should be evidenced not just by senior
management but rather by the organizational structure.
72
Interestingly, the new proposal for an offence of corporate killing seeks to develop the
concept of organisational blame worthiness.
73
While this is a welcome development, it
still requires definition and elucidation. One danger may be the desire to equate this,
simply with managerial failings. Corporate fault must look at collective failing rather
than the failings on one section of the organisation.
6. Sanctions for Criminal Corporations
Historically, the only practical sanction available for corporations convicted of a
criminal offence has been a fine.
74
Essentially, there are two reasons for this limitation
in sentencing. First, corporations are legal fictions, and as such have not been subject
to sanctions designed for individuals. Second, courts are reluctant to use dissolution of
a criminal corporation as a sanction.
75
a. Fine:
A fine is a criminal sanction while a civil sanction is called a penalty.
76
Non-payment
of a criminal fine can result in incarceration, whereas non-payment of a civil penalty
cannot.
77
The amount of a fine varies with the severity of the offence. Fines are the
most common type of sentence given. Fines can be given to organizations or
companies as well as people. However, fines have been the primary method used to
control corporate criminal liability. A corporation operated for criminal purposes or
by criminal means should be fined at a level sufficient to strip it of all its assets.
78
72
French, ‘The Corporation as a Moral Person’, (1979),16American Philosophical Quarterly 207-215.
73
Ridley &Dunford, ‘Corporate Killing-Legislating for Unlawful Death’, (1997) 26 (2) Industrial Law
Journal, 99-113.
74
‘Structural Crime and Institutional Rehabilitation: A New Approach to Corporate Sentencing’, (1979)
89 Yale Law Journal 354.
75
Ibid.
76
Fines-Sentencing Council <http://www.sentencingcouncil.org.uk> Accessed on 10 Nov. 2017.
77
United States Sentencing Commision Guidelines Manual (1992). Hereinafter referred to as (U.S.S.G.)
Section 8 (1) I. The Guideline calculation that falls short of a statutory minimum or exceeds a
statutory minimum must be adjusted accordingly.
78
18 U.S.C 3572 (b), U.S.S.G Section 8(C) 2.2
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On the other hand, a fine need not be imposed at all if it would render full victim
restitution impossible.
79
On the other side, a fine below the recommended range
should be imposed when necessary to permit restitution or may be below that range,
when the corporation will be unable to pay a higher fine even on an installment
basis.
80
A below-range corporate fine may also be fitting in light of individual fine
imposed upon the owners of a closely held corporation. The criminal fines are the
most common sanction. The rationale behind the use of fines in sentencing is
deterrence. Corporations are presumed to act rationally in their profit-making
ventures. The establishment of a system of fines is also designed to make corporate
crime unprofitable, thus deterring rational corporations from criminal conduct.
Unfortunately, the use of fine as a deterrence is rendered ineffective through a
phenomenon known as the “deterrence trap”. The “deterrence trap” occurs when the
size of the fine that is necessary to deter criminal conduct by a corporation is larger
than that which the corporation is able to pay.
A pecuniary sanction has the advantages of directly affecting the corporation, it
generates the capital necessary for compensation or restitution to the victims, it can be
executed with minimum costs, and when appropriately individualized, it has a
sufficiently strong impact to accomplish the scope of the punishment (especially the
retributive and deterrent scopes).
81
Whereas the greatest threat to an individual may
be loss of liberty, the greatest threat to a company is the loss of profitability. Because
such a loss strikes at the essential purpose of the company, a fine holds the potential
to be an effective deterrent.
82
A corporation will balance the momentary gain from the
offence with the loss from the potential criminal fine. Therefore, the fines must be
sufficiently high to have an impact on the corporations: the amount of the fines should
also take into account the financial resources of the corporation.
83
At the same time, fines have some disadvantages. A very high fine would have a
negative effect on innocent third parts. Although a corporate manger usually commits
the crime, he will be the last one to suffer the impacts of his actions. Even if adequate
79
U.S.S.G. Section 8(C) (3) 3.
80
U.S.S.G. Section 8 (C) (3) 4.
81
I P Anca, ‘Criminal Liability of Corporations-Comparative Jurisprudence,
<http://www.law.msu.edu> Accessed on 25 November, 2017.
82
J Gobert, ‘Controlling Corporate Criminality: Penal Sanctions and Beyond, 2 Web JCU p. 7 (1998)
<http://www.webjcli.nd.ac.uk/1998/issue/gbert2.html> Accessed on 20 November, 2017.
83
Ibid p. 8.
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fines are imposed, however, other problems arise when monetary penalties are the
sole sanction used to control corporate behavior. The use of fines may also work
injustice on innocent parties. The real cost of a fine may be borne not by the
corporation, but by the shareholders through lower dividends and by the consumers
through the increase of the prices for the corporation’s products. Neither of these
parties has significant control over corporate-decision making. Furthermore,
depending on the characteristics of the relevant market, heavily fining a corporation
may lead to non-management employee layoffs as well as other forms of detriment to
innocent third parties.
84
Thus, raising the level of fines will not prevent a corporation
from passing along the penalty.
The multi-divisional and often radically decentralized structure of the modern
corporation also acts to weaken the deterrence value of fines. While it is the top
management which sets the directives of the corporation, it is often up to the middle-
level managers to meet those directives. This tends to insulate the top management
(which may well desire that the sordid details of ‘meeting the competition’ not filter
up to its attention) and intensify the pressures on those below.
85
As a result, the top
management, which is generally the most concerned with profit maximization, is
often unaware of the criminal conduct by the middle-level managers. Fines alone do
not address the complexities of corporate criminal behavior. Despite all its drawbacks
the fine is the least expensive and most frequently applied sanction.
b. Community Service
This is one of the innovative criminal sanctions. Community service is paying the
community back for harm done, through doing work that benefits the public, is the
essence of community service. Sentencing courts can require corporate offenders to
engage in commodity service that is ‘reasonably designed to repair the harm caused
by the offense’.
86
Community service should not be used as an indirect means to
impose financial burdens on a convicted firm since a community order is a less
efficient means to achieve this end than a direct fine.
87
Rather, courts should impose
community service orders only when “the convicted organization possesses
knowledge, facilities or skills that uniquely qualify it to repair damage caused by the
84
United States v Danilow Pastry Co. (1983) S.D.N.Y 563F.Supp 1159, 1166-1167.
85
C Stone, ‘Where the Law Ends- The Social Control of Corporate Behaviour’. (1975) Criminal Law
Reviev, 36.
86
U.S.S.G. Chapter 8, Section 8 B 1.3.
87
However, community servics may be a sensible sanction when a firm is unable to pay its full fine.
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offense.
88
The U.S. Guidelines endorse community service when a corporate offender
can efficiently repair offense damage through its own efforts. However, the U.S.
Guidelines do not identify the features that distinguish corporate community service
order from remedial orders. The former are described as requiring a convicted
corporation to “repair the harm caused by the offense,” while the latter entail efforts
to “remedy the harm caused by the offense”.
89
While the common remedial focus is
certainly present, there is little difference in the description of these types of orders
other than the labels used.
The Sentencing Guidelines do not recommend community service for punitive or
deterrent purposes alone. The Guidelines provide that compelled community service
should remedy offense harm, suggesting that community service imposed for purely
punitive or deterrent reasons is inappropriate.
90
Even with this restriction, courts can
tailor community service obligations provide for some impact on corporate
reputations along with remedial benefits and thereby serve punitive or deterrent goals
as well as remedial ends. Corporate community service has previously entailed
service obligations imposed on specific executives who were not themselves
convicted of an offense. The involvement of high-level mangers in corporate
community service activities may be necessary for community service to have the
types of reputational impacts that will have significant punitive and deterrent value.
The reputation of a firm and the attitudes of its managers will be less likely to change
if a firm can designate a low-level employee to perform its community service than if
that service must be performed by a high-ranking corporate officer.
91
c. Remedial Order
A remedial order is also one of the innovative criminal sanctions that serve important
sentencing goals that are often unsatisfied through other criminal sentences. The
Sentencing Reform Act of 1984,
92
places remedial goals at the heart of federal
sentencing in the U.S. The Guidelines reflect the U.S. Sentencing Commission’s view
that in sentencing an organizational offender, a court must, whenever practicable
order the organization to remedy any harm caused by the offense.
93
If for example the
88
R Gruner, ‘To Let the Punishment Fit the Organization: Sanctioning Corporate Offenders through
Corporate Probation (1988) 16 American Journal of Criminal Law, 39.
89
U.S.S.G., Section 8 B1.3 and Section B. 1. 2 (a).
90
B Fisse,‘Community Service as a Sanction against Corporations’, (1981)Wisconsin Law Review, 970.
91
Ibid.
92
The Sentencing Reform Act of 1984 was enacted as part of the comprehensive Crime Control Act of
1984.
93
U.S. Sentencing Commission, Sentencing Guidelines Manual (2001) 413.
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company involved in the corporate crime deals on delivering health and safety
services, they would be required to provide health and safety services to the
community or to families or to workers, that have been affected by a workplace death
(s). Remedial orders were intended by the Sentencing Commission to be fallback
sanction for corporate offenders, imposed only when restitution orders are insufficient
to address victim injuries.
94
Reasons why restitution might be inadequate and
remedial orders correspondingly justified include difficulty in identifying crime
victims and the scope of their economic damage, the presence of small damage to
numerous victims making individual recoveries procedurally inefficient, or the
involvement of aesthetic or other non-pecuniary harm in an offense.
95
Two areas
where these orders may be particularly important are food and drug violations and
environmental offenses.
96
d. Adverse Publicity
The publication of the decision or the adverse publicity order (which consist in the
publication at the company’s expense of an advertisement emphasizing the crime
committed and its consequences) are also sanctions for corporate criminal activity.
97
This has an important deterrent effect because of the incidental loss of profits that
negative publicity can cause.
98
By its nature, this sanction can be only an auxiliary
sanction accompanying another corporate penalty.
99
This sanction also has a possible
spill-over effect, the losses can cause the corporations to close plants or even go out of
business, which in turn will negatively affect innocent employees, distributors and
suppliers
100
.
Adverse publicity diminishes corporate prestige by stigmatizing the corporation and
by pulling it in an undesirable spotlight thereby facilitating unwanted investigation
and regulation. In certain circumstance, adverse publicity may also cause financial
loss to the company. The unique value of a publicity sanction, however, lies in its
94
M Jefferson, ‘Corporate Criminal Liability: Sanctions and Remedial Action’, (1996) Journal of
Financial CrimeVol 4 Issue 2, 176 available at https://www.doi.org accessed on 28 November,
2017.
95
Ibid.
96
R S Gruner, ‘Beyond Fines: Innovative Corporate Sentences under Federal Sentencing’, (2013)
Washington University Law QuarterlyVol 71, 261 < https//openscholarship.wustl.edu accessed on
22 Nov, 2007.
97
J Gobert, op cit.
98
Ibid.
99
I P Anca , ‘Criminal Liability of Corporations – Comparative Jurisprudence,
<http://www.law.msu.edu> Accessed on 22 November, 2017.
100
Ibid.
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ability to target aspects of corporate welfare that cash fines cannot directly affect
101
.
Adverse publicity can also exploit the sensitivities of corporate management who
value prestige and autonomy as end in themselves, not merely as means to profits.
Corporate executive are thought to be highly deterrable by adverse publicity because
those in high status occupations have more to lose in social standing and
respectability by having their reputations tarnished
102
. Large scale market-surveys of
consumer attitudes also support the existence of a direct relationship between
corporate reputation and firm performance.
103
They report that most consumers claim
that brand quality, company image and reputation have a significant impact on their
purchasing decisions. Companies fear the string of adverse publicity attacks on their
reputation more than they fear the law itself
104
.
e. Corporate Probation
As part of Federal Organisational Sentencing Guidelines enacted on November 1,
1991, the United States Sentencing Commission included organizational probation.
This sanction allows courts to place convicted corporations on probation, with
conditions designed to reduce the likelihood of future law violations and remedy the
effects of the original offense.
105
Organiations cannot be incarcerated. Probation is
one of the criminal sanctions available to them.
106
Probation for organisations was
formally codified into Federal law in November 1991, when the U.S Sentencing
Commission added Chapter 8 to the U.S Sentencing Guidelines. Unfortunately, the
legal soil in which Parsons tried to root his precedent, the Federal Probation Act of
1925 was tenuous because it was intended originally for the rehabilitation of
individuals, not organisations. As a result of this weakness, probation sentences for
organisations often were successfully appealed on the grounds that they were not
aimed solely at monitoring fine collection.
101
K Yeung, ‘Is the Use of Informal Adverse Publicity a Legitimate Regulatory Compliance
Technique?’ Australian Institute of Criminology <https://www.aic.gov.au> Accessed on 20 Nov.
2017.
102
A Cowan , ‘Scarlet Letters for Corporations? Punishment by Publicity under the New Sentencing`
Guidelines (1992) 65 Southern California Law Review, 2387.
103
I Devine and P Halpern, ‘Implicit Claims: The Role of Corporate Reputation in Value Creation’
(2001) 4 Corporate Reputation Review, 42.
104
B Fisse and J Brithwaite, The Impact of Publicity on Corporate Offenders (New York State
University of New York Press, 1984) p. 10.
105
W S Lofquist, ‘Organisational Probation and the U.S Sentencing Commission, Sage Journals,
<htpps://www.journals.sagepub.com accessed on 29 November, 2017.
106
G Green, Organisational Probation under the Federal Sentencing Guidelines, Available
at<http://www.uscourts.gov accessed on November30, 2017.
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f. Dissolution or Winding Up
Dissolution or winding up represents the capital punishment for corporations.
Winding up of a company involves the liquidation of the company so that the assets
are distributed to those entitled to receive them. In the case of Oredola Okoya Trading
Co v B.C.C.I.
107
, the court held that liquidation is distinguishable from dissolution
which is the end of the legal existence of a corporation. Liquidation may precede or
follow dissolution. However, the court went ahead to state that mere revocation of
banking license of a bank without more cannot bring to an end the juristic life of a bank
or corporation. Firstly, too small or closely held corporations, dissolution alone does
not prevent the controlling parties from simply regrouping in a new form. Secondly,
as to large corporations, the socially disruptive effects of the dissolution of a whole
corporation would generally be so great as to outweigh its benefits. Winding up or
liquidation is putting an end to the life at a company. A winding up may be effected in
any of the following ways; by the federal High court, voluntarily; or subject to the
supervision of the court.
108
7. Conclusion
While Nigerian has achieved significant success in our efforts at controlling corporate
activities and combating corporate crime thus far, we recognize that we cannot rest on
our laurels. We will need to constantly fine tune our system by learning from the
experiences of some other jurisdictions and ensuring that we keep abreast of the latest
developments. We must remain nimble and agile in our ability to deal with emerging
trends in corporate criminal liability and corporate crime as we continue to safeguard
and preserve our reputation and integrity as a trusted international financial and
business hub with tenacity and resolve.
Thus, it is recommended that in line with best international practices that the Nigerian
courts adopt the corporate culture liability theory in holding corporations to account
for their criminal activities. This will obviate the need for mens rea. It has also
become imperative that Nigeria enact a statute comparable to the Corporate
Manslaughter and Corporate Homicide Act 2007 of the United Kingdom to properly
spell out potential liability of corporate bodies whose operations may result in the
deaths of either their workers or third parties. This way, corporate criminal liability
will be deterred.
107
[2015] F.W.L.R Pt 806, p. 248.
108
Section 401 CAMA 2004.
Towards a Rational Theory of Criminal
Liability for Corporations in Nigeria
NAU.JCPL Vol. 6(1) 2019
~Umejiaku NO & Uzoka CN
149 | Nnamdi Azikiwe University Journal of Commercial and Property Law Vol. 6(1) 2019