Sun, 13 Nov 2011
How To Put Corporations in Jail and Prison (draft)
In the U.S., some crimes carry jail or prison terms for the persons who commit them. Some of the persons who commit these crimes are so-called "natural persons" -- people like you and me. Some of them are corporations. This brief essay explains how and why to apply prison sentences to these artificial persons.
I am not a lawyer. I do live in a country with laws, and I worry that these "artificial persons" can skirt the law by being structured to avoid jail time. So I propose this draft, and I am interested in feedback.
1. A brief summary of jail and prison
First, let us review life for natural persons when they are convicted of a crime with a prison term. Prisoners may find themselves in a minimum-security institution, where they are given some small degree of autonomy, limited (but non-zero) access to communication systems like postal mail, telephones, and in-person visits, and are put to work. Persons who commit violent crimes and constitute a risk to other inmates may be incarcerated in a medium- or high-security facility; in these, inmates are carefully tracked and intensive barriers and check-points prevent too-great movement.
It can be disruptive for a person to find himself or herself behind bars, but it is a disruption that the legal system is willing to make so that the public can enjoy a law-abiding society.
Life in prisons is still life: inmates may always eat, drink water, think to themselves, and (as far as I know) make written notes to themselves. Many famous activists have spent time in jail or prison and gone on to continue their careers. Prisoners in low-security facilities may enjoy lots of communication with other persons, so long as it does not require the use of communication technology.
Persons spending time in prison may continue to own property outside of the prison. Their ability to use it while incarcerated is minimal to nonexistent, but they may have bank accounts, investments, or other financial instruments that appreciate in value.
2. How the structure of corporations makes law enforcement harder
Now that we have a concept of what prison is like, let us carefully consider what it means to be a corporation. Corporations are legal constructions, created to achieve a specific end. They have a primary place of business where individual natural persons meet to do work to help the corporation achieve those ends. Most corporations are created for the private profit of their founders.
The corporation is, fundamentally, a legally-approved veil over the collective activity of individual persons. This corporate veil limits the financial liability for its Directors; if the corporation owes rent on its property, for example, the Directors are not responsible personally for this debt. Virtually all actions of corporations are about the transfer of money. The existence of this structure is widely-considered a good, efficient thing.
Some actions of a corporation go beyond the transfer of money; some actions are criminal. At the moment, individual natural persons who commit crimes as part of their duties to the corporation may find themselves in court and possibly in jail. This can flow all the way up the chain to the Directors.
But if an employee is asked by her manager to commit a crime for the private inurement of the corporation, she is the one most at-risk for criminal proceedings. If a corporation profits from check fraud, the fines may be smaller than the profits earned.
The incentives are mis-aligned: if an investor calculates that the financial punishment for breaking the law will not hurt the corporation, he might urge the corporation to flout the law. The result might be dramatically increased profits with a side-effect of an employee or a Director in jail.
There is an elegant solution to this problem: when an agent for the corporation commits a crime with a jail term, the corporation should spend some time incarcerated as well. This brings us to the final part: the mechanics of applying jail and prison terms to corporations.
3. How to put companies behind bars
Rather than painstakingly identify the employees most responsible for lawbreaking within a corporation, it may be simpler to put the corporation behind bars. Practically speaking, this means moving the primary place of business of the corporation to a jail or prison.
In this regime, when a company is in jail, the employees must go to the jail and subject themselves to the standard restrictions of the jail as they go about their business. If the company has committed a violent offense (perhaps the calculated murder of citizens who live near its place of toxic waste dumping), then while employees are contributing their time to the corporation, they would be subject to highly-secured perimeter fences and close supervision.
Just like a natural person, the corporation can continue its life while in prison. It may have limited access to communication technology, but (depending on the security level of the facility) employees will be able to take notes on paper, send checks in the mail, plan the corporation's future actions, and possibly attend meetings with each other. If this is not enough to maintain the corporation's activities, it should have considered that before committing criminal acts.
One downside to this system is that as corporations are increasingly convicted of crimes, their employees could fill up our already-stretched prison capacity. This, and other practical problems, are easy to address if you consider the spirit of this proposal. The restrictions of prison life could be applied by sending jail wardens to corporate headquarters, where employees are scrutinized and restricted under the same rules as they would be in prison. The warden can be responsible for ensuring limits on communication technology use are enforced.
It can be disruptive for a corporation to find itself behind bars, but it is a disruption that the legal system should be willing to make so that the public can enjoy a law-abiding society.
