IAAL, and corporations are indeed persons in the eyes of the law. This is what we call a “legal fiction”: a legal construct designed to foster certain policy goals. Corporations are treated as persons for a couple of reasons I can think of off the top of my head:
Limited liability. This is really the big reason corporations exist: it allows people to invest in an enterprise while limiting their liability to the amount of their investment. Imagine if this wasn’t the case: imagine if you owned 100 shares of stock in, say, Union Carbide when the accident at their Bhophal plant occurred. Further imagine that, in addition to the potential for your 100 shares becoming worthless, your personal assets could be pursued to satisfy the Bhophal judgment. How many people, faced with that potential unlimited liability, would want to invest in a company? Thus, the corporation is a “person” for lawsuit purposes – that way, plaintiffs can seek a remedy for their injuries by suing the corporation, but the individual shareholders remain protected.
To protect the economic rights of the underlying shareholders. It would be impractical to, say, have each shareholder become a party to every contract involving the corporation, and to have each shareholder sue on their own behalf if a contract is breached. It is much easier to just treat the corporation as a party who can sue and be sued.
I’m sure others will pop in with others.
Also, IANAM(athematician), but I did want to remind folks that 2+2=5 for large values of 2.
WADR to The Ryan, we don’t have a legal wrangle here. Corporations are legal persons that may be charged with crimes. End of story.
I’ll continue this hijack slightly. As The Ryan correctly pointed out, the biggest conceptual obstacle to criminal liability for corporations is the issue of intent or mens rea. Quite obviously, a corporation itself cannot form the intent to commit a crime - it is a fictional entity that doesn’t have a brain.
But we attribute intent to a corporation all the time (as an example, any time a corporation is sued for fraud, intent is attributed to the company - fraud requires intent), and for extremely good economic and social reasons.
Let’s look at the Andersen situation as an example of the benefit of corporate criminal liability (assuming the facts alleged are true). The choices are individually charge a few partners or charge the whole firm. First, does charging only the partners correctly attribute liability for the criminal acts? That is, could these few partners have caused the destruction of documents without the participation or at least acquisence of the firm as a whole? Second, does charging only the partners send the correct signal to the markets as to where the problem is? Should Andersen be able to dismiss the conduct as that of a few “rogue” employees, or should the markets be on notice that the firm as a whole has engaged in bad acts?
In general, the concept of criminal corporate liability adds an additional layer of incentive for good corporate governance.
By the way Sua, am I recalling correctly that fictive legal persons goes back to Roman law. You know the quickie law primers I got in my econ education I have found not to be of the greatest profundity. (Never mind a failing memory)
I can see how you might misunderstand my position. To make it more clear, I agree that corporations are legal persons. I do not agree that they are persons. I agree that they can be charged with crimes. I do not agree that the are capable of committing crimes. I agree that there is a law saying that they are to be treated as persons. I do not agree that entities can be transformed into people simply by legal fiat. Was Gepetto (sp?) a lawyer?
BTW, when I posted that orignial statement, I did not mean to start a hijack into legal theory. I just wanted to point out that thre should be people being charged with crimes here.
I’ve done a bit of poking around, Collounsbury, and can report back that the Romans didn’t have the concept of fictive legal persons, at least not during the period of the Republic. On this point, their legal concepts were pretty straightforward - only a human being could be a person, and vice versa.
Even in the contract of societas, the Romans fell short of the common law idea of a partnership, which is a suable entity for the acts of the partners. The contract of societas only gave rights to the members against each other. Third parties could not sue the societas. So, for example, suppose Julius and Antony form a societas to run a restaurant. Julius goes out and contracts with Octavius for pork for the restaurant. Octavius delivers, but Julius doesn’t pay. Octavius’ only remedy is to sue Julius; he can’t sue the societas, nor Antony. (If Antony nonetheless pays up, he could then go after Julius for his share of the cost.)
However, I did find an interesting little quote from Gibbon, Decline and Fall of the Roman Empire, chap. 16, which suggests that by the time of the Empire, there was some recognition of a corporation with a separate status, but that it was very rare:
So, although there may have been some recognition of the idea of a separate corporate status during the period of the Empire, I would be inclined to think that the concept only started to be generally accepted during the late medieval period, when the great craft guilds began to be incorporated. That’s just my speculation, however.
On this point, I agree. To me, charging the corporation (or partnership, or organization) with the crime means that the partners, or managers, can act with impunity. If the corporation is convicted, it will simply pay a fine. Those that directed the company in the illegal action will either continue to collect paychecks and bonuses, or recieve severence packages and find new employment. Until actual persons in the company are charged with crimes, the message sent is ‘business as usual’.
On the other hand, if there is indeed some companywide policy that breaks the law, would you want the corporate directors (and possibly large shareholders) getting off scot free by allowing them to let some patsy at the vice president level take the fall?
And AFAIK prosecution at the corporate level doesn’t preclude prosecution of individuals implicated in the company’s actions. BNMAIALF*, but wouldn’t a corporate conviction make it easier thereupon to “pierce the corporate veil” and go after the principals?
Nawp - charging a corporation and charging officers and employees of a corporation are not mutually exclusive. I fully expect that individual indictments will be handed down soon.
Why was Andersen charged before individuals? Two (speculative) reasons:
It’s easier to make a quick case against Andersen, and the prosecutors wanted to move quickly. When charging the corporation as a whole, the prosecutors can look to the entire grouping of actions taken on Andersen’s behalf without having to attribute individual criminal liability for each act. Second, they can impute criminal intent without having to demonstrate it individually.
The indictment of Andersen has had serious repercussions - several entities cannot, under various laws and ethics rules, be audited by an indicted corporation (the federal government, N.J. casinos, and a mess of others). Probably, the uncertainty in the markets as to whether Andersen could or couldn’t continue to audit certain entities put pressure on the prosecutors to indict quickly before they were ready to indict individuals.
Andersen knew it had a time bomb on its hands, and wants a quick resolution. That’s part of the reason the indictment and trial are speeding along. Andersen is not using any type of delaying tactic. Whether or not it will help, time will only tell (I’m guessing not).
Well, yes and no. Yes, if the partnership is convicted, no-one goes to jail, and a fine is paid. But, on the facts of this case, I’m betting (purely as an observer who reads the media - no legal advice implied or inferred ) that if convicted, Andersen goes down the tubes (at least in the U.S.) and all the partners lose their equity in the firm to bankruptcy and civil litigation proceedings.
As others have commented, an accounting firm doesn’t have hard assets: it’s got its reputation and the professional standing and expertise of its accountants. The Andersen firm is already losing customers, as their client corporations dump the firm as their auditors, out of a concern to distance themselves from any connexion with Enron. If that continues and snowballs, the partners are going to find their equity in the firm declining.
The situation gets worse if the firm gets convicted of obstruction of justice. I’ve seen some media accounts which suggest that a felony conviction for obstruction could bar them from acting as an auditor for any publicly traded company, under SEC rules. If that’s so, I can’t see much future for the firm, anywhere in the U.S., and regardless whether a particular regional office is squeaky clean.
In other words, a conviction on this one count could potentially kill the Andersen firm. That possibility seems to be why Andersen is vigourously fighting the charges, rather than just rolling over and paying a fine, as other corporations have done in the past.
One of the former Andersen auditors of Enron pled guilty today to one count of obstruction in relation to the shredding, in exchange for immunity from further prosecution. Commentators are saying that his testimony may blow open the scandal (and blow up what’s left of Arthur Andersen LLP…)
) that if convicted, Andersen goes down the tubes (at least in the U.S.) and all the partners lose their equity in the firm to bankruptcy and civil litigation proceedings.
.)