Corporate responsibility – what is it good for?

Daniel Dew of the Heritage Foundation has written an excellent piece on the high degree of responsibility that corporate officers bear under United States law. In light of a number of significant scandals currently plaguing the White House, Dew asks whether President Obama would be held responsible if he were the CEO of an American corporation:

Nobody is remotely suggesting that, absent his direct involvement, the President should be prosecuted for the misdeeds of those who work in the executive branch. It is interesting to note, however — by way of analogy only — that under the DOJ’s standard of “responsibility,” if President Obama were the head of a corporation, he would be responsible and could be prosecuted.

The Responsible Corporate Officer Doctrine allows federal prosecutors to criminally prosecute business owners and officers for the criminal activity of their businesses, regardless of whether they had knowledge of the illegal activity. The only requirement for criminal liability is “some relationship between the executive’s supervisory responsibilities and the underlying misconduct.” Put another way, in order to obtain a conviction, the government need only prove (1) illegal conduct occurred, and (2) the corporate officer had authority to exercise control over the activity.

It’s a fascinating way of looking at a concerning trend. And it’s important to remember that Australia has similarly high expectations when it comes to the duties that directors of corporations owe to their shareholders.

In February this year, lawyers Bruce Cowley and Steven Grant had an important article published in Company Director magazine, in which they pointed out there has been an

explosion in the number of Commonwealth, state and territory laws that impose personal liability on directors as a result of a statutory breach by a company. Many of those laws reversed the usual onus of proof so that directors were deemed liable irrespective of whether or not they were to blame, unless they could prove the availability of a statutory defence. At its peak, there were well over 700 such laws, including more than 130 such laws in NSW. This created a minefield of risk for those holding office as directors.

Laws that reverse the burden of proof or make individuals liable for crimes committed by others are anathema to a legal system that seeks to uphold the rule of law. As Dew rightly concludes:

The Responsible Corporate Officer Doctrine turns our notion of fairness on its head. People should be liable for crimes they commit—not crimes committed by others without their knowledge. The Responsible Corporate Officer Doctrine and thousands of criminal statutes and regulations are turning ordinary citizens into criminals.

If the President is not responsible for the wrongdoings of executive branch employees because the federal government is “too vast” for him to know everything that goes on in the various agencies, business owners and officers should be afforded the same excuse in criminal prosecutions.

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