Punishment in the executive suite: Moral responsibility, causal responsibility, and financial crime

Abstract

Despite the enormity of the financial losses flowing from the 2008 financial crisis and the outrageousness of the conduct that led up to it, almost no individual involved has been prosecuted for criminal conduct, much less actually gone to prison. This chapter argues that the failure to punish those in management for their role in this misconduct stems from a misunderstanding of the need to prove that they personally knew of this wrongdoing and harbored an intent to defraud. Not only would negligence be a sufficient legal and moral basis for imposing terms of imprisonment in these cases, mere causal responsibility would also be enough, for causal responsibility has embedded in it all we need to find those causally responsible morally responsible too, and once some basis for moral responsibility is established, the imposition of terms of imprisonment is both legally possible and morally just.

Corporate guilt (management)

“…Judicial systems often find guilty legal bodies rather than individuals, because the bodies' governance structures, procedures, and cultures are seen as causes or enablers of transgressions conducted by individuals (Arnold, 2006;French, 2017). Another reason for assigning guilt to legal bodies rather than individuals can be found in the difficulty of proving who had knowledge of what and who did something with intent (Reiff, 2017).…”

“…Critics of this practice argue that it acknowledges that the corporation pays for its wrongdoings with shareholders' money (Maitland, 2017). Especially in the financial sector, corporations rather than individuals have been found guilty of wrongdoings such as money laundering, manipulation of exchange rates, and the sale of mortgage-backed securities (Reiff, 2017;Smith, 2017). Emotional guilt in a corporate context faces the limitation that it is experienced collectively, only if all members of the organization self-categorize themselves as group members (Schmitt et al, 2008), which may be unrealistic for large corporations, but can apply to certain departments or professions within an organization.…”