Evolution of Corporate Criminal Liability in The USA.


Under the federal and state laws, corporations and individuals can be held criminally liable for wrongful acts as per the US laws. The doctrine of corporate criminal liability is based on the famous common tort law maxim of respondeat superior (let the master answer) which means that a person is vicariously liable for acts done by his agents. Corporate criminal liability was brought into existence keeping in mind the industrial revolution and expansion of corporate activities. As a result of this industrial revolution, very few corporations are convicted, and other offenders face huge penalties that reflect corporate culpability.

The widened scope of criminal liability has imposed heavy consequences on every type of corporate behavior. To avoid criminal liability, corporations have taken powerful steps such as internal investigations, compliance, settling claims of misconduct and monitoring production activities which has helped to reduce the negative effects. Such responsibility has brought about significant positive changes in the structure of the corporate world.

Understanding the doctrine

This maxim imposes vicarious liability on an organization for the wrongful acts committed by agents of the organization. This legal maxim has a broad scope that permits a liability on the organization for the act of any agent, even the lowest level employee. Under tort law, this maxim is understood as – ‘a corporation may be held criminally liable for the acts of any of its agents who:

(1) Commit a crime

(2) Within the scope of employment

(3) With the intent to benefit the corporation.’

The first case to apply this doctrine was New York Central & Hudson River Railroad v. United States[1] which observed that since an agent of the New York Central committed a crime while carrying out his duties, New York Central was criminally liable. However, in this case, the US court failed to distinguish the essential difference between civil and criminal liability. It is significant that in all criminal cases three key ingredients are required: intent, deterrence, and stigma.

Evolution of the doctrine

In America, the Department of Justice and the Sentencing Commission have remolded the enforcement of corporate criminal liability in the federal system. They have implemented a certain set of standards and guidelines to eliminate the wrongful acts by the corporations. The following set of regulations and acts are enacted to accurately hold responsible the offender rather than simply putting into execution the doctrine of respondeat superior.

The United States Attorneys’ Manual (USAM)[2] provides specific provisions which help the prosecutors with the prosecution of business corporations.

The Principles of Federal Prosecution of Business Organizations (Principles of Prosecution) clearly highlight that no case will be admitted only on the basis of the doctrine of respondeat superior. This states that there are always other key factors which can be used to prosecute business organizations such as a corporation’s history of similar misconduct, collateral consequences, the adequacy of the prosecution of individuals responsible for the corporation’s malfeasance etc.

The US federal system has also implemented the advisory Sentencing Guidelines[3] (Guidelines) which include suggestions for the sentencing of organizational breaches. These guidelines enshrine not only fines/penalties but also other remedial measures to impose a consequence on the corporations for wrongful behavior.

1. Fines- The guidelines talk about fine determination and enumerates the essential key factors required to fix the sum of fines to be imposed. It reads out as “the fine range should be based on the seriousness of the offense and the culpability of the organization.”

2. Compliance Programs- The guidelines have inserted an “Effective Compliance and Ethics Program” which controls and monitors the behavior of the corporations and helps them eliminate the occurrence of any wrong-doings.

3. Probation– As the name suggests, probation is a mechanism which allows the offenders to rehabilitate in the event they are convicted. They are supervised and monitored thoroughly so that they do not repeat the same offence. As per the Guidelines, in felony cases, one to five years of corporate probation is required.

4. Remedial Measures- the Guidelines provide that, whenever possible, corporate sentencing should include non‐punitive remedial measures aimed at making the victims whole. This explicitly means that courts shall try to minimize criminal liability as much as possible by giving proper considerations to the alternative remedies.

Disadvantages of the doctrine

The doctrine of respondeat-superior-based corporate criminal liability has its limitation in the practice of federal criminal law. Firstly, the Sentencing Guidelines have only become a limited substitute for criminal code reform. Secondly, the legislation-makers have overlooked the factor of limited resources as against a plethora of cases falling under the criminal code. Lastly, just like corporations, even the defendants get opportunities to settle the dispute amicably which in turn compels them to plead guilty and/or assist in the investigation and prosecution of others.


Times are constantly changing. With that kept in mind, the lawmakers must make amends and update the doctrines according to the need of the hour. Even in the USA, the doctrine of respondeat-superior evolved from being strictly applied to a more flexible application reconsidering other key factors. Individual criminal statutes, Justice Department policies, and the Sentencing Guidelines largely dictate the circumstances under which, and the extent to which, agents, employees, corporations, and similar unincorporated entities are prosecuted and punished.[4] Corporate activities are expanding and to make them socially responsible, it is important to implement regulations and compliance standards to reduce the criminal liability pressure on them and instead make them more efficient.

[1] New York Central & Hudson River Railroad v. United States, 1909.

[2] http://www.justice.gov/usao/eousa/foia_reading_room/usam/title9/27mcrm.htm#9‐27.220.


[4] https://fas.org/sgp/crs/misc/R43293.pdf

This Article is Authored by Ayonee Madhani, 4th Year BLS.LLB Student at Pravin Gandhi College of Law.

Also Read – Introduction To Corporations And Corporate Criminal Liability

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