- New Horizons in Law and Economics series
Edited by Hans Sjögren and Göran Skogh
Chapter 3: Corporate crime, markets and enforcement: a review
Cindy R. Alexander* INTRODUCTION Many issues in the design of optimal sanctions for crime are the same whether the offender is a corporation or individual. In each instance, the canonical problem facing the government or enforcement authority is to design and implement an enforcement strategy that promotes optimal deterrence in the sense of maximizing social welfare. This is typically measured as the difference between the saving from preventing harm to the victim and the sum of the gain to the offender foregone when crime is deterred and the cost of the enforcement resources used in generating deterrence, as the previous chapter explained. Valuable insights have arisen from extensive research treating corporate offenders as little different from individuals in weighing benefits against costs when facing the decision to commit crime. Yet refinements to the underlying assumptions about why corporate crime occurs and the nature of corporate sanctions can significantly enhance the practical relevance of resulting insights. This chapter focuses on the practical implications of a small yet growing body of research that beneficially focuses on two features that distinguish crimes by corporations from crimes by individuals. First, corporate crimes tend to arise from actions of more than one person. This multi-agent property of corporations has been the focus of an extensive theoretical literature that views the modern corporation as a nexus of contracts, or hierarchy, and highlights the roles of transactions costs and property rights within the corporation in shaping corporate conduct. Economic models of corporate crime draw upon this larger...
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