Corporate crimes seem to be on a rise over the past 10 years and it is shocking how corporate laws have failed so miserably in their function of preventing them. Corporate governance has been close to completely ineffective in recent times. The crimes that are corporate in nature are mostly a product of intelligent and long-term planning which are committed by utilizing loopholes in the law. Numerous corporate scandals such as Satyam, Punjab National Bank and more have shown us how harmful such fraudulent activities of select few individuals can be for the entire economy and ultimately, for the entire nation. The ‘Standard Chartered Bank Case’ of 2005 established it unambiguously that in our country, companies can be held criminally liable for their criminal actions. Furthermore, the Court also stated that due to the absence of one unitary physical form of any company, they are incapable of being imprisoned and therefore, compensation should substitute it.
Compensation and fines that are used to condemn such fraudulent acts by corporations have a questionable impact over their deterrence. It is important to keep in mind that the primary purpose of criminal liability is to deter any future crimes from happening along with, ensuring that such corporates do not cross that line again. This brings us to the question: How effective are monetary fines when it comes to extremely harmful fraudulent activities by corporations? An analysis should be made in a simple ‘cost-benefit’ process. It is pretty well-known how resourceful these mega-corporations are. There is no doubt then, that corporations would put these resources to use in order to calculate the number of compensatory damages they would have to pay. Not just calculate actually, they have the resources to go one step further and actually AFFORD that amount. This tells us that the fines imposed by courts on these companies have negligent or absolutely no impact. The courts then, instead of penalizing the companies by fining them, should penalize the individuals responsible for such fraudulent activities and hide behind the corporate body to live a completely normal life. A corporation is nothing without its agents. The officers and promoters have the intention to carry out such activities using the company’s name. They possess the element of ‘mens rea’. It is not a novel idea. There are precedents of such steps being taken by the judiciary of the United States of America in the famous ‘Enron scandal’ where the individuals responsible for fraudulent acts were individually punished. In India too, in the Satyam scandal, Ramalinga Raju and other Managers who concocted the controversy were held accountable for a breach of trust and cheating and as a result, were imprisoned.
It is true that proceedings in such cases involving corporate scams prove to be extremely lengthy and complex. Due to the size of these companies and the number of people employed under its name, it becomes significantly more difficult to hold individuals accountable. Board of Directors and other senior officials find it shockingly easy to wriggle out of accusations.
