Deterrence of White Collar Crime

Corporate crime can be deterred based on the previously discussed motives for its perpetration. Corporate officers are not acting out of “hunger, addiction or desperation” like low-class criminals (Feige 2005). For them, fear can therefore be a powerful deterrent. In contrast, for impulsive actions like spontaneous murder or theft, the fear of punishment has a limited role in deterrence. This is consistent with the findings of the 2001 report of the Maryland State Commission on Criminal Sentencing Policy that has arrived at the conclusion that capital punishment does not result in deterrence of capital crimes in the state (Feige 2005).

On the contrary, corporate fraudsters like Ebbers and Kozlowski are rational criminals who have time and opportunity to evaluate critically the results of their criminal actions. They can plot out their future after the perpetration of the crime. For instance, knowledge that they can count on the support of their influential friends will have an important role in motivating them to take the plunge. For this reason, stricter enforcement of anti-crime legislation will likely reduce the motivation of executives to circumvent laws and regulations.

In the case of WorldCom execs, for instance, who had incurred damage of $11 billion, the judge was free to “order anything from home confinement to a functional life sentence” (Feige 2005). Imposition of strict sentences that has now been extended up to 20 years of imprisonment for corporate fraud can act as a serious deterrent against corporate fraud, showing the risk-taking officers that their courage may bring about highly undesirable circumstances. Citizen Works, a non-profit organisation founded by Ralph Nader, has compiled a list of 12 reforms expected to generate a change in combating white collar crime (Citizen Works).

The authors call on the government to implement new statutes for reception of government contracts so that ‘corporate criminals’ have no access to public money via contracts received through connections with corrupt officials. Corporate tax avoidance, in the opinion of the authors, can be overcome through closing offshore tax loopholes and forcing everybody to pay equal amount of taxes. They also call for the repeal of the Private Securities Litigation Reform Act of 1995 that would permit defrauded investors to seek restitution of their damaged rights in court and impose civil liability on corporate fraudsters (Citizen Works).

Reforms in corporate executive compensation can also help to avoid fraud, for instance, if companies are required to show stock options offered to executives as expense on financial reports and the government removes tax deduction for pays exceeding the smallest employee compensation package by 25 times. More specific measures, such as reform in the regulation of derivatives trading, separation of commercial and investment banking on Wall Street to eliminate conflicts of interest, and toughening disclosure requirements can also help to deter white collar crime (Citizen Works).

Of special interest is the recommendation of Citizen Works to “democratise corporate governance” (Citizen Works). This means increasing the rights of minority shareholders and their potential to influence corporate decision-making. This demand uncovers a fundamental problem in the governance of modern corporations – the agency problem that focuses on the discrepancy between the interests of shareholders and management that oversees daily affairs of the corporation.

Too often shareholders have too little information about the activities of the corporation they own or too little expertise to make sense of the available information to take active part in decision-making. In this case shareholders controlling big stakes or management on its own can manipulate the corporation to commit different kinds of fraud. This problem is grounded in fundamental feature of the modern capitalist system, its reliance on joint-stock ventures, and perpetuates white collar crime, creating prerequisites for the immoral actions of corporate officers.

Conclusion White collar and organized crime is a serious problem in today’s society. Through their violations of the law, white-collar upper-class criminals can inflict serious damage on society, and therefore drastic measures to curb this crime are necessary. This concern is manifested in various policy initiatives dealing with various aspects of organized crime. White collar crime includes actions that are motivated by flaws in the modern market, or capitalist, system.

The emphasis on money as a way to obtain various benefits and to count successful as a person leads many to overlook pitfalls of corporate fraud, and the practice of delegating managing functions to hired managers creates prerequisites for such fraud. These factors have to be considered in the implementation of various deterrence policy initiatives.

Bibliography

Baker, John S. Jr. The Sociological Origins of "White-Collar Crime". Heritage Foundation, Legal Memorandum #14, October 4, 2004. 14 Jan. 06 <http://www. heritage. org/Research/LegalIssues/lm14. cfm.