“Corporate criminal law . . . operates firmly in a deterrence mode.” The ultimate goal of that deterrence is prevention. But recent evidence suggests that deterrence—and in particular, the corporate fine (the favorite tool of deterrence theorists)—is not particularly good at the job. For a host of structural and practical reasons, corporate fines do not influence corporate behavior as we might have hoped. In a forthcoming article, Clockwork Corporations: A Character Theory of Corporate Punishment, I propose abolishing the corporate fine and offer an alternative framework for structuring corporate punishment. The proposal expands on a strategy prosecutors already employ, albeit imperfectly, as part of corporate deferred prosecution agreements: mandating corporate reform. On this new approach, such government-directed reform would be the exclusive means of corporate punishment, and judges and judge-appointed monitors, rather than prosecutors, would be in the driver’s seat. This “character” theory of punishing corporations could beat deterrence theory at its own game by preventing more corporate crime.
There are two obvious ways in which coercive reform prevents corporate crime. To begin, successfully reforming a corporate criminal minimizes the chance that it will reoffend. Merely fining corporations cannot guarantee this. If the fine is low enough, corporate convicts have the option of continuing business as usual. If the fine is high enough to influence corporate conduct, rational corporations may choose to invest in better concealing, rather than preventing, future offenses. Carefully crafted reform, however, would directly address the criminogenic features of corporate convicts.
Additionally, coercive reform has clear general preventive effects that work like ordinary deterrence. To the extent that corporate fines can deter corporate crime (again, it is unclear they do), coercive reform should as well. Corporate reform is expensive, and, like fines, involves costs corporations would prefer to avoid. There are also non-economic disincentives that coercive reform threatens, particularly when government-appointed monitors are involved. Corporations and their managers seem particularly averse to outside oversight and intervention. Fines cannot capitalize on this kind of disincentive since managerial intervention does not translate into financial terms.
There are also less obvious ways that coercive reform can prevent crime: Coercive reform at the entity level stands a better chance of influencing the incentives of individual corporate insiders. Any comprehensive approach to corporate punishment must recognize that corporate crime is frequently caused by corporate insiders exploiting agency costs. For a host of evidentiary reasons, directly targeting these individuals within the criminal justice system has proven difficult. Punishment at the level of the corporate entity can be a way to get at them indirectly, but fines are a clumsy tool for doing this. Just as fines cannot generate the disincentives of managerial intervention, they are also ineffective at reducing agency costs within a firm. To have any real effect, fines would need to impact the incentive structure of the individual corporate insiders who are in a position to commit or prevent crime. Entity-level fines cannot do this since their impact is distributed among all corporate stakeholders. Those with the power to cause or prevent crime bear just a fraction of the burden.
Coerced reform has better prospects for influencing individuals within corporations. If it is true that corporate high-level personnel are particularly averse to government intervention in day-to-day operations, they should be strongly motivated to avoid monitor-led reform. Thus, coercive reform holds out a possibility that has so far eluded deterrence theory: a way of zeroing in on the incentives of the corporate insiders with the power to make a difference.
Coerced reform could also heighten the risks for other individual would-be criminals within corporations. Even in cases where there is strong evidence that corporate crime resulted from individual misconduct, the opacity of the corporate organization can make it difficult to build an individual criminal case. More targeted efforts at corporate reform could give the criminal justice system a way of reaching these individuals anyway. When there is strong evidence that individual misconduct helped bring about corporate crime, reform-oriented courts could require sentenced corporations to replace responsible personnel. The prospect of job loss will raise the stakes for corporate insiders who might otherwise be protected from conviction—due to high criminal evidentiary standards—or from internal corporate sanctions—due to corporate bureaucracy. This would be a way for the criminal justice system to recognize the roles of individual employees in corporate crime, without formally convicting them. Such informal sanctions are known to be effective deterrents.
Lastly, shifting to a reform-focused approach to corporate punishment would influence the incentives of corporate insiders helping the government detect individual misconduct. Currently, the DOJ largely needs to rely on corporations themselves for information about insider misconduct. This is part of why the Sentencing Guidelines encourage corporations to self-report. However, corporations have weak incentives to report and quite strong incentives not to. With respondeat superior looming in the background, reporting insider crime means handing evidence of corporate-level misconduct to the DOJ.
A turn to reform as the exclusive mode of corporate punishment would significantly increase the incentives corporations have to self-report and expose individual criminals. Corporations could report the crimes of individual employees but, at least where the crimes do not reflect organizational defects in need of reform, not face a significant sanction. The corporation may still be guilty of a crime under respondeat superior, but with no corporate defect to fix, a reform-oriented sentencing judge would order no punishment. Self-reporting could even become one effective way for corporations to signal that the criminal conduct was the work of a rogue employee, and not connected to a broader organizational defect in need of reform. If corporations could self-report against rogue employees with less fear of government reprisal, insider would-be criminals would need to reevaluate the expected costs and benefits of misconduct.
Deterrence seems to work poorly for corporations, but relatively well for individuals. Reform is the opposite—relatively easy to accomplish for corporations, notoriously difficult for individuals. Focusing exclusively on reform as a framework for corporate punishment promises the best of both worlds: corporations with fewer criminogenic attributes, and insiders with better incentives to stay on the right side of the law.
 Darryl K. Brown, Street Crime, Corporate Crime, and the Contingency of Criminal Liability, 149 U. Pa. L. Rev. 1295, 1325 (2001); see also Kyron Huigens, Street Crime, Corporate Crime, and Theories of Punishment: A Response to Brown, 37 Wake Forest L. Rev. 1, 7 (2002) (“[T]he discussion of white collar crime is carried out in terms of deterrence.”).
 See 18B Am. Jur. 2d Corporations § 1826 (2017) (“A corporation may be punished by fine; indeed, the only punishment that can be inflicted on a corporation for a criminal offense is a fine or seizure of its property which can be levied by an execution issued by the court.” (citing N.Y. Cent. & Hudson River R.R. Co. v. United States, 212 U.S. 481 (1909))); Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111, 168 (2d Cir. 2010), aff’d, 569 U.S. 108 (2013) (“The only form of punishment readily imposed on a corporation is a fine . . . .”).
 Cindy R. Alexander & Mark A. Cohen, The Causes of Corporate Crime: An Economic Perspective, in Prosecutors in the Boardroom: Using Criminal Law to Regulate Corporate Conduct 11, 24 (Anthony S. Barkow & Rachel E. Barkow eds., 2011) (“There is little evidence that increasing the magnitude of monetary sanctions has a deterrent effect.”).
Mihailis E. Diamantis, Clockwork Corporations: A Character Theory of Corporate Punishment, 103 Iowa L. Rev. (forthcoming 2018), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3057313.
 See Anthony S. Barkow & Rachel E. Barkow, Introduction to Prosecutors in the Boardroom: Using Criminal Law to Regulate Corporate Conduct 1, 3 (Anthony S. Barkow & Rachel E. Barkow eds., 2011) (Using DPAs, “prosecutors impose affirmative obligations on companies to change personnel, revamp their business practices, and adopt new models of corporate governance.”).
 See Ramsey Clark, Crime in America: Observations on its Nature, Causes, Prevention and Control 220 (1970) (“Rehabilitation is also the one clear way that criminal justice processes can significantly reduce crime.”).
 Miriam H. Baer, Too Vast To Succeed, 114 Mich. L. Rev. 1109, 1119 (2016).
 Alexander & Cohen, supra note 4, at 18 (“The costs of internal monitoring and enforcement can be substantial and are likely to be higher for larger and more complex firms . . . .”).
 Vikramaditya Khanna, Reforming the Corporate Monitor?, in Prosecutors in the Boardroom: Using Criminal Law to Regulate Corporate Conduct 226, 231 (Anthony S. Barkow & Rachel E. Barkow eds., 2011) (“[R]elying on a monitor as a sanction may prove desirable when the deterrent effects of cash fines are exhausted and we desire more deterrence.”).
 Brent Fisse, Reconstructing Corporate Criminal Law: Deterrence, Retribution, Fault, and Sanctions, 56 S. Cal. L. Rev. 1141, 1155 (1983) (“A recent discussion of the potential use of probation as a sanction against corporations pointed out that probationary orders requiring corporations to rectify defective standard operating procedures or to make other structural changes within the organization may have a significant deterrent as well as rehabilitative effect because such intervention detracts from managerial autonomy.”).
 For an excellent treatment of how reform mandates can address such agency costs, see generally Jennifer Arlen & Marcel Kahan, Corporate Governance Regulation Through Nonprosecution, 84 U. Chi. L. Rev. 323 (2017).
 See Memorandum from Eric Holder, Deputy Attorney Gen., to All Component Heads and U.S. Attorneys, Bringing Criminal Charges Against Corporations (June 16, 1999), http://www.justice.gov/sites/default/files/criminal-fraud/legacy/2010/04/11/charging-corps.PDF.
 See Albert W. Alschuler, Two Ways to Think About the Punishment of Corporations, 46 Am. Crim. L. Rev. 1359, 1367 (2009) (“This punishment is inflicted instead on human beings whose guilt remains unproven. Innocent shareholders pay the fines, and innocent employees, creditors, customers, and communities sometimes feel the pinch too.”).
 Of course, these individuals should be entitled to some due process. However, since they are not themselves on trial, the full cumbersome machinery of the criminal process need not play a role.
 See Brent Fisse & John Braithwaite, The Impact of Publicity on Corporate Offenders 227–45 (1983) (finding that negative publicity had a greater deterrent effect on managers than formal sanctions); Alexander & Cohen, supra note 4, at 12 (“Reforms to governance at the top of the corporation have thus emerged as a potentially effective substitute for higher monetary sanctions in deterring corporate crime.”); Sally S. Simpson, Corporate-Crime Deterrence and Corporate-Control Policies: Views from the Inside, in White Collar Crime Reconsidered 289,
302–03 (Kip Schlegel & David Weisburd eds., 1992) (finding that informal sanctions had a greater deterrent effect on managers than formal sanctions).
 See U.S. Sentencing Guidelines Manual § 8C2.5(g) (U.S. Sentencing Comm’n 2016).
 Jennifer Arlen, The Failure of the Organizational Sentencing Guidelines, 66 U. Miami L. Rev. 321, 325 (2012) (“[T]he Organizational Guidelines do not provide firms with sufficient mitigation to ensure that firms face lower expected sanctions if they undertake effective corporate policing when corporate policing substantially increases the probability that the government can detect and sanction the wrong.”).
 Id. at 324 (“[C]orporate efforts to help the government could hurt the firm by increasing its probability of being held criminally liable.”).
 In 2009, Deputy Attorney General Larry D. Thompson proposed something similar: a complete defense to corporate liability under respondeat superior if the corporation demonstrated that the individual criminal evaded an otherwise effective compliance program. See generally Larry Thompson, The Blameless Corporation, 46 Am. Crim. L. Rev. 1323 (2009).
Mihailis E. Diamantis is an Associate Professor of Law at the University of Iowa College of Law.
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