by Jennifer Arlen and Lewis A. Kornhauser
In our forthcoming article, we develop a framework based on empirical evidence that identifies the optimal structure of corporate and individual liability when laws can deter through two channels: their ability to set social and ethical norms that express social condemnation (“expressive channels”), as well as through formal sanctions. We show that corporate liability is vital to the law’s ability to deter individuals from engaging in organizational misconduct through expressive channels. We also show that, in order to deter through either channel, governments must ensure that they reliably detect and sanction most individuals and companies who commit crime. Finally, we show why countries should not exempt companies from corporate liability based solely on their adoption of an ostensibly effective compliance program.