The US Supreme Court may say that corporations are people – but let’s be honest, corporations are made up of people (actual human ones), and corporate actions are the result of the decisions and actions of individuals. It can be frustrating and disillusioning to see corporations “punished” (meaning fined) for misdeeds without any consequences to the individuals behind the misdeeds (see the fallout from the financial crisis, as just one example).
U.S. Deputy Attorney General Sally Quillian Yates gets it. In a Department of Justice memo released on September 9, she summarizes the importance of individual accountability:
“One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing. Such accountability is important for several reasons: it deters future illegal activity, it incentivizes changes in corporate behavior, it ensures that the proper parties are held responsible for their actions, and it promotes the public’s confidence in our justice system.”
Recognizing the difficulty of pursuing individuals for corporate misconduct, the DOJ has developed the following measures to be incorporated into current and future civil and criminal investigations of corporate wrongdoing:
- For a corporation to receive any “credit” for its cooperation in an investigation (a mitigating factor in the final decision), it has to disclose all relevant facts about individual misconduct, including misconduct by top executives.
- Both criminal and civil investigations should focus on individual wrongdoing from the beginning of the investigation. The memo notes, “Because a corporation only acts through individuals, investigating the conduct of individuals is the most efficient and effective way to determine the facts and extent of any corporate misconduct.”
- During corporate investigations, civil and criminal attorneys should communicate with each other regarding individual misconduct. If a criminal investigation determines that criminal charges against an individual aren’t feasible, civil charges may still be possible. There may also be potential for concurrent civil and criminal charges.
- Absent extraordinary circumstances, resolutions or settlements with corporations should not include any immunity or releases for individuals.
- If the corporate case is resolved before the individual cases, there should be a plan in place to complete the individual investigations before the statute of limitations expires. If an investigation concludes that no individual charges should be brought, the decision must be approved by the US Attorney or Assistant Attorney General.
- The decision to bring civil actions against individuals should not be based solely on the individuals’ ability to pay. The decision should be based on factors including the seriousness of the misconduct and the importance of the public interest at stake. The rationale here is that “the Department’s civil enforcement efforts are designed not only to return government money to the public fisc, but also to hold the wrongdoers accountable and to deter future wrongdoing.”
The DOJ memo is a promising development for anyone frustrated with the lack of individual accountability in the corporate world. It’s also a wake-up call to individuals within the corporate world: the corporate shield may no longer shield you from responsibility for your corporation’s wrongdoing.