Corporate Crime & Ethics Quiz

Chapter 9: Corporate Crime and Wrongdoing and White-Collar Crime

• Criminology historically overlooked crimes by those with power and privilege.
• Traditional criminology focused on "degenerate" members of "dangerous classes" committing street crimes.
• Traditional criminology neglected crimes by economically privileged, high-status individuals.
• Public perception of crime has focused on the less powerful and marginalized, obscuring the harm caused by the powerful.
• The scale of crimes by professional elites and corporations is extensive, ranging from financial fraud to species extinction.
• Critical criminologists note corporate crime's responsibility for global death, destruction, and injustice, more than all other crimes combined.
• Power and privilege make crimes by elite professionals and corporations complex and difficult to control.
• The criminal harm from powerful entities exceeds that of street criminals, yet mainstream criminology ignored it.
• Early criminologists like Edwin Sutherland and William Chambliss prompted a focus on the crimes of the powerful.
• The criminological inquiry's scope is expanding, including crimes against consumers and green criminology.
• Green criminology focuses on crimes against the ecological environment.
• Ignoring harms by elites and corporations is impossible in today's globalized world, increasing public awareness and activism.
• Crimes by the wealthy/corporations and against the environment are gaining prominence in news media and criminology.
• Corporate crime is defined as organized criminal activity by business executives during business, including violating labor laws, polluting, and manipulating norms.
• White-collar crime is related to corporate crime.
• White-collar crime is a distinct type of criminal wrongdoing that often involves strategies to acquire money.
• White-collar crime is committed by high-status or seemingly well-to-do individuals who are generally trusted
• Examples of white-collar crimes reported include investor Bernie Madoff's Ponzi scheme and the Hollywood "tuition scandal".
• Medical malpractice is a disturbing case of white-collar crime, such as surgical items negligently left inside patients.
• Professional misconduct among lawyers is an ongoing issue in Canada

Increased Awareness and Challenges

• Increasing awareness of crimes committed by the powerful is hoped to lead to efforts to police such crimes.
• Policing these crimes is difficult because of the paradoxical position of business corporations in the global economy.
• Corporations provide jobs and economic growth but also engage in wrongdoing for profit and shareholder value.

Inadequacy of the Legal System

• The historical inadequacy of the legal system to properly define, prosecute, and punish corporate crime is a problem.
• Corporate and white-collar crimes are more elaborate and concealed than street crimes, posing further challenges.
• Criminology examines corporate and white-collar crime, including economic crime, crimes against consumers/employees, and ecological environment crimes.

Edwin Sutherland and White-Collar Crime

• Academic criminology has long minimized the crimes of the powerful.
• Edwin H. Sutherland sought to expose commonly held misconceptions about crime and its causes.
• Sutherland's work in 1939 indicated there is a vast array of criminal wrongdoing that goes unreported.
• He found there was much wrongdoing that is undertheorized that is regularly committed by high-status, "white-collar” individuals.
• White-collar individuals are well-placed within the echelons of business society and use their positions economic privilege for personal gain.
• Sutherland defined white-collar crime as “a crime committed by a person of respectability and high status in the course of his occupation".
• Sutherland emphasized the relation between crime and economic power.
• He aimed to reorient criminologists to the fact that possessing the professional privilege of upper-class social status does not preclude a person from committing serious crimes.
• Elite deviance now constitutes a major problem for much of the world.

C Wright Mills: The Power Elite

• C. Wright Mills wrote about how those deemed the power elite occupied positions of political and economic influence that demanded greater critical scrutiny from social scientists.
• Criminal behaviors classified as white-collar include money laundering, theft of intellectual property, financial accounting fraud, and bribery.

The Globalization of Corporate Power and Influence

• The commission of illegal acts and gross harms by corporate business enterprises and professional elites is not a new phenomenon.
• The modern global capitalist system itself existed founded upon the unjust exploitation of millions of enslaved African people.
• The exploitation of people by those with the power to do so in the course of doing business is one example of how wealth and profit is generated in the modern global economy where human rights are superseded by corporate rights.
• A key part to this system is the invention of the legal entity known as the corporation.
• Corporations have become the most dominant institution of the modern world order.
• Business corporations are administrative businesses that generate wealth for those who own it/own shares in it.
• Corporations claim limited liability, meaning owners/workers generally are not personally responsible for wrongdoings committed during business.
• Limited liability protection hampers attempts at controlling acts of corporate crime.

Corporate Power Expansion Since the 1980s

• Since has undergone historically significant developments that have substantially expanded power.
• These include globalization and corporate personhood.
• Globalization involves removing trade barriers like import/export taxes to allow goods and increase global expansion into foreign markets.
• Corporate globalization has increased the size of many corporations, allowing for the domination in specific sectors of the economy.

Corporate Personhood.

• Corporate personhood relates to the status of a corporation to be deemed a legal person, individual rights and freedoms.
• This allows corporations to make substantial rights claims when pursuing profits; when facing obstacles in doing so, it will vigorously protect those claims through legal court challenges and appeals.
• Virtually all large corporations have in-house legal departments and spend substantial amounts of money protecting and defending their business interests in the legal system.
• Through globalization and free trade agreements, there has been a significant increase in the power and influence of multinational corporations.
• Corporations have become dominant players on the global political stage. -Corporate power has negative outcomes on wages/rights of workers, environmental protections, and food safety.
• Placing profits over people and safety has become common practice in business.

Types of Corporate Crime

• The phrase corporate crime refers to a wide variety of wrongdoings.
• Corporate crime can overlap with other categories of illegal activity.
• Four major types of corporate crime and wrongdoing are: economic and financial crime, crimes against consumers, crimes against employees/workers, crimes against the ecological environment.

Economic and Financial Crime

• Economic or financial crimes are one of the major forms of corporate crime.
• Economic/financial crimes include misrepresentations in financial statements, bribery, anti-competitive activities such as price-fixing, monopolization, and stock market manipulation.
• Stock market pump and dump schemes are a type of economic and financial crime.
• Economic crime can include money laundering and tax haven schemes.
• Economic crime results in financial losses to private individuals while benefiting powerful corporations and economic elites.

Misrepresentation in Financial Statements

• Deliberate falsifications of monetary amounts/accounting records of a company with the intent to deceive investors and shareholders.
• A highly publicized example: the publicly traded energy company Enron.
• Enron's success was based on its exploitation of existing accounting regulations.
• As Enron appeared successful, it became the 7th largest company in the US in terms of sales.
• Enron executives used illegal financial measures to make profits appear to be increasing, while hiding billions in debt via accounting loopholes.
• Enron collapsed due to revelations of major accounting fraud, becoming the largest corporate bankruptcy in American history.
• The accounting firm Arthur Andersen helped facilitate the accounting coverup, performing both auditing and consulting work for Enron.

Price-Fixing

• In a fair market, companies attract consumers by holding prices down.
• Price-fixing occurs when competitors conspire to fix prices, so consumers pay higher prices for these goods/services.
• Individuals whose compensation are tied to financial performance of a business have an incentive to engage in price-fixing.
• Price-fixing violations are widespread across industries.
• The competition watchdog in Canada has investigated price-fixing schemes in the chocolate and Quebec's gasoline industries.
• Examples include the Archer Daniels Midland (ADM) lysine case.

The Monopolization of Markets

• Economic competition is said to benefit consumers, yet many corporations to eliminate competition by securing a monopoly or oligopoly over a particular industry.
• In Canada, a small group of corporations dominate key sectors such as technology platforms, telecommunications, and banks.
• Without competition, corporations use market dominance to yield power over the economy.
• The loss of competition results in consumers paying higher prices for lower-quality items.
• Over the last several decades, most industries have become more concentrated.
• Without competition, corporations take advantage of consumers/suppliers, stifle innovation, drive down workers' wages, and influence elections.
• During the COVID-19 pandemic, larger companies were able to purchase financially distressed companies at much lower prices.

Banking and Mortgage Finance Crime

• Wrongdoing in the financial sector is economically damaging to society.
• The world has had financial losses to individuals and their investments, and the disruption of job creation, home ownership, and investments.
• Financial wrongdoing has disrupted the quality of life of massive populations.
• Deliberate insider fraud is the very centre of the disaster.
• The global financial crisis of 2008 has become known as the world's largest financial crisis since the Great Depression.
• The crisis was caused by reckless risk-taking by banking and lending institutions.
• These institutions would make loans to homeowners with deceptive terms and conditions that would lead to the collapse of the mortgage market.

Tax Evasion and Money Laundering

• Wealthy and powerful individuals shift their money to other countries shift their money to other countries to avoid paying taxes or to conceal purposes of transactions.
• Expertise from legal / financial organizations is required to evade taxes or conceal crime proceeds.
• The process of making large amounts of money generated by criminal activities appear legitimate is referred as "money laundering".
• The Panama Papers leaked documents that revealed millions of leaked documents and hundreds of thousands secret tax shelter companies.
• These organizations that financially benefited the global elite, and were satirized in "The Laundromat" film.
• The Panama Papers revealed how the rich and powerful hid billions of dollars in complex financial networks.
• Other documents included the Paradise Papers.
• The Paradise Papers exposes links that connected the offshore financial industry with organized crime and large-scale financial wrongdoing.
• The promise of tax havens is secrecy-offshore locales oversee companies that often difficult/impossible to trace back to their owners.

Bribery

• Bribery is the act of someone offering money or other incentives to compel someone to return a favour.
• Bribery gives those who wish to compete for services and contracts in a fair and transparent manner an unfair advantage.

Crimes Against Employees and Workers

• In Canada, the Corruption of Foreign Officials Act (2017) outlines/prohibits bribery by Canadian companies.and employees.
• Nevertheless, the internationally recognized Canadian engineering and construction firm SNC-Lavalin has engaged in bribery to be awarded government projects overseas.

Crimes and Wrongdoings Against Consumers

• Many people are familiar with the snake oil salesmen in the early days of consumer society where they offered bogus cure-all concoctions.
• Nowadays consumers expect that the products they purchase are safe, authentic, and reasonably priced.
• Yet consumers continue to suffer the consequences of crimes and wrongdoings.
• Instances of this include; fake online reviews, tainted and adulterated foods, market manipulation and price-fixing, false advertising, pharmaceutical drugs of harm, etc.

Consumer Protection Law

• Canada's consumer protection legislation does not necessarily form part of the Criminal Code.
• Instead, the Canada Consumer Product Safety Act regulates the safety of a wide variety of consumer products.
• Anti-competitive practices are regulated by the Competition Act, such as regulating price-fixing, and misleading advertising.
• Despite consumer protection laws, many fraudulent or adulterated consumer items continue to appear on the market.
• Examples of consumer crimes include the Apple slowing down older iPhones, a French drug maker guilty of deceit/manslaughter over a weight loss pill, and general motors faulty ignition swtiches

Crimes Against Employees and Workers

• Another type of corporate involves crimes against employees and workers, including union busting, occupational health and safety violations,
• Enslavement and abuse of in-home workers/workers abroad, violence, sexual harassment, and discrimination in the workplace are examples

Union-Busting

• The ability to engage in collective bargaining with employees is important in seeing improving wages, benefits, and working conditions
• Employers and corporations perceive unions and bargaining as an impediment to generate profits.
• As a result, some employers will engage in activities that are considered “union-busting."
• Union Busting is employers will prevent employees from forming or joining a labour union.

Safe and Health Violations

• Another crime against employees/workers involves unsafe conditions/health hazards in workplace.
• Many corporations agressively pursue profits without safety and health for the lives of the workers..
• Also some of industries have exposure of workers to hazardous chemicls, causing the development of respirator and cancer many years.

Crimes Against the Ecological Environment

• Some governments in places have legal provisions to protect the health/safety of workers, legal provisions will not guarantee accidents and violations of safety protocols.
• Due to ongoing efforts of critical scholars and environmental activists, some developments involvingenvironmental justicehave transpired.
• environmental or green crimes crimes, destruction, and wrongdoings against the natural environment, as well as the flora and fauna that inhabit it, including humans.
• Environmental or green crimes represent a persistent threat to the interconnected living systems that make up the planet and of which humans are a part.

Toxic Emissions in Petroleum Fuels

• The concept of environmental racism refers to how racialized communities are chemical/toxic exposures that threat their lives greater extent.
• For over half of the country, the Grassy Narrowsdid not have chemicals and fish for the river

Causes of Corporate Crime

• Understanding the imperatives of how economic systems have operated historically gives us insight those continues to stimiluate illegal activity on the corporations.
• In course of business under market and generating money, business corporations operate some interference, that can cause managers to commit wrong doing.

Complying with Open Market Pressures

• competition Compels some companies to sell them commodities for cheaper and companies have to cut costs, reduce timeline make products inferior quality
• Boeing grounded after killer and crashed

Maintaining Business Imperative/Market Domination

• Tendency to have market dominance the result sector is interest corporations interests greater choice corporation power

Test your knowledge of corporate crime, lawbreaking, and ethical violations using examples like the Boeing 737 Max case and Bernie Madoff's Ponzi scheme. Explore the distinctions between corporate and white-collar crime.