Question

Should a business entity be liable for its criminal actions? Or should the business entity's management and employees be held solely liable for criminal actions that benefit the business? Or should both the business entity and its management & employees be held liable? Explain.

Answer 1

There are various types of criminal activities that are committed by the Companies such as misrepresentation or fraud, tax evasion, price fixing or bankruptcy, etc. Usually, Company, being an artificial person created by law, it has a different identity from that of its members and hence the Company cannot be imprisoned but only be penalized for its criminal actions. However, I feel that since the Company cannot work on its own but simply a puppet in hands of the management and employees, it only makes sense to hold the business entity's management and employees liable for the criminal actions. In this regard, in US, the Sarbanes-Oxley Act has already come into existence which was actually in response to the public outcry for the financial misconduct of the Public companies as faced by the shareholders and public. Accordingly, this Act became part of the US Federal law that emphasizes upon the Corporate responsibility, transparency in business and the Auditing accountability of the Public companies, as an expansion of the already existing accounting acts that govern the activities undertaken by the Public companies.