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Given this vacuum, governments have had to resort to other measures to control and direct corporations toward the public good. The practice of punishment, effective in controlling human behavior, was extended to corporations. But Baron Thurlow (a British legal theorist) framed the central dilemma in corporate punishment with his oft quoted comment that corporations cannot be punished because they have "no soul to damn" and "no body to kick." The unique attributes of corporations has given rise to creative options for corporate control and punishment: fining, stock dilution, court-mandated changes in corporate structure, adverse publicity orders, and community service. (See Fisse) Most recently, Federal Sentencing Guidelines have sought to provide incentives for corporations to take preventive measures to avoid wrongdoing by developing ethics compliance programs. These guidelines adjust punishments in light of ethics programs that the corporations have designed and implemented to prevent wrongdoing. Corporations found guilty of wrongdoing would still be punished. But punishments can be reduced when guilty corporations show that they have developed and implemented compliance programs to promote organizational ethics and to prevent corporate wroingdoing. These include compliance codes, ethics training programs, ethics risk identification measures, and corporate ethical audits.

Modified from Christopher Stone, Where the Law Ends
History of corporation
Problem Solution Organizational Form
Successfully transferring stewardship over church holdings to new abbot Create a "passive device to hold property" Proto-corporation
Control over and regulation of a practice or skill Create a device to (a) hold the privileges of some particular trade, (b) establish rules and regulations for commerce, and (c) hold courts to adjudicate grievances among members. Medieval guilds that evolve into regulated companies.
Pooling capital and resources and directing complex ventures Create a device (a) to hold provileges of trade, (b) where investors provide capital, and (c) that delegates operations to managers Unchartered joint stock companies
Limiting investor liability, limiting manager liability, and balancing the two Corporation evolves into a legal person with (a) legal rights and duties, (b) owned by shareholders, (c) run by managers, (d) regulated through state charter Limited corporation whose operations are defined in and limited by the charter
Ultra Vires (charter prevents growth) and Charter Mongering Granted broad powers through more broadly defined charters Full Blown Corporation
Finding agent responsible for wrongdoing (a) Due process, equal protection, and free speech rights, (b) legal duties, (c) legal standing, (d) Federal Sentencing Guidelines, and Sarbanes-Oxley Act Corporation as Legal Person
Options for corporate punishment (fisse and french)
Description Example Target of Punishment Deterrence Trap Avoided? Non-financial Values Addressed? Responsive Adjustment Interference with Corporate Black Box
Monetary Exaction Fines Pentagon Procurement Scandals Harms innocent Fails to Escape Few or None Targeted None No interference
Stock Dilution Dilute Stock and award to victim Stockholders (Not necessarily guilty) Escapes by attacking future earnings Few or None Limited No interference
Probation Court orders internal changes (special board appointments) SEC Voluntary Disclosure Program Corporation and its Members Escapes since it mandates organizational changes Focuses on management and subgroup values Passive adjustment since imposed from outside Substantial entry into and interference with corporate black box
Court Ordered Adverse Publicity Court orders corporation to publicize crime English Bread Acts (Hester Prynne shame in Scarlet Letter ) Targets corporate image Escapes (although adverse publicity indirectly attacks financial values) Loss of prestige / Corporate shame / Loss of Face/Honor Active adjustment triggered by shame No direct interference (corporation motived to restore itself)
Community Service Orders Corporation performs services mandated by court Allied chemical (James River Pollution) Representative groups/individuals from corporation Escapes since targets non-financial values Adds value to community Passive or no adjustment: sometimes public does recognize that cs is punishment None

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Source:  OpenStax, Business ethics. OpenStax CNX. Sep 04, 2013 Download for free at http://legacy.cnx.org/content/col10491/1.11
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