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Robert Kert

Video Robert Kert

Robert Kert

Researcher of the Month

Cor­rup­tion, tax eva­sion, pol­lu­tion: What can cor­por­a­tions get away with?

In 2006, new le­gis­la­tion entered into force in Aus­tria that made it possible to hold cor­por­a­tions li­able for crim­inal acts. Be­fore that, crim­inal li­ab­il­ity had been lim­ited to nat­ural per­sons only, for in­stance man­agers or em­ploy­ees work­ing for a cor­por­a­tion. In his re­search, Robert Kert, full pro­fessor at WU’s In­sti­tute for Aus­trian and European Eco­nomic Crim­inal Law, looks at how cor­por­a­tions can ac­tu­ally be pun­ished and which con­sequences they face if sen­tenced. His res­ults show that the fines are man­age­able, espe­cially for large com­pan­ies. However, cor­por­ate crim­inal li­ab­il­ity has proven ef­fect­ive nev­er­the­less.

It was a long-held prin­ciple that crim­inal law was only ap­plic­able to nat­ural per­sons. In prac­tice, this had the fol­low­ing con­sequences: In cases where a com­pany’s de­cision-­makers or em­ploy­ees com­mit­ted crim­inal of­fences, for in­stance large-s­cale pol­lu­tion, fol­low­ing orders re­ceived from the com­pany, it was only possible to hold the people them­selves li­able un­der crim­inal law, even though they had ac­ted on be­half and possibly for the be­ne­fit of the com­pany. Cor­por­ate crim­inal li­ab­il­ity was in­tro­duced to make the sys­tem more just in this regard. “It’s about re­think­ing old, dog­matic con­cepts and break­ing up out­dated no­tions of crim­inal law that’s only ap­plic­able to nat­ural per­sons,” ex­plains Robert Kert. “In this con­text, we in­vestig­ated the ap­plic­ab­il­ity of prin­ciples of crim­inal law to cor­por­a­tions.”

Crim­inal of­fences for the be­ne­fit of cor­por­a­tions

Pro­fessor Kert’s stud­ies show that, con­trary to what some crit­ics claim, hold­ing cor­por­a­tions li­able for crim­inal of­fences is com­pat­ible with the cur­rent prin­ciples of crim­inal law. “It is possible to hold a com­pany li­able for or­gan­iz­a­tional short­falls or il­li­cit busi­ness prac­tices,” says Kert, “But a com­pany can only be sen­tenced if a suf­fi­ciently close con­nec­tion ex­ists between the ac­tions of an in­di­vidual and the cor­por­a­tion in ques­tion.” Un­der Aus­trian law, com­pan­ies can be held li­able for crim­inal acts com­mit­ted by their de­cision-­makers and em­ploy­ees. Cor­por­ate crim­inal li­ab­il­ity only ap­plies, however, if the acts in ques­tion were car­ried out for the be­ne­fit of the cor­por­a­tion or if they vi­ol­ated any of the cor­por­a­tion’s legal du­ties and ob­lig­a­tions.

Lim­ited fines

If sen­tenced, com­pan­ies face fines of up to € 1.8 mil­lion. Espe­cially for large cor­por­a­tions, fines of this scale are re­l­at­ively light and eas­ily man­age­able. Prac­tice shows, however, that crim­inal cor­por­ate li­ab­il­ity has had pos­it­ive ef­fects in many areas. “First and fore­most, cor­por­ate crim­inal li­ab­il­ity is a pre­vent­ive in­stru­ment. It is in­ten­ded to prompt com­pan­ies to put or­gan­iz­a­tional struc­tures and safe­guards in place to pre­vent crim­inal acts be­ing com­mit­ted from within the cor­por­a­tion,” pro­fessor Kert ex­plains, “Many com­pan­ies fear a possible sen­tence and the res­ult­ing dam­age to their repu­ta­tion so much that they hasten to im­ple­ment ap­pro­pri­ate com­pli­ance meas­ures.” However, Robert Kert calls for a sim­pli­fic­a­tion of the mech­an­isms for cal­cu­lat­ing the pen­al­ties and for a sig­ni­fic­ant in­crease in the fines that can be im­posed. He ar­gues that this would be ne­ces­sary to ef­fect­ively sanc­tion com­pan­ies that are un­will­ing to en­sure com­pli­ance with the law. Ac­cord­ing to Kert, the fines cur­rently in place are “pea­nuts” for large en­ter­prises. He ar­gues that it would be cru­cial to ex­pand the possib­il­it­ies for out-of-­court set­tle­ments in cor­por­ate crim­inal li­ab­il­ity pro­ceed­ings, i.e. for­go­ing a formal crim­inal case if pre­scribed meas­ures are im­ple­men­ted. Ac­cord­ing to Kert, it should be possible to drop charges against cor­por­a­tions if they agree to com­ply with cer­tain con­di­tions. “For example, cor­por­a­tions could be ob­lig­ated to pay a com­pens­a­tion to the vic­tims of the crim­inal acts or to im­ple­ment re­struc­tur­ing meas­ures and put in­ternal safe­guards into place,” he says. Even if a cor­por­a­tion is sen­tenced, more em­phasis should be placed on spe­cific con­di­tions to be im­posed on the com­pany in ques­tion or on su­per­vis­ory meas­ures to make sure that the com­pany im­ple­ments ap­pro­pri­ate steps in its or­gan­iz­a­tional struc­ture, pro­cesses, and per­son­nel man­age­ment to elim­in­ate any or­gan­iz­a­tional short­falls.