The Corporation in Action
| Author | J. Anthony Vanduzer |
| Pages | 168-190 |
CHAPTER
5
THE
CORPORATION
IN
ACTION
A.
INTRODUCTION
As
discussed
in
Chapter
3, it is
often
helpful
to
think
of
corporations
as
having legal characteristics similar
to
those
of
natural persons.
The
com-
parison
may
only
be
taken
so
far,
of
course,
and in
this chapter
we
look
at
one of the
most important
differences
between corporate
and
natural
persons:
the
necessity
for
corporate persons
to act
through human
agents.
In
particular,
we
will look
at how
corporations acting through
agents
can be
said
to
enter into contracts
and to
commit crimes
and
torts.
The
rules governing corporate liability
are
fundamentally
impor-
tant
to all the
stakeholders
in the
corporation because they determine
the
legal
consequences
of the
corporation's
behaviour
in the
marketplace
and,
as a
result, influence that behaviour.
For
example,
the
rules that
determine when
a
corporation
is
bound
by
contracts will
affect
how a
corporation sets
up its
contract-approval process.
The
corporation will
want
to
ensure that only those employees whom
it has
given authority
to
enter into contracts
are in a
position
to
bind
the
corporation.
The
theories
of
liability developed
by the
courts over
the
years have
varied
depending
on
whether
the
liability sought
to be
imposed was,
on
the one
hand, contractual
or, on the
other, criminal
or
tortious.
In
imposing
contractual liability,
the
courts
have focused
on
whether
the
individual whose actions
are
alleged
to
have given rise
to
corporate lia-
bility
was an
agent
of the
corporation with authority
to
incur liability
on
168
The
Corporation
in
Action
169
behalf
of the
corporation.
By
contrast,
to
impose
liability
on a
corpora-
tion
for a
crime
or a
tort,
the
courts have asked whether
the
person
could
be
considered
to be the
same
as the
corporation
for the
purpose
of
the
activity alleged
to
constitute
the
crime
or the
tort.
The
signifi-
cance
of
these distinctions will
be
explained
in the
following
sections.
B.
LIABILITY
OF
CORPORATIONS
FOR
CRIMES
1)
Introduction
Because
corporations have
"no
soul
to be
damned;
no
body
to be
kicked"1
but
fundamentally
comprise
a
locus
of
claims
by the
various
stakeholders,
as
discussed
in
Chapter
1, the
reasons
for and
conse-
quences
of
imposing criminal liability
on
corporations
are
somewhat
different
from
those associated with imposing such liability
on
natural
persons.
It
seems unlikely,
for
example, that conviction
for a
criminal
offence
would
have
the
same
deterrent
effect
on a
soulless
corporation
as it
would have
on an
individual. Certainly
the
managers
of a
corpo-
ration will
be
discouraged
from
causing
the
corporation
to
commit
crimes
to
some extent
by the
prospect that
the
corporation
for
which
they
are
responsible will
be
found
criminally liable.
The
deterrent
effect
associated with
the
prospective damage
to the
corporation's reputation
caused
by a
criminal conviction, however, will
not be as
great
as the
deterrence
resulting
from
the
threat
of
personal
responsibility.
This
problem
is
mitigated
to a
significant extent
by
provisions
in the
crimi-
nal law and
many regulatory statutes
which
impose
liability
on the
individuals through whom corporations commit crimes.
The
remedies used
to
sanction criminal behaviour
are
problematic
as
well when
a
corporation
is the
offender.
Imprisonment
of the
corpo-
ration itself
is not
possible and,
if a
fine
is
imposed
on a
corporation,
its
shareholders, employees,
and
others with
financial
claims against
the
corporation will
suffer.2
At the
same time, despite
the
conceptual
1
Lord
Thurlow,
quoted
by
Glanville Williams,
in
Criminal
Law:
The
General
Part,
2d
ed.
(London: Stevens,
1961),
at
856.
2 An
alternative sentence
was
imposed
in
R.
v.
NorthWest
Territories
Power
Corpo-
ration,
[1990]
N.W.T.R.
115
(Terr. Ct.).
The
court
ordered
the
directors
and the
chief
executive
officer
of a
corporation convicted
of a
criminal
offence
to
pub-
lish
a
public apology.
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