The Corporate Insanity Defense

Mihailis E. Diamantis | March 1, 2021

Corporate criminal justice rests on the fiction that corporations possess “minds” capable of instantiating culpable mens rea. The retributive and deterrent justifications for punishing criminal corporations are strongest when those minds are well-ordered. In such cases misdeeds are most likely to reflect malice, and sanctions are most likely to have their intended preventive benefits. But what if a corporate defendant’s mind is disordered? Organizational psychology and economics have tools to identify normally functioning organizations that are fully accountable for the harms they cause. These disciplines can also diagnose dysfunctional organizations where the threads of accountability may have frayed and where sanctions would not deter. Punishing such corporations undermines the goals of criminal law, leaves victim interests unaddressed, and is unfair to corporate stakeholders.

This Article argues that some corporate criminal defendants should be able to raise the insanity defense. Statutory text makes the insanity defense available to all qualifying defendants. When a corporate criminal defendant’s mind is sufficiently disordered, basic criminal law purposes also support the defense. Corporate crime in these cases may trace to dysfunctional systems or subversive third parties rather than to corporate malice. For example, individual corporate employees may thwart well-meaning corporate policies to pursue personal advantage at the expense of the corporation itself. Corporations then may seem more like victims of their own misconduct rather than perpetrators of it.

Justice and prevention favor treatment of insane corporations rather than punishment. Recognizing the corporate insanity defense would better serve victims’ and stakeholders’ interests in condemning and preventing corporate misconduct. Treatment would create an opportunity for government experts to reform dysfunctional corporations in a way that predominant modes of corporate punishment cannot. Effective reform takes victims seriously by minimizing the chance that others will be harmed. It also spares corporate stakeholders unnecessary punishment for corporate misconduct that could be sanctioned in more constructive ways.