On Tuesday, Sen. Elizabeth Warren published an op-ed in the Washington Post in which she called for corporate executives to be “hauled out in handcuffs for failing to reasonably oversee the companies they run.” Warren used the piece as a vehicle to introduce new legislation, the Corporate Executive Accountability Act. The bill would expand “criminal liability to any corporate executive who negligently oversees a giant company causing severe harm to U.S. families.” While there is a lot to like about Warren’s plan, the proposal to put corporate executives in jail for acting negligently is a very bad idea.
This is not the first time that Warren has made these arguments or focused on criminal liability for corporate executives. Last year, she introduced the Ending Too Big to Jail Act, which would have increased government resources devoted to investigating fraud and potential criminal conduct by large financial institutions. Her new bill takes aim at corporate criminality by shifting more resources to prosecution, requiring executives to certify that no crimes have been committed on their watch, and lowering the mental state required for guilt to negligence.
Negligence is an incredibly low standard for criminal punishment. A person who is acting negligently does not know that what she is doing (or failing to do) is wrong or risky. Negligence means that a “reasonable person” in that position would have realized that there was a risk of harm. Prosecutors are likely to think that defendants should have known that there were risks simply because something bad occurred—not because they necessarily would have recognized the risks themselves if they’d been in that situation.
Not only is the standard itself problematic, but Warren also supports her proposal with a highly misleading example. She says, “Even when in-house lawyers flag conduct that skirts the law, there’s little reason for executives to listen. The executives know that, at worst, the company will get hit with a fine—and the money will come out of their shareholders’ pockets, not their own.” But her example is not of an executive acting negligently. The whole point of Warren’s example—and what makes the executives so blameworthy—is that they are aware of the risk that they are breaking the law. The executives in her example are not guilty of negligence, but recklessness or “willful blindness”—mental states that are both more serious and more difficult to prove than the negligence standard she proposes.
We think it may not be an accident that Warren gives an example of executives who are engaged in more serious conduct than negligence. Anyone familiar with Warren’s work should recognize that she doesn’t believe that the 2008 financial crisis was the result of unfortunate accidents; she and others have argued (quite compellingly) that corporate executives were well aware of the riskiness of their behavior but took risks to make bigger profits. Warren has argued that financial “fraud” should be prosecuted aggressively. But the bill she is now proposing would treat mistakes the same as intentional fraud.
Warren tells us that one reason prosecutors don’t try to bring criminal prosecutions against corporate executives is that they claim “it’s too hard to prove that the people at the top knew about the corporate misconduct.” And she complains that under current law, those executives “can escape the threat of prosecution so long as no one can prove exactly what they knew.” In other words, the problem isn’t necessarily that the law criminalizes the wrong conduct—it’s that corporate fraud cases are hard to prove. Warren does acknowledge that current law could address a lot of these problems if prosecutors devoted more time and resources to those cases. While she deserves credit for this admission, she also deserves criticism for trying to water down the law simply to make it easier to punish people.
Now, some will say that prosecutors will only use this overly broad law to go after executives who were willfully blind or who knew about these problems. That claim is reminiscent of arguments made in other contexts—that the burden of proof makes some cases too difficult to prove, so we need to change the law. That’s very dangerous.
Warren has been a proponent of this approach elsewhere. She has opposed bipartisan criminal justice reform legislation out of concern that it might benefit white-collar defendants. When legislators sought to clarify or impose higher mental state requirements for criminal culpability, Warren argued that prosecutors needed greater flexibility to reach bad actors in the financial sector. In advancing these arguments, Warren once again argued for criminal statutes that went well beyond the conduct that she had identified as deserving punishment. And in doing so, she has embraced the sort of prosecutorial power that criminal justice reformers nationwide have long sought to curtail.
To be clear, there are other aspects of Warren’s proposal that seem like worthy reforms. In particular, Warren proposes a certification requirement so executives at big banks would need to certify that they had done “due diligence” inquiries to ensure that their subordinates were abiding by the law. This proposal certainly seems that it would foster a culture of accountability, particularly because Warren’s bill would impose penalties for filing false certifications. And focusing more resources on regulating financial institutions, as Warren argues in her op-ed, might well be an important component of curbing economic inequality and preventing the next financial crisis.
But Warren’s decision to use criminal law to bring about change is part of a broader pathology present on both the right and the left in this country: the assumption that the best way to solve a social problem is to pass a new criminal statute. The past half-century provides plenty of evidence that this approach is a recipe for disaster. As criminal codes have expanded, prison populations have ballooned, and prosecutorial and police discretion have led to a massive, racialized underclass of individuals with criminal records. Anyone who is committed to criminal justice reform should reject this approach.
It can be tempting to make exceptions when we encounter particularly unsympathetic defendants. And certainly, U.S. prisons are not full of bank executives. But those exceptions can add up quickly, and they help normalize arguments that equate accountability with incarceration. The fact that economic inequality is a pressing problem and criminal laws are historically easier to pass than civil regulatory statutes shouldn’t excuse Warren’s approach. Addressing the crisis of the U.S. criminal system requires moving beyond a reflexive turn to punishment when we encounter bad conduct or injustice. Warren rightly notes that the rich and poor are treated differently in the criminal system. But we should not use the much-criticized treatment of poor defendants, particularly poor defendants of color, as a model for policymaking. It doesn’t improve the treatment of the poor and the disenfranchised to subject others to that same terrible treatment.
Criminal punishment should be used sparingly. And when other avenues, such as regulatory regimes and civil penalties, are available, there is no good reason to turn to criminal law. Calls to put people “in handcuffs” at that point seem like political rhetoric that is designed to inflame voters’ sense of injustice and righteous indignation. That’s the path that led this country to mass incarceration, and it is time to change course.
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