> If you corporate death’d them, the contracts and assets would still exist. Allred would be unpunished. Everything would go back to shareholders who were presumably fine with the status quo, and would be fine putting them into a new entity that Allred could manage.
This is wrong for a variety of reasons:
(1) The corporate death penalty is proposed as an additional remedy, not an alternative remedy, to personal liability for officers, etc. (in fact, many corporate death penalty proposals would make additional personal penalties for corporate officers available as a part of that on top of any that would be available independently of the corporate death penalty for their actions, e.g., in one proposal for a federal charter revocation law, “The statute should specify that, for a period of five to ten years, the directors of the condemned corporation could serve on the same corporate board together only when they are a minority, ensuring that that set of directors would not form a majority of the board of another corporation. Similarly, key senior officers should be prohibited from working together for five to ten years. In addition, no director or officer could serve on the board or work for any corporation affiliated with the parent corporation of the convicted corporation. Courts must be empowered to issue injunctions to enforce these rules, preventing reconstitution of substantially the same corporation under another name.” [0])
(2) Corporate death penalty proposals tend to include proposals for how dissolved corporations are to be wound down that address the concerns you address (like a bankruptcy, these would be generally be administered by courts, probably most normally the court issuing the penalty.) From the same proposal, “The dissolution of the corporation should impose the harshest penalty on the corporate entity itself, directors, and officers, while only damaging shareholders-who have less control over corporate misconduct-to the extent necessary to incentivize them to take an interest in the corporation’s criminal misconduct. […] the penalty should dissolve the corporation with as little impact on innocent parties–employees, consumers, suppliers, and the larger economy-as possible.” [1] The proposal goes on to propose that an corporation subject to the corporate death penalty should have a court appointed “czar” take over management of its assets (similar, in a way, to a bankruptcy trustee), operating them and preparing and organizing them for sale (by default, by auction, but by other means where appropriate), with a specified distribution of the proceeds: “The statute should specify that revenues from the sale of the corporation’s assets first pay court costs and the costs of the czar’s operation during dissolution. Next, nonmanagement employees of the corporation that have clearly suffered harm due to the dissolution, such as being rendered unemployed, should be compensated through a one-time stipend. Finally, the balance should be distributed among the shareholders. In this way, the affairs of the corporation could be wrapped up in an orderly and just way that would protect innocent parties while only causing minimal harm to shareholders.” [2]
(3) As with personal sanctions, the corporate death penalty is proposed in addition to, not in replacement for, criminal fines and restitution, and civil damages that may be available. The key difference between corporate death penalty and bankruptcy is that the corporate death penalty can punish directors and officers, and it de-institutionalizes the firm in much the same way as bankruptcy, but it does so even if the amount of the monetary penalties would not render the corporation insolvent.
I’d go so far as to say that the officers should be barred from working in the same industry for a couple of years. Long enough that whatever edge they had is eroded by time. It might be extreme, but adding a “curse” aspect to officers’ careers would act as an additional deterrent.
> officers should be barred from working in the same industry for a couple of years
"The Bureau’s order permanently bans BloomTech from all consumer-lending activities and bans Allred from any student-lending activities for ten years" [1].
> corporate death penalty is proposed as an additional remedy, not an alternative remedy
Corporal death penalties aren't an additional remedy--they're the ultimate remedy. The branding sucks.
> to personal liability for officers
Just do this. Why the extra steps?
> Corporate death penalty proposals tend to include proposals for how dissolved corporations are to be wound down that address the concerns you address
So does bankruptcy, a precedented mechanism.
> the penalty should dissolve the corporation with as little impact on innocent parties–employees, consumers, suppliers, and the larger economy-as possible
How? You're putting their employer, vendor, customer and taxpayer out of business. (If not, what are we talking about?)
> but it does so even if the amount of the monetary penalties would not render the corporation insolvent
Increase the fine.
More pointedly: if you can't justify a fine or penalty more than the company is worth, maybe--on the net--they shouldn't be poofed?
Criminal companies should take every opportunity to shift debate around fines, penalties, license revocation and personal responsibility to one about a corproate death penalties. You get the baggage of the corporal death penalty for free with a heaping spoonful of ambiguity. While everyone debates what common punishments this Rude Goldberg replaces, you can slink away. Worst case: if they do enact it, it's so novel and convoluted you can probably buy a decade of appeals before you have to give up the assets.
Fines are money. Charters paperwork. We're currently seeing a charter revocation example in the Trump fraud trials [1]. It is by far the least meaningful part of the penalty. Could Trump trade the fine for the revocation, he would take it--anyone would.
This is wrong for a variety of reasons:
(1) The corporate death penalty is proposed as an additional remedy, not an alternative remedy, to personal liability for officers, etc. (in fact, many corporate death penalty proposals would make additional personal penalties for corporate officers available as a part of that on top of any that would be available independently of the corporate death penalty for their actions, e.g., in one proposal for a federal charter revocation law, “The statute should specify that, for a period of five to ten years, the directors of the condemned corporation could serve on the same corporate board together only when they are a minority, ensuring that that set of directors would not form a majority of the board of another corporation. Similarly, key senior officers should be prohibited from working together for five to ten years. In addition, no director or officer could serve on the board or work for any corporation affiliated with the parent corporation of the convicted corporation. Courts must be empowered to issue injunctions to enforce these rules, preventing reconstitution of substantially the same corporation under another name.” [0])
(2) Corporate death penalty proposals tend to include proposals for how dissolved corporations are to be wound down that address the concerns you address (like a bankruptcy, these would be generally be administered by courts, probably most normally the court issuing the penalty.) From the same proposal, “The dissolution of the corporation should impose the harshest penalty on the corporate entity itself, directors, and officers, while only damaging shareholders-who have less control over corporate misconduct-to the extent necessary to incentivize them to take an interest in the corporation’s criminal misconduct. […] the penalty should dissolve the corporation with as little impact on innocent parties–employees, consumers, suppliers, and the larger economy-as possible.” [1] The proposal goes on to propose that an corporation subject to the corporate death penalty should have a court appointed “czar” take over management of its assets (similar, in a way, to a bankruptcy trustee), operating them and preparing and organizing them for sale (by default, by auction, but by other means where appropriate), with a specified distribution of the proceeds: “The statute should specify that revenues from the sale of the corporation’s assets first pay court costs and the costs of the czar’s operation during dissolution. Next, nonmanagement employees of the corporation that have clearly suffered harm due to the dissolution, such as being rendered unemployed, should be compensated through a one-time stipend. Finally, the balance should be distributed among the shareholders. In this way, the affairs of the corporation could be wrapped up in an orderly and just way that would protect innocent parties while only causing minimal harm to shareholders.” [2]
(3) As with personal sanctions, the corporate death penalty is proposed in addition to, not in replacement for, criminal fines and restitution, and civil damages that may be available. The key difference between corporate death penalty and bankruptcy is that the corporate death penalty can punish directors and officers, and it de-institutionalizes the firm in much the same way as bankruptcy, but it does so even if the amount of the monetary penalties would not render the corporation insolvent.
[0] https://www.gwlr.org/wp-content/uploads/2018/04/80-Geo.-Wash..., pp. 621-622
[1] id., pp. 628-629
[2] id., p. 630