Traditional mechanisms for ensuring corporate accountability – civil, regulatory and federal criminal – are failing. At the same time, industries that generate great economic value cause great harm. The present time calls for effective reforms, free from the forces that have hampered federal oversight.
In a recent articlewe examine this federal withdrawal and propose a revitalization of state criminal law. When the facts show that a business has harmed the public and, in doing so, violated a state criminal law, prosecutors can and should bring criminal charges against businesses under applicable state law. Instead of relying on fines and ineffective enforcement or drastic measures like dissolution, prosecutors should demand lasting governance reforms, leveraging the state's charter-granting power to align corporate profits with the public good.
Collapse of corporate responsibility
Through various majorities in Congress, the Supreme Court, and presidential administrations, each branch of the federal government has expanded corporate rights and reduced regulatory power. Weakening regulations, legal barriers to civil litigation, and amplified corporate political influence have created an environment in which essential accountability mechanisms are increasingly compromised or dismantled.
The Supreme Court has erected several legal barriers to corporate liability. Building on prior precedent, the Court opened up corporate political spending, reversed decades of deference to regulatory experts, and strengthened pleading requirements for injured plaintiffs. These legal developments have fueled feedback loops, mixing politics and irresponsibility within powerful corporate sectors.
Recent examples include the fossil fuel industry's financial commitment to the 2024 election cycle, which was quickly followed by a massive federal effort to give that industry every possible advantage. What just a year ago looked like the start of a real federal effort to combat the deadly effects of climate change now appears dead on arrival.
Similarly, large donations have earned big tech companies and the cryptocurrency industry various regulatory and enforcement pauses and pushbacks. Likewise, structural changes to federal law enforcement agencies have depleted enforcement resources, from the diminishing power of the Environmental Protection Agency, the Securities and Exchange Commission, and the Consumer Financial Protection Bureau, to the shuttering of the Justice Department's Consumer Protection Branch.
This great retreat in accountability creates an imperative with few obvious paths forward.
The resilient power of state prosecutors
State criminal law offers a promising avenue. State criminal codes prohibit a wide range of business conduct that endangers or harms the health and safety of the public. And while our goal is not to point the finger at specific bad actors, headlines regularly report deaths and other serious injuries caused by unchecked pollution, technology, and greed.
Unlike federal oversight, states' primary authority to enforce their own criminal laws remains largely intact and particularly resilient to both recent decisions gutting federal regulatory power and preemption. Furthermore, criminal sanctions reflect powerful moral judgments and provide opportunities for tailored rehabilitative measures targeting specific criminal behaviors, rather than a rule generally applicable to an entire sector.
Proving causation and mens rea beyond a reasonable doubt – particularly for diffuse harm – can be challenging. But many laws criminalize inadvertent endangerment, which eases the burden of causation by shifting the emphasis away from proving disregard for substantial, known risks. Additionally, establishing corporate intent is facilitated by approaches such as the “doctrine of collective knowledge,” which brings together the knowledge of individual employees within complex organizations. The evidentiary challenge ultimately underscores the vital role that juries play in our legal system, expressing public opinion on the appropriate allocation of responsibility for harm to businesses in this state.
Of course, before going before a jury, a case must begin with a prosecutor. Our proposal envisages a coalition of what we might call the “Problem Solvers Caucus” attorneys general and district attorneys. As society's problems become more and more intractable, this coalition should fulfill its public duty to enforce the criminal law to promote the public good.
“Punishments” that promote the good of the company
One criticism of our proposal might be that traditional corporate criminal enforcement tools – fines, compliance programs and controls – have proven ineffective. Despite years of criminal charges against businesses, harms and incentives have barely changed, and existing enforcement measures have become part of the cost of doing business.
We propose a different approach that can succeed where other methods have failed: the mandatory formation of a state-approved public utility subsidiary with enforceable commitments relevant to the state's interests. This would significantly improve traditional compliance checks. A charter change fundamentally alters the fiduciary duties and legal mission of the corporation – a permanent structural change – as opposed to temporary oversight. Furthermore, this approach is distinct from voluntary adoption of PBC (often criticized as “greenwashing”) because it is a criminally mandated sanction, with detailed enforcement measures tailored to the specific harm.
As the Supreme Court did said“(no) principle of corporate law and practice is more firmly established than the power of a state to regulate domestic corporations. » The proposal thus respects federalism, giving states the power to exercise their uncontested authority over public safety and public charters.
Profit and the public good can coexist
Our approach draws on the resilience of state criminal and corporate law to respond directly – but also productively and flexibly – to systemic accountability failures. Whether the charges are followed by a trial, a plea, or a deferred prosecution agreement, prosecutors could require a company criminally responsible for causing harm within the state to conduct its future business operations in that state through a newly created or restructured subsidiary chartered as a public benefit corporation. Community service has long been part of criminal sentencing.
Corporate restructuring would address root causes by correcting governance and incentive structures, while preserving value by saving the business rather than destroying it. Following the adage that the punishment should fit the crime, a given public policy objective might specifically address the harm caused by a given corporate defendant (e.g., environmental cleanup, consumer transparency, or product safety). Our article presents hypothetical examples of how this could work in practice.
Prosecutors are understandably reluctant to squander the significant social and economic value created by corporations and harm the livelihoods of innocent employees. But this should not mean turning a blind eye to the real harm that corporate behavior can sometimes inflict on people. When a business abuses its state privileges by engaging in criminal activity that causes significant harm to a state's residents or environment, the state must intervene.
The erosion of federal oversight has created a dangerous vacuum, but it has also created an opportunity. This moment calls for a bold reinvention of corporate responsibility, one that revives the fundamental role of states in defining corporate purpose. The way forward is not to wait to rebuild a defunct federal system, but to activate the latent power of state criminal law.
Donald Braman is an associate professor and Theresa A. Gabaldon professor at the George Washington Law School. Cindy J. Cho is a lecturer at the Indiana University Maurer School of Law. This article is based on their recent article, “Reconstituting Corporate Power & Accountability,” available here.
