Corporate executives have duties to their companies and their shareholders, and they can face consequences if they breach these duties. Generally speaking, those consequences don’t involve facing criminal charges. The situation is very different in cases where a corporation has been accused of white-collar crime. This can be true even in cases where the executive did not actually know about the wrongdoing until after the fact.
Under the “responsible corporate officer doctrine,” courts assume that high-ranking corporate officers knew about criminal behavior by their corporation. The doctrine imposes a form of strict liability. Even if the executive can show that they had no actual knowledge about the crime, the court can hold them responsible for it because they were in a position to know about it and to stop it.
Acts and omissions
The responsible corporate officer doctrine has been around for decades, and has always been controversial. In a 1975 case before the U.S. Supreme Court, a food industry executive was held criminally liable for failing to correct a pest infestation at a corporate warehouse. In his defense, the executive argued that he should not be held responsible because he had properly delegated authority for ending the infestation to lower corporate officers. The Supreme Court disagreed, holding him responsible because he had a duty not only to the corporation and his shareholders, but also to the public because the food business was directly related to public health.
More recently, a federal court relied upon the doctrine when it upheld three-month jail sentences for food industry executives whose corporation distributed unsafe eggs to consumers. The executives tried to appeal their case the U.S. Supreme Court, but the high court declined to take their case. This meant the decades-old doctrine stands, and court can — at least in certain cases — hold corporate officers responsible not just for their acts, but also for their omissions.
The responsible corporate officer doctrine has serious implications for corporate governance and compliance as well as for criminal defense. Executives can speak to skilled white-collar crime defense attorneys about how to avoid problems in advance, and how to defend their rights if such a problem does occur.