Judicial dissolution

Judicial dissolution, sometimes called the corporate death penalty, is a legal procedure in which a corporation is forced to dissolve or cease to exist.

Negligence, such as causing preventable disasters such as the Deepwater Horizon oil spill, is one example of justifications often cited by proponents of a corporate death penalty.[1]

Dissolution is the revocation of a corporation's charter for significant harm to society.[2] In some countries, there are corporate manslaughter laws; however, almost all countries enable the revocation of a corporate charter. There have been numerous calls in the literature for a "corporate death penalty".[3][4][5][6] Most recently a study argued that industries that kill more people each year than they employ should have an industry-wide corporate death penalty.[7][8] Some legal analysis has been done on the idea to revoke corporate charters for environmental violations[9][10][11] such as for severe environmental pollution. Actual judicial dissolutions in the United States are rare.[12] For example, Markoff has shown that no publicly traded company failed because of a criminal conviction that occurred between 2001 and 2010.[13]

Companies suggested as deserving the corporate death penalty include Eli Lilly & Company, Equifax, Unocal Corporation, and Wells Fargo.[14][12][15] "If Volkswagen or other examples in this volume were forced out of existence, this would send a message", John Hulpke wrote in the Journal of Management Inquiry in 2017.[16]

One argument against its use is that otherwise innocent employees and shareholders will lose money or their jobs. But author David Dayen argues in The New Republic that "the risk of a corporate death penalty should inspire active governance practices to protect their investments".[17]

Examples

In 1890, New York's highest court revoked the charter of the North River Sugar Refining Corporation on the grounds that it was abusing its powers as a monopoly.[18]

In 2022, New York Supreme Court Judge Joel M. Cohen rejected a move by the state's Attorney General to dissolve the National Rifle Association of America. According to The Wall Street Journal, "the state's allegations of corruption and mismanagement by NRA top officials fell short of the public harm required to impose the 'corporate death penalty' on the nonprofit group".[19]

In 2023, numerous observers have described as a 'corporate death penalty' the order by a New York judge of the revocation of the business licenses of Donald Trump's businesses in the State of New York, which would force them into liquidation.[20][21][22]

Alternatives

In some jurisdictions, a judge or a government may have the freedom to:

  • Nationalise a corporation
  • Fining it enough to force it to close
  • Take employees to court
  • Expel it
  • Confiscate some of its assets

See also

References
  1. "Do We Need a 'Death Penalty' for Negligent Oil Companies?" Frontline.
  2. Grossman, Drew Isler (2015–2016). "Would a Corporate Death Penalty Be Cruel and Unusual Punishment". Cornell Journal of Law and Public Policy. 25: 697.
  3. Markoff, Gabriel (2012–2013). "Arthur Andersen and the Myth of the Corporate Death Penalty: Corporate Criminal Convictions in the Twenty-First Century". University of Pennsylvania Journal of Business Law. 15: 797.
  4. Ramirez, Mary Kreiner (2005). "The Science Fiction of Corporate Criminal Liability: Containing the Machine through the Corporate Death Penalty". Arizona Law Review. 47: 933.
  5. Ramirez, Mary Kreiner; Ramirez, Steven A. (2017-01-31). The Case for the Corporate Death Penalty: Restoring Law and Order on Wall Street. NYU Press. ISBN 9781479881574.
  6. Amann, Diane Marie (2000–2001). "Capital Punishment: Corporate Criminal Liability for Gross Violations of Human Rights". Hastings International and Comparative Law Review. 24: 327.
  7. "Do industries that kill more people than they employ have a right to exist?". Big Think. 2019-02-24. Retrieved 2019-03-09.
  8. Pearce, Joshua M. (February 2019). "Towards Quantifiable Metrics Warranting Industry-Wide Corporate Death Penalties". Social Sciences. 8 (2): 62. doi:10.3390/socsci8020062.
  9. Linzey, Thomas (1997). "Killing Goliath: Defending Our Sovereignty and Environmental Sustainability through Corporate Charter Revocation in Pennsylvania and Delaware". Dickinson Journal of Environmental Law & Policy. 6: 31.
  10. Linzey, Thomas (1995–1996). "Awakening a Sleeping Giant: Creating a Quasi-Private Cause of Action for Revoking Corporate Charters in Response to Environmental Violations". Pace Environmental Law Review. 13: 219.
  11. Crusto, Mitchell F. (2002–2003). "Green Business: Should We Revoke Corporate Charters for Environmental Violations". Louisiana Law Review. 63: 175.
  12. "The Death Penalty for Corporations Comes of Age". Corpwatch.
  13. Markoff, Gabriel (2012–2013). "Arthur Andersen and the Myth of the Corporate Death Penalty: Corporate Criminal Convictions in the Twenty-First Century". University of Pennsylvania Journal of Business Law. 15: 797.
  14. "Equifax Deserves the Corporate Death Penalty". Wired. 2017-10-20.
  15. "Give Wells Fargo the Corporate Death Penalty". The New Republic. August 2017.
  16. Hulpke, John F. (2017). "If All else Fails, A Corporate Death Penalty?". Journal of Management Inquiry. 26 (4): 433–439. doi:10.1177/1056492617706545. S2CID 149136851.
  17. "Give Wells Fargo the Corporate Death Penalty". The New Republic. August 2017.
  18. Osborne, Algernon Ashburner (1913). "Speculation on the New York Stock Exchange, September, 1904-March, 1907".
  19. Maremont, Mark (2 March 2022). "Judge Tosses New York AG's Bid to Dissolve NRA". The Wall Street Journal.
  20. DeGregory, Priscilla; Kochman, Ben; Schnitze, Kyle (2023-09-27). "How Donald Trump's NY fraud ruling impacts his businesses". Retrieved 2023-09-28.
  21. Wolf, Zachary B. (2023-09-27). "Why a fraud finding is like 'corporate death penalty' for Trump | CNN Politics". CNN. Retrieved 2023-09-28.
  22. Italiano, Laura. "Trump's 'corporate death penalty' explained: Veteran Manhattan fraud prosecutors describe what's next". Business Insider. Retrieved 2023-09-28.
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