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Changing Organizational Behavior - Home | United States ...

* Member and Vice Chair, United States Sentencing Commission. The views expressedherein are those of the author and do not necessarily represent the official position of the Commission. Please cite this paper as follows: John R. Steer, Changing OrganizationalBehavior The Federal Sentencing Guidelines Experiment Begins to Bear Fruit (unpublished paperpresented at the Twenty-Ninth Annual Conference on Value Inquiry, Tulsa, Oklahoma (Apr. 26,2001)).1 No. 98-473, 98 Stat. 1838, 1987 (1984) (codified at 18 3551 et seq.; 991 et. seq.). Changing Organizational Behavior THE FEDERAL SENTENCINGGUIDELINES EXPERIMENT BEGINS TO BEAR FRUITJOHN R. STEER*IntroductionThe United States Sentencing Commission is an independent agency in the Judicial Branch ofthe Federal Government created by Congress through the Sentencing Reform title of theComprehensive Crime Control Act of Under Congress s continued direction and oversight, theCommission regulates sentencing policy within the federal court system through a regime ofpresumptively mandatory sentencing guidelines applicable to convicted individual and organizationaldefendants.

CHANGING ORGANIZATIONAL BEHAVIOR — THE FEDERAL SENTENCING GUIDELINES EXPERIMENT BEGINS TO BEAR FRUIT JOHN R. STEER* Introduction The United States Sentencing Commission is an independent agency in the Judicial Branch of the Federal Government created by Congress through the Sentencing Reform title of the

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Transcription of Changing Organizational Behavior - Home | United States ...

1 * Member and Vice Chair, United States Sentencing Commission. The views expressedherein are those of the author and do not necessarily represent the official position of the Commission. Please cite this paper as follows: John R. Steer, Changing OrganizationalBehavior The Federal Sentencing Guidelines Experiment Begins to Bear Fruit (unpublished paperpresented at the Twenty-Ninth Annual Conference on Value Inquiry, Tulsa, Oklahoma (Apr. 26,2001)).1 No. 98-473, 98 Stat. 1838, 1987 (1984) (codified at 18 3551 et seq.; 991 et. seq.). Changing Organizational Behavior THE FEDERAL SENTENCINGGUIDELINES EXPERIMENT BEGINS TO BEAR FRUITJOHN R. STEER*IntroductionThe United States Sentencing Commission is an independent agency in the Judicial Branch ofthe Federal Government created by Congress through the Sentencing Reform title of theComprehensive Crime Control Act of Under Congress s continued direction and oversight, theCommission regulates sentencing policy within the federal court system through a regime ofpresumptively mandatory sentencing guidelines applicable to convicted individual and organizationaldefendants.

2 In addition to its rulemaking function that focuses and limits the sentencing discretion offederal district court judges, the Commission also has continuing research and educational missionsrelated to explicating, monitoring, evaluating, and revising the sentencing paper spotlights the system of sentencing guidelines for Organizational defendants, includingcorporations, partnerships, labor unions, cooperatives, trusts, trade associations, other non-profitentities, and governmental units each of which, under certain circumstances, can be convicted of2 These guidelines may be found in Chapter Eight - Sentencing of Organizations, Sentencing Commission, Guidelines Manual (2000) (available through West Group Publishing oron the Commission s website @ ).2federal crimes and, as a consequence, subjected to the sentencing policies embodied in theseorganizational Through their actual application to convicted organizations, as well as theirthreatened application to other potential law breakers, these guidelines provide a novel and ambitiousapproach to punishment.

3 This approach combines the threat of heavy criminal fines for law violatorsand the likelihood of court-supervised probation (the sticks ), with the opportunity for very substantialfine mitigation (and perhaps no probation) (the carrots ) for those convicted entities who either haveinstituted an effective program to prevent and detect violations of law, or who promptly report theirwrongdoing and fully cooperate with law I. Philosophy and Goals of the Organizational GuidelinesBefore promulgating these particular guidelines in 1991, the Sentencing Commission engaged inan intense, extended debate about the philosophical sentencing purposes a set of organizationalguidelines should further and the manner in which those purposes might best be achieved. As itapproached its complicated task, the Commission was cognizant of the ongoing, sometimes vigorousdebate about whether corporations, and other legally recognized entities that 3 For a sampling of writings illustrative of this ongoing debate, see, , Lawrence Friedman,In Defense of Corporate Criminal Liability, 23 Harv.

4 & Pub. Pol y 833 (2000); Celia Wells,Corporations and Criminal Responsibility, Ch. 5 (Clarendon Press 1993); John C. Coffee, Jr.,From Tort to Crime: Some Reflections on the Criminalization of Fiduciary Breaches and theProblematic Line Between Law and Ethics, 19 Am. Crim. 117 (1981).4 28 994(a).5 18 3551(c) provides as follows: (c) Organizations. - An organization found guilty of an offense shall be sentenced, inaccordance with the provisions of section 3553, to-(1) a term of probation as authorized by subchapter B; or (2) a fine as authorized by subchapter sentence to pay a fine may be imposed in addition to the sentence required by thissubsection. 3are not natural persons, should be held accountable under the criminal Though aware of thisdebate, the Commission accepted as a given that Organizational beings could be held criminally liableand sentenced.

5 Indeed, the Commission s organic statute directed it to develop guidelines for use of asentencing court in determining the sentence to be imposed in a criminal case without regard towhether the criminal case involved an individual or an Organizational Further, theguidelines necessarily were to be consistent with all pertinent provisions 5 of the Sentencing ReformAct, including those provisions establishing the basic, authorized sentences for the reality that organizations can be convicted of crimes, the Commission initiallyexplored two competing, if not diametrically-opposed, philosophical approaches to punishing convictedorganizations. One approach followed a just punishment philosophy closely linked to the Commission s7 Nolan Ezra Clark, Jr., Corporate Sentencing Guidelines: Drafting History 2:04, inCompliance Programs and the Corporate Sentencing Guidelines (Kaplan, et al.)

6 , eds.) (West Group2000).4guidelines for individual defendants (then under development). This approach suggested considerationof certain indicia of greater or lesser Organizational culpability, a principle that turned out to be central inthe proposal ultimately adopted by the Commission some four years later. Among these indicia were whether the crime resulted from a conscious plan of top management or by the independent actions oflower echelon employees and whether the organization took steps to discipline responsibleemployees prior to indictment. 7 A contrasting scheme explored a harm-based deterrence andcompensation approach drawn from the realm of economics and its theory of optimal penalties. Under this theory, social costs of Organizational crime and attendant law enforcement would beminimized by basing financial penalties on the following formula: financial penalty (fine) = quantifiedsocial costs/harm resulting from the offense divided by the probability of offense detection.

7 Thisformulaic approach, so it was argued, would optimize crime deterrence because the punitiveconsequences facing potential Organizational offenders would precisely equal the harm potentiallycaused by the offense. After a process of studied consideration, public airing of the issues, and debate, theCommission found neither of these approaches entirely satisfactory. Both ultimately foundered on thehard shoals of practicality. The conceptual just punishment approach that had been envisioned, butnever fully developed, collapsed when the underlying system of guidelines for individuals on which it5was to have been based was rejected by the Commission as unworkable. The more fully developed,optimal penalty/deterrence approach faced difficulties in easily quantifying all social harm and lackedreliable data on the probability of detecting offenses of various types; hence, the formula that was itskey proved to be little more than guesswork.

8 Additionally, as commissioners further investigated thecomplicated terrain of determining appropriate corporate punishment, several expressed interest inalternative approaches that would account more fully for important variations in organizationalculpability and use the sentencing tool of court-supervised probation to force changes in the better part of the 1989-1991 period, the Commission explored variations of theseinitial models, as well as some rather different proposals. A group of experienced white-collar attorney-practitioners, organized by the Commission to provide advice on the issue, recommended avery flexible set of non-binding policy statements that called for substantial fine reductions if theorganization had instituted an effective compliance program to prevent law violations and otherwiseacted responsibly.

9 The Department of Justice developed a set of draft Organizational guidelines thatused the extant guidelines for individual defendants (which had been completed and put into effect in1987) as a means of determining a fine range. While the Department of Justice proposal focused moreon aggravating factors that would enhance the nominal fine, it also provided modest discounts for aneffective compliance program and for certain indicia of post-offense cooperation. Finally, Commissionstaff developed a draft proposal that attempted to meld useful concepts from several approaches. Thetheoretical heart of the staff proposal was a belief that organizations could be induced to behave legally8 See Clark, supra note 7, at responsibly by, in effect, offering them the promise of substantial fine reductions if the entity hadinstituted effective measures to prevent and detect violations ( , the violation occurred in spite ofreasonable preventive efforts and was promptly reported and addressed).

10 On the other hand, if theorganization acted negligently with regard to its legal risks, its punishment upon conviction would bemuch staff proposal subsequently was refined under the leadership of the Commission s thenChairman, Judge William W. Wilkins, Jr, and subjected to an open, intense process of publicparticipation in which influential business and bar organizations directly contributed. The Commission sultimately adopted scheme of guidelines used the concept of a base fine amount, determined as thegreater of the loss from the offense, the defendant s gain, and a fall-back fine amount calculated fromthe guidelines for individual defendants who committed like offenses. This base fine would then besubject to culpability adjustments, with the prospect of substantial increases for such aggravatingfactors as prior wrongdoing and direct involvement of management in the offense.


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