May 31, 2006
Judges and juries
Posted by Account Deleted

In my previous post I pointed out that applying the criminal law to agency costs requires the kinds of judgments that the criminal justice system was not designed to, and should not, make. But it gets worse, because I didn’t take into account the problems judges and jurors face in drawing these lines in actual cases.

For many people -- judges and juries -- what goes on in an executive suite may as well be happening on Mars. When people have to make judgments that transcend their experience and knowledge, they engage in heuristic shortcuts. They may not be able to determine whether precise conduct crossed a precise line, but they do know that bad people should go to jail, good people shouldn’t.

Who’s bad? When it comes to businessmen, most people get their information from the newspapers and television. There you hear the word “greed” a lot. In fact, apart from business publications like the Wall Street Journal (and even there, a lot of the time), much of what people read and see about corporate executives is negative – they get paid too much, they fly around in corporate jets, they don’t take responsibility for corporate failure. There’s very little about what the executives’ jobs actually entail, about what good management entails.

So the Enron the jurors knew that Enron spectacularly collapsed and many people lost their savings and jobs. And lo, here before them, are two prime specimens. If the jurors can’t trace every step in the prosecution’s case – it they have to connect some dots – what connections would you expect them to make, given what they've been exposed to?

This is not to say that executives shouldn’t be tried for corporate crimes just because judges and jurors might get it wrong. But it is to say that, even if it is theoretically possible to distinguish criminal and non-criminal behavior in the agency costs context, we need to be realistic about actual jurors' ability to make these distinctions.

Enron, Forum: Enron | Bookmark

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