Legal procedure that forcibly dissolves a corporation
Negligence, such as causing preventable disasters like theDeepwater Horizon oil spill, is one justification often cited by proponents of a corporate death penalty.[1]
Judicial dissolution, informally called thecorporate death penalty, is a legal procedure in which acorporation is forced to dissolve or cease to exist.
Dissolution is the revocation of a corporation's charter for significant harm to society.[2] In some countries, there arecorporate 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] In 2019, 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 severeenvironmental pollution. Actual judicial dissolutions in theUnited 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.[3]
Companies suggested as deserving the corporate death penalty includeEli Lilly & Company,Equifax,Unocal Corporation, andWells Fargo.[13][12][14] "If other examples in this volume were forced out of existence, this would send a message", John Hulpke wrote in theJournal of Management Inquiry in 2017.[15]
One argument against its use is that otherwise innocent employees and shareholders will lose money or their jobs. But authorDavid Dayen argues inThe New Republic that "the risk of a corporate death penalty should inspire active governance practices to protect their investments".[16]
In 2022, New York Supreme Court Judge Joel M. Cohen rejected a move by the state's Attorney General to dissolve theNational Rifle Association of America. According toThe 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".[18]
In 2023, numerous observers have described as a 'corporate death penalty' the order by a New York judge of the revocation of thebusiness licenses ofDonald Trump's businesses in theState of New York, which would force them into liquidation.[19][20][21]
.jpg)
