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Thomas Hedger

Thomas Hedger

Crime—particularly tearing crime—may exist our national obsession. It dominates the news, it's the subject of popular novels, and it's all over television receiver, from FX's The People v. O.J. Simpson to HBO's The Dark Of to Netflix'southward Making a Murderer.

Our mental attitude toward white-collar crime is a little unlike. On the one mitt, it fascinates us: Why practice well-paid professionals commit it—on their own, with colleagues, or as part of an organization-broad collaboration? On the other hand, it bores usa: Complicated financial schemes are difficult to understand, and the perpetrators and victims are often unclear. Who suffers when a company shifts numbers around on a spreadsheet? Who's to blame when it has thousands of employees and layers of bureaucracy? And even if we can identify those responsible, how should we punish them? Two new books shed light on these and other questions.

Exploring the legal issues is Capital Offenses, by Samuel West. Buell, a law professor at Knuckles University who was a atomic number 82 prosecutor in the Enron case. Buell starts by pointing out that corporate criminal offense is all about context and that cases may come down to whether those accused knew their actions were illegal—which means prosecutors must try to read minds after the fact. He notes, for example, that the standard defence in a fraud instance is not that the fraud didn't happen; it's that the fraudster didn't know he or she was breaking the police force—or that, whatever the authorities may think, the fraudulent behavior is business as usual in that industry.

Cartoon these fine lines around intention is fifty-fifty trickier when executives rely on expert advisers to assist with their decisions. If a lawyer or an accountant tells y'all that something is legal—even simply barely—should you have to go to jail if he's wrong? Many things that appear greedy or selfish in hindsight are not illegal, and many actual crimes occur when valid business practices edge beyond what the police force allows.

Prosecution is especially difficult when criminal behavior spans a whole organisation. In such cases it'due south extremely hard to figure out exactly where the error lies. (Remember of how often the public fails to distinguish betwixt a corporation and the individuals who piece of work for it.) Those high up on the org chart, who bear the most responsibility for the company, may know niggling almost its twenty-four hours-to-day activities. And punishing a large company—through massive fines or past sending its most senior leaders to jail—tin destroy it, which has serious economic ripple effects for innocent employees, customers, and communities.

In that location are no easy answers, and Buell notes that the authorities tends to pursue only those white-collar cases it thinks it tin win. Still, we can have solace in this bit of progress: From 1996 to 2011 the boilerplate sentence most doubled in fraud cases—even as it dropped for federal crimes overall.

Whereas Buell's expertise is in organizational corruption and the difficulty of fighting information technology, Why They Practise It, by Eugene Soltes, a professor at Harvard Business School, focuses squarely on individual perpetrators who have been caught and punished. His volume is based on extensive interviews he's conducted with white-collar criminals, with Soltes seeking to understand how these men (near all corporate wrongdoers are male, he notes) went from the C-suite to a prison cell.

Over the years, people have offered all sorts of explanations: deviant nature, the "bad apple tree" theory, concrete characteristics, poor self-control, lack of empathy, brain chemistry, psychopathy, peer force per unit area. Some of these ideas have been discredited; others, Soltes says, are insufficient. But what do the criminals themselves say?

If one idea can sum upwards the results of his research, it'due south that white-collar criminals rarely pause to call up nearly the outcomes or potential victims of their decisions. Consider these revealing quotations from his interviews: "I never once thought about the costs versus the rewards" (insider trading); "I know this is going to sound bizarre, but when I was signing the documents, I didn't think of that as lying" (fraud); and "I never thought near the consequences…because I didn't think I was doing anything blatantly incorrect" (insider trading).

To address this striking lack of self-reflection, Soltes delves into the psychology of decision making within organizations, which dovetails nicely with Buell's work. I consequence of the modernistic corporation, he writes, is that leaders are removed from shareholders, customers, and the public. This psychological distance can cause executives to lose their style. In example afterward example, Soltes shows that white-collar crimes tend to result when the "routine unremarkableness" of everyday actions lets them slip through the perpetrators' moral filters. Business school ethics courses can help, but making tough choices in the classroom is far different from facing them in the real globe.

The two authors hold that nosotros need better ways to deal with white-neckband criminal offense. Soltes's remedy is to finish illegal behavior earlier it starts. Given that much of it is committed without criminal intent, he says, the best solution is for executives to environment themselves with people who aren't afraid to question their decisions. On the legal side, Buell says we demand greater corporate transparency and incentives for executives to deed in the interests of shareholders. He also calls for meliorate regulations, but emphasizes that they would help only to a betoken, because corporations pour money into keeping the ones that constrain them from condign law. And, more to the point, regulations don't prevent crimes.

The existent solution, Buell says, is to rethink what corruption looks like, both in business and in politics. After all, campaign contributions that influence policy are among those greedy, selfish acts that aren't illegal. Until the definition of "legal" is no longer controlled by the people or organizations with the deepest pockets, it's unlikely that existent change will come up about.

A version of this article appeared in the November 2016 issue (pp.110–111) of Harvard Business Review.