Article Review: Corporate Crime

7 Jul



            Raymond J. Michalowski and Ronald C. Kramer, The Space between Laws: The Problem of Corporate Crime in a Transnational Context. California: University of California Press, 1987.


This paper seeks to review the abovementioned article written by Michalowski and Kramer in 1987, with the focal point revolving around the conceptualisation of the transgressions committed by transnational corporations as corporate crime. The authors have settled to use the term ‘Transnational Corporations’ (TNCs) to describe the corporations that expand their business operations beyond their resident countries to other countries that have less stringent laws and with societies having lower economic bargaining power compared to their resident countries. The authors delved extensively on the concept of corporate crime in relation to TNCs – primarily on its definition, perception, operation & influences from the societal and legal standpoint.

The authors’ perspective on corporate crime by TNCs also sought to push the limit of the traditional framework of criminal law to the extent that the definition of crime could be further expanded beyond the common parameters of violations of criminal codes of a State, that is to criminalise the violations of civil or regulatory provisions, in order to effectively categorise the transgressions committed by corporations as crime proper. The authors were keen to shed some light on the relevance of exploring the definitional framework regarding the space between the laws of both the home and host nations which has caused both positive and negative impacts. They have segmented the article into five (5) headings with several subheadings. It is viewed that the discussions in this paper is aptly arranged in accordance to the breakdown sequence of the headings and subheadings as set by the authors in their article in order to better illustrate and appreciate the framework of the authors’ objective on the topic.

 TNCs and Relocation of Corporate Hazards

After the end of the Second World War, especially since the economic upsurge from 1960 onwards, the activities of corporations around the globe have evolved from having business operations locally to broadening their wings to other countries as well, hence making them international in status, suitably addressed as ‘transnational’ in this context. This economic boom has sparked more transgressions committed by the TNCs not only in their home nation, but also in the host nations, primarily the developing countries. This development has thus prompted the authors to undertake the observation on the issue at hand.

Generally, the authors discussed at length the trend undergone that witnessed the relocation of TNCs’ industrial operations from their home nations which are usually a developed country, such as the United States and United Kingdom, to less developed nations such as the Third World countries. Guided by the studies undertaken by various researchers as well as the United Nation in mid-1970s through the 1980s, the authors observed that in the United States alone, majority of its multimillion dollars companies – specifically those with over $100 million in sales chose to set up their operation in the developing countries. One of the obvious reasons for such relocation was due to the lower capital and operating costs as well as less stringent compliance provisions and laws compared to those in their home nations. This has caused a prominent shift of not only the manufacturing activities from the developed countries to the developing ones, but also the baggage of the industrial hazards usually resulted from the injurious corporate activities engaged by the TNCs.

The authors also stressed that the TNCs have adopted a much more relaxed attitude in observing the legal standards and provisions of the host nations, unlike when they are operating in their home nations since the laws in the host nations, especially the developing countries have less-developed regulatory provisions. The relocation of both the manufacturing activities as well as the industrial violations and production hazards brought by the TNCs has induced great sufferings to the developing nations mainly because these nations have limited or adolescent awareness and legal control on relevant issues such as the environment, employment/labour rights as well as consumer protection. The authors have further narrowed down the industrial hazards exported to the less developed countries to three (3) undeniably noteworthy issues whilst being the host nations to the TNCs, they are the i) Working Condition, (ii) Environmental Pollution and (iii) Consumer Safety, all three being inter-related to one another.

(i)      Working Condition

It has been discussed by the authors that one of the striking problems of the industrial hazards exported to the developing countries that begs our attention is the condition of the workplace provided by the TNCs in the host nation. Although the workers may be working for the same company, the working atmosphere of the manufacturing facilities both in the home nation and the host nation are contrasting. The TNCs are more sensitive and obedient in ensuring the regulatory provisions on working condition of their employees in the resident country are complied with. However, they take a rather laissez-faire attitude in providing a reasonable working condition for their employees in the host nation simply because the labour-related provisions in the host nations, being a third world country, are not always as demanding or strict as the ones in the home nation.

However, this issue may not be as cut and dry ‘criminal’ as the authors implied it to be. It is felt that the TNCs should not be bombarded with criticisms merely because the working conditions in their manufacturing facilities may not match up to those in the home nation. This situation must be analysed objectively with other factors as well, such as the fact that the conditions of the workplace of both TNCs as well as the local companies may not be that much different after all. Furthermore, the workers of the TNCs are reasonably compensated with a much higher wages, at least twice as much, such as in Vietnam, compared to their fellow friends working in the local based companies in equally criticised working conditions[1].

(ii)      Environment Pollution

Many high-pollution industries prefer to have their manufacturing facilities in countries that have lower environmental standard and lower pollution control cost. This has caused the emergence of a new phenomenon that is the pollution export. The TNCs seem rather reckless in complying with the environmental standards in the host countries, unlike when they are in their resident countries which have stricter regulations. The authors highlighted that this attitude has resulted that the hazardous wastes produced in the developed countries were being exported to less developed countries. Pepsi, Nestle and Panasonic were among other giant TNCs, who have been found guilty of violating the water pollution control in China[2]. In Malaysia, one of many examples of hazard exports caused by TNCs was the case of Woon Tan Kan & 7 Ors v. Asian Rare Earth (1992) where the residents in Bukit Merah, Ipoh who were threatened by the dangers of radioactive wastes produced and stored by a Japanese-owned factory located nearby. Only after persistent efforts by the residents, a court injunction was granted to stop the hazardous operation.[3] The environmental pollution at hand is further aggravated by the inaptitude of the environmental authorities in the host nations in supervising the TNCs. Consequently, it has only caused more damages to the already alarming scenario.

However, the authors may have missed out in clarifying why should the TNCs be doing more than what they are expected to comply with when the host nations themselves do not even have strict regulations on environmental protection to embark on. Even when the TNCs are complying with the lax regulations of the host nations, some argued that it would still seem to be insufficient as the TNCs, having more financial stability and stronger economic leverage, ought to be expected to go an extra mile in ensuring that their profit-driven operation do not harm the society and the environment and at the same time to be the exemplary model for all the smaller enterprises to look up to in achieving sustainable development[4].

(iii)     Consumer Safety

The authors have associated TNCs with unsafe products exported to the consumers such as the sale of non-prescription drugs, which would have been illegal in the US due to its dangerous content but sold to a significant market elsewhere. Other examples were dangerous chemically-treated products, shoddily made mechanical objects, inadequate information on the use of products that may lead to injuries or even fatalities were some of many examples that can be related to insensitive profit-crazed TNCs who put the safety of the consumer as last in their priority list.

Concerns over consumer safety is one issue, but what is more alarming is the prosecution against these TNCs as the culprits of these injurious corporate actions has created another dilemma. More often than not, these violations do not fall under the category of crime in the host nations, again, due to the lax regulations on product safety. This was aggravated by the consistent efforts by the TNCs to find markets elsewhere, for the sale of products prohibited in their home nations. As such, it is understandable that some researchers are keen advocates for a higher level of supervision and control mechanism, to which these TNCs should succumbed to, that acts both as an umbrella to cover the no man’s land i.e. the space between laws, with guidelines and compliances as well as the referee to penalise any foul play amongst the corporate players. The authors have made a good attempt tapping on this issue under the subheading: U.N Code as International Politics, in the later part of the article.

TNCs and Regulatory Climates

Direct and Indirect Influence

The authors suggested that the TNCs have to a certain extent, direct and indirect influences on the host countries relating to regulatory denominator. Various strategies and incentives have been lined up by the developing nations who are competing with each other to attract foreign investments into their country such as the offering of lax regulations on environmental standards, limited labour rights, lower costs on labour and pollution control, imposition of lower tax and many more. The authors even suggested that there may be a double standard approach taken by the host nations at the expense of the workers, environment and consumers.

The notion raised by the authors is also supported by an article by UNESCO stating that the Asia-Pacific countries have been noted to have lower environment standard to attract foreign investment such as Indonesia and Philippines who have compromised their environment for the sake of attracting foreign investment in the mining industry[5]. It is quite understandable for the authors to note that the people’s rights as workers were put on the sideline by the host government to accommodate the TNCs as companies have been known to dissuade from investment in countries whose government could not control its people. It is also agreeable for the authors to suggest that too much repression by the host government would trigger unrest among its people, which would then result to wise TNCs pulling out from the investment.

The authors emphasised on the gap between the wages earned by the workers in the home nation and those in the host nation, the former earning much higher than the latter for the same job. This issue raises the question whether TNCs are inclined to degrade labour conditions. This point, as discussed earlier, may not always be such an unfair treatment as the workers of multinational companies operating in the host nations are usually earning at least twice as much as the workers in the local enterprises. The authors also mentioned that the TNCs have also been known to pressure the host nations to mould its regulations in favour of the TNCs to operate their manufacturing facilities with less hassles than in their home nations.  Using the economic bargaining power and strong leverage as TNCs, they have been known to use threats against the host nations with disinvestment. A United Kingdom-based firm known as P&O operating in India was reported to have pressured the Indian government to declassify the protected land of Dahanu so that their land can be used for the construction of an international port, thus adversely affecting the livelihood of the Dahanu residents who were mostly fishermen[6].

The authors have quoted an example which took place in Malaysia whereby the United States-based electronic firms have threatened the Malaysian government that they would withdraw their investment in Malaysia should the government proceeded with their plan to allow unionization of the workers in electronic field, as this would create much complications for the TNCs to deal with the demands for better labour rights such as wages, working hours, policies on recruitment and retrenchment. Since the developing nations were dependent on foreign investments to enhance their economy, the TNCs have also exploited the situation to their advantage to influence the political movement of the host nations while favouring the friendliest ones and most accommodating to their investment aside from thwarting those which are hostile and jeopardising their interest.

The U.N. Code as International Politics

The authors moved on to raise the concern that international politics have become a vital mechanism to govern the market operation of transnational businesses amongst all the corporate stakeholders. The authors observed that the “Draft Codes of Conduct on Transnational Corporations and the Guidelines for Consumer Protection” under the auspice of the United Nation (“U.N. Code”) has transformed the cross-border businesses into international politics. Unfortunately for the authors, they may have overlooked the fact that the U.N. Code has remained in its draft form and thus, it is hard to foresee that the code itself would have any political teeth or claws to regulate the conduct of the TNCs. To regulate the conduct of TNCs, it is viewed that the U.N. Code has failed to encourage TNCs in developing countries to pursue their own policies that are shaped based on the local conditions and culture in order to produce greater economic success in accordance with the international standards.

With regards to the formulation of the U.N. Code, the authors described the roles of various entities and organisations in the process of designing the code. Basically, the authors discussed the issues in the definitional process of corporate crime from the standpoints of the developing countries, developed countries and the TNCs themselves. For instance, the trade unions in developing countries favoured more public control in the world economy whilst the developed countries are more concerned with the conservative approach of providing more flexible room for the governance of corporate conduct in the realm of international businesses. On the other hand, the TNCs, especially the International Chamber of Commerce has questioned the essential principles that go into the roots of the U.N. Code since they emphasised more on the market force over the international politics in shaping such international code of conduct.

It is doubtful as to whether the political definition of corporate crime contained in the U.N. Code serves any significant impact upon the legislations governing the corporate conduct in developing nations as envisaged by the authors. Pilon (1987) opined that the U.N. Code was “designed to force Western companies to operate according to the New International Economic Order for mandatory resource transfers from the West to the developing world”[7]. Furthermore, it seems that no unanimous understanding on the U.N. Code was reached during the consultations convened at the United Nations General Assembly in 1992 due to the reasons that the changing “international economic environment and the importance attached to encouraging foreign investment requires that a fresh approach should be examined”.[8]

 The Search for Alternative Frameworks

That said, the authors recognised the fact that there were attempts by criminological researchers to reach alternative definitions of crime with the aim to create a proper regime for the research on the corporate misconducts of TNCs. This effort has eventually culminated in the notions of “human rights” as an alternative definition of crime. The author further observed that it has been a norm for the criminological researchers to distinguish the behavioural standards from the intervention of law. Baucus and Dworkin (2008) argued that “corporate crime” should not be confused with the words “illegal corporate behaviour” which denotes a different phenomenon in the context of corporate misconduct.[9] This contention strikes a perfect consonance with the arguments of Shapiro cited by the authors that it is inappropriate to conduct the studies on corporate crime based on considerations other than the element of illegality as far as the definition of corporate crime is concerned. Although the authors somehow agreed with the contention that law may cover moral choice in defining corporate transgression, they questioned the need to opt for one specific framework rather than the other framework in defining the appropriate boundaries of study on corporate crime.

Be that as it may, the argument that law should be utilised as a means to control corporate behaviours since it relates to the “moral agenda” of transnational corporations has thus invited vast criticisms against its practicality and application due to the gaps between the international law and the national law in governing corporate crime. As Stone (1975) augured well that:

Those who trust to the law to bind corporations have failed to take into account a whole host of reasons why the threat of legal sanction is apt to lack the desired effects when corporate behaviour is its target – for example, limited liability, the lack of congruence between the incentives of top executives and the incentives of “the corporation,” the organisation’s proclivity to buffer itself against external, especially legal threats, and so on.[10]


In a nutshell, it is noted that the issue of substantial gap between the laws of the home and host States pertaining to the examination of corporate crime has been persistently thorny in the field of criminological research. In this regards, the authors have also observed that there are different approaches adopted by researchers in the studies of the definitional crime of TNCs. However, to date, there is still no one conclusive definition and satisfactory evidence that may lead to the setting up of an appropriate framework for the purpose of criminological analysis. Nevertheless, it is opined that there is some relevance to the issue at hand which cannot be ignored, that the violation of corporate responsibility should no longer be seen as mere violation of moral responsibility since there are damages and harm done not to oneself but to other entities such as the society and the environment. As such, it is vital for research efforts to march on cogently in high spirit beyond the boundaries of conventional criminal law in order to experiment and explore the aforesaid subject with an open mindset since at the rate the world is evolving, both economically and environmentally, we cannot afford to go on being unintelligent and oblivious, as the damages done, will soon take its toll on all of us.

[1] Flanagan, R. J. (2006). Globalization and labour conditions: Working conditions and workers rights in global economy. United Kingdom: Oxford University press.

[2] French, P. (2006). Pollution in China – Big foreign knuckles rapped. Retrieved from

[3] Woon Tan Kan & 7 Ors v. Asian Rare Earth, 4 CLJ 2299 (1992).

[4] Jianqiang, L. (2006). Multinational corporations violating China’s environmental laws and regulations. Retrieved from

[5]  Jones, T. & McNally, R. (1998). Pollution for Export? Retrieved from

[6] Jones, T. & McNally, R. (1998). Pollution for Export? Retrieved from

[7] Pilon, J. G. (1987). The centre on transnational corporations: How the U.K. injures poor nations. Retrieved from

[8] United Nations. General Assembly, 46th Session. (15 September 1992). Report by the President of the forty-sixth session of the General Assembly [United Nations document, A/47/446]. Available: [Accessed on 9 September 2009].

[9] Baucus, M.S & Dworkin, T.M. (2008). What is corporate crime? It is not illegal corporate behaviour. Law & Policy, 13 (3), 231–244.

[10] Stone, C.D. (1975). Where the law ends. New York: Harper and Row.


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