zations, the crime results from different possible actors committing or pre- venting offenses. Thus, the results presented in Polinsky and Shavell(2000) must be reinterpreted in the context of corporate crime Corporate crime is not committed by firms, as such, but by different in- dividuals within the corporation, who are eventually criminally liable. A socially optimal criminal sanctioning policy would favor large corporate fines over criminal liability(and jail sentences) for these individuals involved in the criminal activity(Cohen, 1996). This claim, based on Becker's analy assumes that corporate directors and shareholders who could be subject te large fines will provide the correct amount of employee monitoring, and even- tually er post sanctions on their employees to ensure that socially harmful offenses are not committed. In a perfect world, with complete contracting and without liquidity constraints, individual liability alone would induce efficient behavior. Consequently, corporate liability would not be necessary(Arlen 1999). Conversely, corporate liability is worthwhile investigating when con- tracts are incomplete or when solvency matters Imposing non-monetary sanctions(e.g, imprisonment sentences) is a par- tial solution to the problem of agents insufficient wealth. Imprisonment how ever is expensive and usually courts are not willing to impose them(Arlen nd Kraakman, 1997). Thus, corporate liability is the other possible solution Corporate liability can take the form of strict liability imposed whenever a crime takes place; duty-based liability imposed only the firm itself violates a legal duty; or a composite regime in which the firm is liable but the magnitude of the sanction depends on whether the firm complied with its duties(Arlen 1999). Vicarious liability is the strict liability of a principal or the firm for the misconduct of an agent or an employee. Most corporate liability for torts and in the United States for crimes as well, is vicarious(Kraakman, 1999) Within a context of corporate liability, shareholders become quasi-enforcers Since corporations are held strictly liable for their employees'actions, the government delegates on the corporation the task of monitoring and control- ling potential offenders(Baysinger, 1991). It lowers the cost of enforcement to the government, but it increases the monitoring costs to firms. Moreover, the government must make sure the firm has the appropriate incentives to monitor and penalize its employees The principal-agent setup is the usual framework to study this problem 3zations, the crime results from different possible actors committing or pre￾venting offenses. Thus, the results presented in Polinsky and Shavell (2000) must be reinterpreted in the context of corporate crime. Corporate crime is not committed by firms, as such, but by different in￾dividuals within the corporation, who are eventually criminally liable. A socially optimal criminal sanctioning policy would favor large corporate fines over criminal liability (and jail sentences) for these individuals involved in the criminal activity (Cohen, 1996). This claim, based on Becker’s analysis, assumes that corporate directors and shareholders who could be subject to large fines will provide the correct amount of employee monitoring, and even￾tually ex post sanctions on their employees to ensure that socially harmful offenses are not committed. In a perfect world, with complete contracting and without liquidity constraints, individual liability alone would induce efficient behavior. Consequently, corporate liability would not be necessary (Arlen, 1999). Conversely, corporate liability is worthwhile investigating when con￾tracts are incomplete or when solvency matters. Imposing non-monetary sanctions (e.g., imprisonment sentences) is a par￾tial solution to the problem of agents’ insufficient wealth. Imprisonment how￾ever is expensive and usually courts are not willing to impose them (Arlen and Kraakman, 1997). Thus, corporate liability is the other possible solution. Corporate liability can take the form of strict liability imposed whenever a crime takes place; duty-based liability imposed only the firm itself violates a legal duty; or a composite regime in which the firm is liable but the magnitude of the sanction depends on whether the firm complied with its duties (Arlen, 1999). Vicarious liability is the strict liability of a principal or the firm for the misconduct of an agent or an employee. Most corporate liability for torts, and in the United States for crimes as well, is vicarious (Kraakman, 1999). Within a context of corporate liability, shareholders become quasi-enforcers. Since corporations are held strictly liable for their employees’ actions, the government delegates on the corporation the task of monitoring and control￾ling potential offenders (Baysinger, 1991). It lowers the cost of enforcement to the government, but it increases the monitoring costs to firms. Moreover, the government must make sure the firm has the appropriate incentives to monitor and penalize its employees. The principal-agent setup is the usual framework to study this problem, 3