(FORTUNE Magazine) – Amid all the front-page hoopla over MCI's agreement with the feds to settle fraud charges for $500 million--the largest penalty ever sought by the SEC--did you notice anything ... missing?

The penalty may indeed be "historic," as the SEC says, but if you'd like to see disbelief on the faces of friends and relatives, just tell them that MCI, formerly known as WorldCom, perpetrator of the largest financial fraud in history, has not been indicted. Nearly a year after its multibillion-dollar lies began to be exposed, the corporation still faces no criminal charges at all.

It's in distinguished company. Enron has not been indicted. Nor has HealthSouth, Tyco, or Adelphia.

But before steam starts hissing from your ears, consider that this may represent sensible policy. Becoming outraged over corporate misdeeds is easy (and good). Deciding what to do about them is hard. Specifically, the latest rash of executive crime has forced enforcers to think deeply about who's really guilty and who ought to be punished, and those aren't simple decisions.

The basic dilemma for prosecutors is whether they help society more by filing criminal charges against the companies or against the individual executives who allegedly committed the crimes. In all the cases mentioned above, the Justice Department's indictments have gone against individuals. That has infuriated some people, especially those who've spent years stoking the belief that big corporations are basically evil.

Yet consider what happens when a company doesn't escape. Remember Arthur Andersen? The Justice Department last year charged the firm with obstruction of justice and won a conviction. The company instantly withered to almost nothing, tens of thousands of innocent employees lost their jobs, and thousands of partners who knew nothing about the crime, which involved the firm's auditing of Enron, lost nest eggs they'd been building for years.

So which course makes more sense--sending bad guys to the big house, if you can convict them, or punishing a company and all who are associated with it for egregiously illegal behavior?

Guiding federal prosectors who make those decisions--profound decisions for companies and potential life changers for thousands of people--is a memo issued in January by deputy attorney general Larry D. Thompson. Bush haters who think it's a cave-in to corporate interests should know that it's actually a mild revision of a 1999 memo from Clinton's deputy attorney general Eric Holder. Now in private practice, Holder has argued against indicting MCI.

The memo's basic advice to prosecutors, which explains a lot of what we've seen at the scandal companies, is to focus on "the authenticity of a corporation's cooperation." That is, a company can improve its odds of avoiding indictment if it does pretty much everything Justice asks. Like what? Most notable is to "identify the culprits within the corporation, including senior executives."

That's why the board should kick out the CEO and his team--fast. If there's the least chance they know anything about the alleged crimes and won't cooperate sufficiently, the company will get nailed. Thompson's memo pointedly zaps companies that, "while purporting to cooperate with a department investigation, in fact take steps to impede the quick and effective exposure of the complete scope of wrongdoing under investigation." He didn't actually say "Arthur Andersen," but a number of lawyers think that's what he meant.

The feds' emerging policy seems to be one of going easy on companies that don't fight back, even while getting ugly with their executives. The SEC is participating as well. Its $500 million settlement with MCI, though trumpeted by both sides for its size, isn't much more than a mosquito bite to this still-mammoth corporation. Adjusted for inflation, it's only about three times what Ivan Boesky paid all by himself in 1986.

Maybe it's true that busting corporations--legal constructs that can't be sent to jail--isn't the best way to fix what's wrong. As Thompson says, "Because a corporation can act only through individuals, imposition of individual criminal liability may provide the strongest deterrent against future corporate wrongdoing." Trouble is, no bad guys have gone to jail yet. If the feds want credibility with investors and the public, they need to put some perps behind bars.

GEOFFREY COLVIN, the senior editor at large of FORTUNE, can be reached at gcolvin@fortunemail.com. Watch him on Wall $treet Week With FORTUNE, Friday evenings on PBS.