Corporate Crime

On May 7, 2000 the Federal Bureau of Investigation, released data on serious crime in the United States. The FBI notes that both murder and robbery registered 8-percent drops since 1988. Missing from the FBI news release were any data on crime in the suites.

That information vacuum is notable because corporate crime and violence are often the result of calculated, rational executive decision-makers; people who clearly could be deterred by stronger penalties and enforcement measures.

Corporate decision-making determines many of the key questions that affect our lives. These decisions are made not through the democratic process but in the private suites of major business corporations here and abroad. Decisions about: how our natural resources will be used; the kind and price of products and services; where much toxic pollution will be released into the air, water and soil; whether jobs will be created, taken away, or moved to other countries; whether conditions in
workplaces will be safe; compensation levels for top executives as well as entry-level workers; whether women and minorities will receive truly equal opportunities to succeed in the corporate structure; which political parties, groups and candidates will have enough money to saturate the airwaves prior to elections and key legislative votes; what technologies will be developed that fundamentally affect the natural world and the shape of our urban skylines, and the way crops are grown on our soil are all shaped by corporate power.

Many of these decisions are constrained by market forces and addressed by state and federal statutes and regulations. But marketfactors don’t work where, as is often the case, various dimensions of competition are minimized and consumer access to information is weak. Moreover, due to corporate lobbying and the competition among states for corporate business, the laws governing corporate conduct set low standards; which
give corporate executives plenty of leeway within the weak existing legal strictures.

The influence on corporate decision-making by shareholders — let alone by employees, consumers, affected small businesses and surrounding communities and other stakeholders — is pathetically weak because our system of regulating corporate governance is a failure. Rules for corporate control have been left to the individual states, and the result is well-known: a “race to the bottom,” in which states compete to offer the package of rules and incentives most attractive to the corporate managers who choose the state of incorporation.

Weak legal provisions and an imbalance of power between corporate management and shareholders are one thing, but what is worse is that even the relatively low standards set by the law — limits on corporate misconduct like fraud, toxic dumping, indifference to hazardous work conditions, and marketing of dangerous products — are often flouted. As bad as street crime is, the evidence is stronger than ever that business wrongdoing inflicts far more preventable violence and economic damage on society than all street crimes combined.

We don’t know the precise magnitude of corporate crime due to the curious absence of Justice Department data on such lawlessness, but there is reason to believe it is enormous. The FBI reports that in 1999, burglary and robbery cost our nation approximately $3.8 billion. Meanwhile, according to W. Steve Albrecht, professor of accountancy at Brigham Young University, white-collar fraud — doctor and lawyer over-billing, defense procurement scams and the like — costs us perhaps $200 billion per year.

Street criminals do not have a monopoly on violent crime, either. About 24,000 people in this country are murdered each year, says the FBI. But far more Americans — 100,000, according to the National Institute of Occupational Safety and Health — die annually from work-related diseases like black lung and asbestosis. Sixty-five thousand die preventable deaths due to air pollution. More than 400,000 Americans die annually from tobacco-related disease; a product to a considerable extent of long-time tobacco industry marketing practices aimed at hooking adolescents into a lifetime of tobacco addiction.

Corporate environmental crimes are also widespread. Exxon, International Paper, United Technologies, Weyerhaeuser, Pillsbury, Ashland Oil, Texaco, Nabisco and Ralston-Purina have all been convicted in recent years.

Against the backdrop of these factors — immense power and influence by the major corporations and weak controls by shareholders, labor and other concerned constituencies, a disastrous race to the bottom in state corporate chartering, and an epidemic of corporate misconduct — citizens need to consider a Corporate Decency Act, a new approach to ensuring that our largest corporations act as good citizens in our society.

Where traditional federal regulation has focused on the external relationships of the corporation — don’t pollute, don’t fix prices, don’t air deceptive advertisements — the Corporate Decency Act would seek to reform the internal governance structure of our largest corporations so that — in a manner consistent with our free-market economy — companies will exercise their power and discretion in more democratic and accountable ways. It’s time for corporate crime to be treated like street crime — as a dangerous affront to an organized, law-respecting society.

Citizens interested in getting tough on crime in the suites can find a model Corporate Decency Act on the following web page: http://www.nader.org/modellaws/decency.html