Atelier 15, article 2

© Multinational Monitor :
(July/August 1999)

"Corporate Crime and Punishment"

"Corporate carnage and crime runs rampant." That was the central argument of an editorial we published at the beginning of the decade ("Criminal Business," Multinational Monitor, June 1990). Sadly, almost nothing has changed. The close of the decade marks yet another 10 years of largely unrestrained corporate criminality and violence. 

Nor has corporate criminal enforcement advanced noticeably. The late 1990s has seen an uptick in criminal prosecutions for cartels and price-fixing, and environmental prosecutions are up somewhat from the see-no-evil Reagan era, but by and large the regulatory cops on the corporate crime beat are weak and ineffective. 

Russell Mokhiber's report in this issue on the top 100 corporate criminals of the 1990s illustrates at least four critical components of the problem. 

First, corporate crime is pervasive. The most serious acts of corporate criminality, at least as measured by size of resulting fine, involve many of the largest and most well established companies in the United States and the world. (Mokhiber's review only covers U.S. prosecutions.) Companies with familiar names like Alcoa, Borden, Bristol-Myers Squibb, Chevron, Eastman Kodak, Exxon, General Electric, Hyundai, IBM, Mitsubishi, Royal Caribbean and Tyson Foods were among the decade's leading corporate criminals. 

Second, criminal prosecutions are not done for "technical" violations of the law, but generally for intentional or reckless acts. Many of the top 100 cases involve premeditated, planned and consciously designed criminal acts. 

Third, financial penalties for corporate crime are far too small to deter wrongdoers. When Kodak was hit with a $1 million fine for a chemical spill, one neighboring resident correctly said, "It's equivalent to you or I getting a jaywalking incident." With perhaps an arguable exception in the case of cartels and overt price-fixing, it is generally the case that corporate crime pays. 

Fourth, criminal prosecutions are infrequent compared to the massive number of regulatory violations; and too many acts of corporate wrongdoing are improperly considered civil violations under the law, or are defined as legal altogether. No example makes the point more clearly than the tobacco industry's escape from criminal prosecution, despite its well documented record of concealing health risks and the addictive properties of smoking, manipulating cigarette ingredients to promote addiction, and marketing to children. 

As we editorialized in 1990, "as the numbers show, the system is not working. ... [T]he criminal prosecution system fails to seriously address corporate crime." 

We argued at the time for a series of more aggressive and creative corporate criminal sanctions. Those ideas remain highly relevant today. They include : 

Equity fines: The payment of fines not in cash, but stock -- a penalty that diminishes the value of already issued stock and garners shareholder attention; 
Probation: Placing companies under the continuing surveillance of a court-appointed supervisor, with strong sanctions-issuing powers for repeat violations; 
Revocation of subsidies and privileges: Taking away government-granted tax and other subsidies, or denying government-granted privileges for corporate offenders; and 
Adverse publicity: Requiring corporate criminals to advertise their criminal convictions, an antidote to the image-enhancing advertisements. 
These all remain vibrant, if infrequently enacted, ideas. 

The Clinton administration is now considering adoption of a modest version of one of them, revocation of privileges, with its anti-scofflaw proposal. 

The anti-scofflaw regulation would prevent companies with a record of "substantial non-compliance" with labor, environmental, tax, antitrust, consumer or employment laws from receiving federal government contracts. 

Because the federal government contracts for approximately $200 billion of business a year, and because so many companies rely heavily on government contracts, the regulation could meaningfully deter corporate law-breaking. 

There are notable flaws in the regulation, including an overly vague characterization of "substantial non-compliance." That vagueness, combined with the political difficulty in denying contracts to major corporations based on their demonstrated irresponsibility, makes it very likely that the regulation, if adopted, will be underenforced. But even the possibility of enforcement should encourage more corporate respect for the law. 

Adoption of the anti-scofflaw regulation is certainly no panacea. But given how little progress was made in dealing with the corporate crime epidemic in the 1990s, every step forward is important. For more information on the anti-scofflaw regulation, including details on how to submit comments to the Clinton administration by the November 8 deadline (it is easy to do), see Essential Action's anti-scofflaw web page, a