Sauce for the Corporate Goose
SCOTUS says corporations are jes folks like us? Good, then let’s lay some justice on them. From a post over here, discussing “Housebreaking the Corporations:”
The core difficulty is simple enough to describe. Corporations, under the laws of the United States and most other nations, are legal persons; they have many, though not all, of the same rights that “natural persons” – that is, you and me – have under the law. Still, the most obvious difference between corporate persons and natural persons these days is that the corporate kind are noticeably more antisocial. They pursue their purposes – primarily, making money – with a single-mindedness and a lack of concern for consequences that, in natural persons, would be accurately labeled psychopathic; they’ve proven themselves consistently willing to lie, cheat, steal, and kill whenever the likely return on these acts outweighs the risk of punishment.
… we’ve actually got a tolerably effective way of responding to antisocial behavior; we just don’t apply it to corporate persons the way we do to natural persons.
A glance back into the history of law may help clarify the matter. I’m not sure how many people these days know that the earliest version of English common law, from which our American legal system descends, operated entirely on the basis of fines. The principle of wergild, as it was called, gave each person a cash value; if a murder took place, the murderer had to pay the family of the victim that cash value as wergild for the death.
From this perspective, the problem with corporate persons is simple enough: the only risk they run in breaking the law is that they have to pay wergild, and that doesn’t constrain antisocial behavior any more effectively now than it did in Anglo-Saxon times.
My more perceptive readers may be wondering at this point whether I’m seriously proposing that corporations should be thrown in jail or put to death. Yes, that’s what I’m proposing, with the adjustments needed to account for the differences between corporate persons and natural persons. What’s the essential nature of imprisonment for a crime, after all? The criminal ceases to be a free person; for a specified period of time, he is a chattel of society, and society has the right to profit from his labor during that period. And capital punishment? The criminal, having proven that he isn’t willing to abide by even the most minimal standards of social existence, ceases to exist by act of society. Both of these can be applied to corporations easily enough.
Imagine, then, that a corporation – we’ll call it the Shyster Company – has just been caught selling worthless securities to widows and orphans. The district attorney files charges of felony fraud and theft. The trial date arrives, the lawyers bicker, the jury finds the defendant guilty as charged and the judge sentences the corporation to the equivalent of ten years in the slammer. The judge appoints a trustee, who takes control of Shysterco and all its assets. For the following ten years, Shysterco is a wholly owned subsidiary of the state government. Its stock pays no dividends and has no voting rights, its directors have to find something else to do with their time, and if the trustee decides that the CEO and other overpaid office fauna get to find new jobs, they get to find new jobs – assuming that they’re not doing time themselves, as they probably should be. All profits earned by Shysterco during its period of imprisonment go to the state government, subject to set-asides that pay restitution to the victims of the crime.
Meanwhile another conglomerate – we’ll call this one Dirty Rotten Scoundrel Inc. – has been caught knowingly selling food products tainted with deadly bacteria, and a dozen people have died. This time the district attorney files charges of aggravated first degree murder. The trial date arrives, the media has a field day, the lawyers bicker, the jury returns a verdict of guilty as charged, the judge sentences DRSI to death and the appeals court upholds the sentence. On the scheduled date of execution, DRSI ceases to exist. Its stock becomes worthless, its assets are sold off in an auction in which no former shareholder is allowed to bid, its name and trademarks can never again be used by anybody under penalty of law, and its creditors get whatever scraps are left once the victims’ families receive their settlements.
It’s crucial that the stockholders in both cases, and the creditors in the latter case, suffer for the behavior of the corporation. The stockholders of a corporation are its owners, in fact and law; they profit from its activities, and therefore should pay for its crimes.
I have thought the same thing. I do have one slight modification of the following:
“All profits earned by Shysterco during its period of imprisonment go to the state government, subject to set-asides that pay restitution to the victims of the crime.”
The corporation needs to pay the restitution and serve its sentence, not have restitution deducted from its sentence. That is what happens to humans.
What if the company in holding loses money?
Companies should be shot, like horses. To put them out of our misery.
only problem is the company goes out of business and re emerges with a new name.
the SC has just demonstrated once again why American civilization is doomed.
after all the whole point of a corporation is to keep rich people from having to pay for their mistakes.
One recent, rather dramatic example of a large and powerful corporation facing extinction upon conviction of a felony is Arthur Anderson. The company was charged with a felony in connnection with paper shredding by a few employees in one of its branch offices in the Enron case. The conviction was later reversed on appeal, but the damage was done.
The company, whose survival was dependent upon a reputation for honesty, imploded almost instantly, forcing thousands of people who previously had good productive jobs to seek employment elsewhere, depriving other creditors of the firm of any meaningful remedies, and reducing the number of major accounting firms to four which reduced competition in the industry.
Now, was this catastrophic punishment of an overwhelmingly innocent group of talented people and their creditors (including the creditors who were victims of the fraud giving rise to the criminal charges) because three guys in a branch office shredded files really the best way of doing justice? I sincerely doubt that it was. A civil lawsuit for damages would have done everyone involved a favor.
The lack of flesh and blood is also not what makes the corporation distinctive. A Roman analog to a corporation was a sole proprietorship with a slave as the sole proprietor. A slave’s owner had the right to demand all of his earnings, but under Roman law, slave owners did not have personal liability for the wrongdoings of a slave. So the economic effect was the same, despite the fact that there was a flesh and blood person at the helm. In a more modern example, there is also a flesh and blood person, a trustee, who embodies a business trust (a common entity type for mutual funds).
Conversely, dissolving a corporation with corrupt employees (and those kinds of corporations tend not to have profitable operations), also fails to do justice, because the employees go free and suffer no more consequences than they would have from being laid off, while a few assets are seized.
Owner liability doesn’t cut it either. Most often than not, third party investors have no culpability and are instead victims like everyone else.
The most powerful requirement of Sarbane-Oxley was not new liablities for corporations, but a personal responsibility requirement imposed upon officers. What we need more of is managerial liability, not entity level or ownership liability.
“The most powerful requirement of Sarbane-Oxley was not new liablities for corporations, but a personal responsibility requirement imposed upon officers. What we need more of is managerial liability, not entity level or ownership liability.”
If the Board of Directors are included in tha liability requirement we would probably see some greater reform of corporate behavior.
The second item I would add is end the Soviet style directors elections by companies. Require that there be at least 2 candidates, and each to state their position on some issues, rather than today when all you know that each candidate is the best thing since sliced bread. Nominations for director could be made by any combination of shareholders have 2% of the stock. It is often said that the shareholders could choose to run the company into the ground, but since they own it is that not their right? If I run a business is it not my right to screw up and go bankrupt? Actually since most stock is now held by institutions who have a duty to vote the stock in the interest of their holders, it is extremely unlikely that they would vote to run the company into the ground. Further require that comp be approved for the CEO, top 5 past the CEO, and then the next 25 by 3 seperate share holder proposals. I own some CITI stock and realistically have no input on the incompetent boobs who run/ran that company.
Here’s the problem. Corporations are people doing the directing, managing, and planning hiding inside a protective cloak of invisibility, if you will. Whatever good or bad is planned and carried out by people. But only a “corporate person” is responsible for these acts, no matter how illegal or monstrous they may be. The corporation takes the fall, not the person who planned and carried out the illegal acts, whatever they may be, which the corporation shields.
This is the perverse result of a perfectly sensible idea. Corporations can take risks and do things that individuals cannot do because it shelters individuals from some of the costs of failure. The resulting opportunities for economic growth benefit society by providing jobs and investments to continue that growth. But, this supposes that there is some societal control on the types of acts and goals the corporations will pursue. A corporation that manages an enormous mercenary army is a threat to society, not a beneficial means to economic growth. But, it is seen as the legal equivalent to a Subchapter S closely-held corporation for a family farming operation in the Salinas Valley.
This is where we are now. In the early years of the 20th century, monopolies were recognized as a threat to the economic well-being of the American economy. They still are, but now we call them multinational corporations operating in a global economy. And, the SCOTUS has now decided that Phillips Petroleum has a voice in our national and local elections. I don’t know what we can or should do. But, I suggest that to tolerate this intolerable situation is insane.
Having been an auditor in Chicago at the time, I can tell you that the vast majority of the partners in AA just took their clients, their audit staff, and everything else and just moved it all to the name of one of the other big firms.
I’ll donate the corporate entity if somebody wants to take my lawsuit: my LLC wants its absentee ballot. There is no true freedom without the right to vote!
Let’s see John Roberts tell me no. I know at heart he is a civil libertarian.
A corporation is not a person because it does not feel pain and it doesn’t know fear. It can’t serve time. It shouldn’t be
Yeah, they “ought” this and they “ought” that and this needs to change and that needs to change and so on and so forth. In the USA today nobody is going to be able to make corporations answer for much of anything. Even if they break the law, the punishment is a little slap on the wrist. The only “punishment” corporations suffer is when the people running them drive them into the ground via stupid decisions. Or when their market disappears.
Sometimes, justice is served.
If you drive along Big Beaver Road heading east from Woodward Avenue (which they hold the annual dream cruise of old cars), you will find a modern and very unique building that used to house K-Mart corporate headquarters. Charles Conaway was the CEO of K-Mart when it went bankrupt.
A federal court denied reversal of a lower court ruling finding him guilty of:
“a conclusion that Conaway provided ‘substantial assistance’ to Kmart in the commission of the fraud and the MD&A inadequacies,” Pepe said in his 211-page decision. “The jury could conclude that Conaway was the driving force behind the fraud in its inception, and in the lies and non- disclosures that perpetuated it.”
Conaway will be liable for $12.5 million in fines from the DEC and will be banned from ever being an officer in a public company. He over bought inventory to the tune of $850 million and hid it from the board. http://www.dailyherald.com/story/?id=352623
Judge Radkoff is still questioning the bonues paid to Merril Lynch employees before it was merged with BofA. http://www.nakedcapitalism.com/2009/08/judge-takes-sec-and-bank-of-america.html It appears the good judge does not agree with the millions being sucked up by shareholders in fines, believes it is too small, and is looking for liable parties.
Then there is today’s events with SCOTUS casting the deciding vote split amongst liberal and conservative judges. The flood gates have been opened for corporations to directly influence national, state, and local elections as long as they reveal their participation and do not donate directly. Justice Kennedy has made legitimate back door politics.
16 billions in pay for doing diddly poo for the US public. None of this “trading” does one damn thing for the public but it makes the gluttons of the plutocracy very rich indeed. And Americans can’t seem to figure it all out. Of course they are fed lies to keep them figuring it out and the lies work.
Maybe we need more law saying you can do things rather than things you can do.
Since the Supreme Court has alreadly severely limited punitive damages, they no longer evern have to pay “wergild.” They do get away with murder.
> we’ve actually got a tolerably effective way of responding to antisocial behavior; we just don’t apply it to corporate persons the way we do to natural persons.
The heck with wergild! The tolerably effective way we have of responding to antisocial behavior is putting people in jail. Corporations can’t go to jail.
Everything not mandatory is illegal.
Neither a corporation or union or non-profit group is a person. But, the people who own and/or operate/participate in these structures are. So are many of you saying only individuals have this right? You cannot have advocacy groups in any form, or just the forms that favor you? There are organizations such as AARP that blur the lines too.
More importantly, the ban on corporations had no effect anyways, as they just hired armies of lobbyists.
There are probably better ways to get money out of politics.
The other way is reputation damage. If one does not like a corporations stand start a boycott movement, if enought follow the movement to hurt the business it will change its ways, otherwise the board could be sued by other shareholders. For example start a movement saying buy non-detroit cars and push it hard.
Justice stevens in his dissent of DC v Heller (gun case):
In the First Amendment, no words define the class of individuals entitled to speak, to publish,or to worship; in that Amendment it is only the rightpeaceably to assemble, and to petition the Government fora redress of grievances, that is described as a right of “the people.” These rights contemplate collective action. While the right peaceably to assemble protects the individual rights of those persons participating in the assembly, its concern is with action engaged in by members of a group, rather than any single individual. Likewise, although the act of petitioning the Government is a right that can be exercised by individuals, it is primarily collective in nature.
For if they are to be effective, petitions must involvegroups of individuals acting in concert.
Or as more beautifully stated by Andrew Jackson, “No ass to kick, no soul to damn.”
This might be fine for more compact businesses, even big ones — but how do you boycott some of the big companies that have metastasized so much you can hardly walk down a grocery aisle without being within 8 feet of one of their items, but never know it? Or, if I decide to boycott Blackwater, where does that get me? it’s taxpayer dollars (mine, if I still lived stateside) that pay their salaries, but I can’t fire them.
It’s a nice idea. Not sure if it will get anywhere, but it’s appealing. (Isn’t this what antitrust laws are for?) The issue I have with it is how do you prevent such a law or process from corrupting the police? Due to RICO Laws, law enforcement can seize and use the proceeds of drug dealers and such. There was a case where the LA County Sheriff’s Department killed a rancher during a marijuana bust. The problem was that there there were no plants on his Malibu property. The widow won a suit against the sheriff where she claimed that the sheriff had decided to seize the property because of its value and made the drug bust up. How do you prevent the possibility of competitors using the police to seize or the police themselves from seizing a firm for its value and trumping up charges? After all, we all violate the laws of the land everyday that we don’t know about. The state can throw any one of us in jail on trumped up charges. How would you prevent such a law like this from making the Criminal Justice system (which is already broken) more corrupt, powerful, and wealthy? Would this law or process turn the Criminal Justice system into a criminal extortion racket like Russia has (see http://news.bbc.co.uk/2/hi/europe/8475649.stm)?
The plutopython killed health care for the masses and now it will doubtless kill any reform of bankers’ greed and recklessness. The python rules America and has us in its tight tight coils. Don’t ever imagine we will struggle free. Hopeless. Simply hopeless.
One can only laugh at the stupidity of a population that permits this to be done to it.
Pointing out that corporations are not people is idiotic. People in government can’t meet with all of us, there is just not enough time in the day. With a population of 300 million if President Obama were to give us all a paltry 5 minutes of his time working 24/7 365 days a year it would take him many thousands of years to see us all.
So we’re represented by lobbyists since this is the only way to make the system work given the constraint on available time. However, lobbying organizations are no more people than corporations are, and to be against all these organizations that pool our interests means you are against the U.S. constitution which says we can petition the government, and it protects our right to free speach. Corporations represent the interest of the owners or the corporation and the ownership always leads to people. And you can’t deny these groups of people the right to organize and to try influence the political process from their constiutional right of free speach and how they may chose to organize themselves. Therefore, the U.S. Supreme Court got this one right.
A corporation is not a person because
And neither is any group or entity that represents people. And since there are not enough hours in the day for our government to meet with all of us we’re stuck being represented by lobbying organizations. And, again, a lobbying organization is not a person.
What they need to do is go after the senior executives. I can’t wait until some innovative prosecutor thinks of filing RICO charges against them. Conspiracy to commit murder, fraud, etc. But as long as they just fine the companies they are wasting their time. Fines get passed through to the shareholders, and are meaningless. They cause no pain to the senior executives, and have no influence on their behavior.