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Many people don’t know the half of it when it comes to modern corporate greed and can’t distinguish it from old-fashioned capitalist greed, exposing a major gap in public understanding of business institutions.
Take the jury findings against Enron’s two top dogs last week in Houston, Texas. The case, which began with the evaporation of $60-bil of invested monies, has been hailed as a showcase trial demonstrating how corporate piggishness is treated under the American justice system.
But more accurately, it’s a demonstration of how executive greed gets singled out in a global legal system that continues to give carte blanche to corporations.
“No matter how rich and powerful you are, you have to play by the rules,” federal prosecutor Sean Berkowitz crowed. In a Hollywood-style outcome, the jury verdict will see the former chair and CEO of Enron, Kenneth Lay and Jeffrey Skilling, do serious time in a Club Fed slammer.
Sure, Enron and related scandals have pressured governments and stock exchanges across North America to clamp down on fraudulent management and accounting practices that prevent investors from learning what’s happening to their money.
Corporations are thereby being made more accountable to their owners. But forceful government regs are about the care and feeding of speculators and gamblers in what’s called the investment industry.
Nothing will be done for the thousands of employees who were bilked of their pensions and jobs. And nothing will be done to change the legal framework of these entities to make them more accountable to the rest of us.
Governance of the unseen nine-tenths of problems lurking beneath the surface of executive untrustworthiness remains unrevised. If this continues, we will all lose the possibility of reinventing the corporation itself so that it’s part of a governance system that’s accountable to all stakeholders, and in line with justice, not just the law.
“Corporate” is a much misunderstood word, and an even more under-estimated force. During protests, we hear “corporate capitalists” bandied about as if “capitalism” were the dirty word that stands for selfish, heartless and irresponsible profiteering, while “corporate” refers to the bland headquarters staff who serve the order papers for the evil capitalists.
But distinguished legal scholars such as Joel Bakan and Harry Glasbeek have been hard at work over last 25 years to upend that stereotype by decoupling capitalist from corporate.
From a public perspective, as distinct from investor standpoint, Glasbeek, author of Wealth By Stealth: Corporate Crime, Corporate Law And The Perversion Of Democracy, insists it’s the legal structure, not the lack of transparency, that turns corporations into bad actors. Capitalist greed may not be innocent, but corporate greed is what makes a mess.
Bakan’s The Corporation: The Pathological Pursuit Of Profit And Power, has even been made into a popular movie. Courts, he says, endowed corps with two major rights that have allowed them to triumph over other ways of managing capitalist enterprise. First, the courts treated corporations as “persons,” with the same rights as individuals when it comes to such liberties as free speech, free expression and free movement.
That’s why it’s been such an uphill battle for public interest groups and governments to limit ads pushing tobacco or junk food on children, packages that harm the environment and leave municipalities with huge garbage collection costs, or offshore outsourcing that wreaks havoc on the entire economy of cities and towns.
In each case, corporations are seen and treated as people with rights, not organizations with responsibilities.
Secondly, courts ruled that corporations had none of the obligations of individuals when it came to paying debts that were the full cost of their way of doing business. That’s why corporate names carry the tag of “Limited” or “Ltd.” Unlike profits, which go to the owners, punishments (fines, for example) are limited to the corporation, not its owners.
Corporate mandates and duties are also strictly limited by law to serve owners alone, not the general public.
So laws give corporations the best of both worlds: they enjoy all the rights of individual citizens but are shielded from most adult citizens’ obligations. They should live up to the personal responsibilities they like to preach to others, Glasbeek argues, clean up their messes and take their lumps “as sovereign beings are expected to do.”
There are many ways to promote legal changes that go beyond tinkering with transparent audits and conflicts of interest among vested interest groups.
One is to require corporations that receive government subsidies and grants and those that perform functions with a major impact on the public interest (the food industry, for example) to register under amended corporation laws that spell out obligations to social, enviro and economic sustainability what’s sometimes called the “triple bottom line.”
Until the mills of justice grind slow and exceedingly fine over that kind of challenge, little good will come from the scandal over AWOL dollars at Enron.
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