Special Weapons for Fighting Giants
The last few years have seen a series of corporate catastrophes, for which the perpetrator companies have escaped any meaningful accountability. Big banks and giant Wall Street firms tricked and ripped off homeowners and investors, and crashed the national and global economy. BP’s reckless operations poisoned the Gulf of Mexico in one of the worst oil disasters in history. Massey Energy’s cost-cutting led to the Upper Big Branch coal mine collapse that killed 29 workers.
There have been virtually no criminal prosecutions for Wall Street wrongdoing related to the crash, and precious few civil actions. Criminal charges are likely to be filed against BP, but the company already has been granted new permits to drill for oil in the Gulf. Massey Energy—now owned by Alpha Natural Resources—was forced to pay $200 million in penalties but avoided any criminal prosecution.
This history notwithstanding, We the People, and our government representatives, do have the power to hold companies accountable for the wrongs they commit. The challenge is to mobilize sufficient political pressure to demand that available tools be used and new mechanisms of accountability be created.
One powerful way to hold companies accountable is through debarment—denying corporate wrongdoers the right to obtain government contracts. Almost every major company does significant business with the government, so debarment is a penalty with teeth. Similarly, federal, state, and local governments should deny other government benefits to corporate criminals and wrongdoers. Denying BP the right to drill in the Gulf is a penalty that would sting. Drug companies that can’t sell to Medicare, Medicaid, and the Department of Veterans Affairs are deprived of more than a third of their market. The Federal Communications Commission has the authority to deny broadcast licenses to media corporations that do not exhibit “good character.” Federal and state governments do frequently debar companies, but typically only smaller firms that engage in massive fraud or operate as criminal enterprises.
A second tool to discipline corporate wrongdoers is charter revocation. Establishing a new corporation requires that a state government grant a charter to operate. (This is typically a perfunctory requirement, as evidenced by the state of Virginia’s grant of a charter to Licensed to Kill, Inc., a company whose articles of incorporation state that it will engage in “manufactur[ing] and marketing of tobacco products in a way that each year kills over 400,000 Americans and 4.5 million other persons worldwide.”) State governments have the right to revoke charters from companies that do not serve the public interest. Free Speech for People has petitioned Delaware to revoke the charter of Massey Energy. Charter revocation effectively constitutes the death penalty for a corporation. Even occasional use against large corporations would be a major deterrent to corporate wrongdoing.
A third form of control on corporate wrongdoing is civil litigation. Lawsuits against corporate wrongdoers not only afford victims an opportunity to receive some compensation for the harms they have suffered, they work to strip corporations of ill-gotten gains. The civil justice system is a vital deterrent to corporate misconduct, because it means corporations will at least sometimes be forced to pay for the harms they cause. And lawsuits provide direct justice to victims of corporate wrongdoing, without the need to persuade government officials to act. In many ways, the U.S. civil justice system is the most important form of corporate accountability we have.
It’s for exactly these reasons that corporations have worked for decades to undermine the functioning of the civil justice system, making it harder to file cases, interfering with the ability of victims to join together in class actions, making it harder for victims to obtain evidence, capping the damages that victims may recover, limiting punitive damages, and forcing victims out of the civil justice system (real courts) and into arbitration tribunals biased to favor giant corporations.
In recent years, organizations like EarthRights International and the Center for Constitutional Rights have innovated new ways to hold corporations accountable in U.S. courts for harms perpetrated overseas, relying especially on a law passed in 1789 called the Alien Tort Claims Act. The U.S. Chamber of Commerce has responded with a campaign to foreclose such litigation.
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In addition to using these and other corporate accountability tools already at our disposal, we need more. Among other things, we need to significantly strengthen the penalties for corporate endangerment of people’s lives and well-being. In many instances, there is no criminal penalty applicable for recklessly putting consumers’ or workers’ lives at risk by knowingly selling dangerous pharmaceuticals or defective cars or by exposing workers to deadly toxic chemicals or other hazards. A law that would make it a felony to recklessly endanger consumers or workers, with stiff fines and sanctions for companies and jail time for responsible corporate management, would make our world safer and restrain corporate misconduct.
We live in a time of massive disparity between penalties for street criminals and corporate wrongdoers. Corporations, which claim all the rights of “persons,” are subjected to much weaker punishments than real people. It doesn’t have to be.
Robert Weissman wrote this article for 9 Strategies to End Corporate Rule. Robert is president of Public Citizen, a consumer advocacy and corporate accountability organization based in Washington, D.C.
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