How do corrupt corporations get away with it?

There are several reasons why corporations are able to practice corruption in its many forms – and get away with it

There is no law that prevents legislators, the judicial or the executive branch from owning stock in corporations. Therefore, all three branches of government are corporate-profits-friendly. See The 6 Most Popular Stocks Owned by Congress. Politicians are able to make laws that profit themselves, their families and friends.

The “revolving door”, like the symbol of infinity, appears to be endless. There is no law that effectively prevents someone from working for a corporation – then working for a government agency that ostensibly oversees that corporation – and then again working for the corporation. In fact, Supreme Court Justice Clarence Thomas, worked for Monsanto and now presides over legal actions filed against Monsanto, found in their favor. Some might call this a “conflict of interests”.

A corporation has the status of “personhood” and no one human individual in the corporation is held accountable on a personal level. Therefore, a corporation might be fined for crimes, including causing the deaths of its customers, but no one from the corporation goes to jail for making dangerous products or policies. The fines corporations are assessed may sound huge to the public, but often they are only a day or week’s worth of a corporation’s profits. Fines are no more than a tap – not even a slap – on the wrist… and so the immoral corporate behaviors persist. A fine equal to or in excess of the total corporate earnings for that product would perhaps constitute a more meaningful fine that would dissuade corruption.

Corporations themselves write the legislation they want passed in Congress.
These laws protect corporations, allow them to maximize their profits, and further their ability to function without restraint. Legislators who go to bat for corporations are generously rewarded by contributions to their always hungry campaign coffers. If legislators own shares in corporations, it is possible they are personally benefitted by passing these laws. This too constitutes a conflict of interests. However, since there is a law that protects the identities of those who have shares in corporations, we do not know for sure who runs the corporations and who benefits from their massive profits. The laws that protect corporations are often beneficial to corporations but detrimental to the health and welfare of real, living people and the environment. Wars, for instance, benefit the banks and the military-industrial complex, but ravage the land and people of the countries in which they are waged. Expensive pharmaceutical drugs trap vulnerable patients in an ongoing siphoning off of their financial assets.

There is a popular myth that corporations are required by law to maximize shareholder profits. This could provide some CEOs justification for bribing Congress and engaging in questionable professional activities. In reality, there is no such law, but the notion of maximizing shareholder value attracts investors… and rewards bad practices of those CEOs and legislators who hold shares in the corporations. However, again, the notion is not law. From Salon.com, April 4, 2012 by Ken Jacobson:

The shareholder fallacy

The idea that a corporation’s sole duty is to stockholders is a dangerous fad with no basis in U.S. law or historyOne famous man who I am supposing is an investor, whose name will be revealed in the paragraph below, stated,

“It is literally – literally – malfeasance for a corporation not to do everything it legally can to maximize its profits. That’s a corporation’s duty to its shareholders.”

Since this sentiment is so familiar, it may come as a surprise that it is factually incorrect: In reality, there is nothing in any U.S. statute, federal or state, that requires corporations to maximize their profits. More surprising still is that, in this instance, the untruth was not uttered as propaganda by a corporate lobbyist but presented as a fact of life by one of the leading lights of the Democratic Party’s progressive wing, Sen. Al Franken. Considering its source, Franken’s statement says less about the nature of a U.S. business corporation’s legal obligations – about which it simply misses the boat – than it does about the point to which laissez-faire ideology has wormed its way into the American mind…

Lynn Stout, Distinguished Professor of Corporate and Business Law at Cornell University, wrote in her book The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public,

“United States corporate law does not, and never has, required directors of public corporations to maximize shareholder wealth. To the contrary, as long as boards do not use their powers to enrich themselves, the law gives them a wide range of discretion to run public corporations with other goals in mind, including growing the firm, creating quality products, protecting employees, and serving the public interest. Chasing shareholder value is a managerial choice – not a legal requirement.”

And from the Wake Forest Law Review:

The Sustainable Corporation and Shareholder Profits

No corporate law statute or court decision explicitly requires firms to adhere to the shareholder primacy view. While the Dodge case speaks of shareholder profit as the central purpose of the corporation, and three subsequent decisions contain similar expressions, all of these passages appear in dicta, and none of these cases hold or stand for the legal proposition that a corporation must maximize shareholder profits. In fact, later decisions cite these cases for other points of law, if at all…

This attitude—known as “shareholder primacy” prioritizes shareholder interests above all other considerations and renders deep commitments to sustainability difficult. According to this view, corporate managers may not sacrifice potential profits to benefit society, the environment, or future generations; rather, firms should aim to maximize shareholder returns and eschew sustainable alternatives that are not profit-maximizing. For example, a firm should incur workplace safety costs only to the extent necessary to comply with applicable laws and regulations, or to the extent such expenditures are otherwise financially justifiable (in that they improve employee morale, attendance, or productivity, or that they result in lower insurance premiums or other corporate outlays). Some profit-maximizing firms may even deliberately violate applicable laws and regulations on the view that any fines or penalties incurred are mere costs of doing business and preferable if outweighed by expected costs of compliance…

For too long, the shareholder primacy view and its incessant focus on profits have stifled corporate efforts to become more sustainable. As a result, shareholders have profited at the expense of the environment, society, and the future. This need not be the case: corporate laws, norms, and markets should not stand in the way of sustainable business efforts and, to a large degree, should affirmatively encourage corporate decision makers to pursue sustainable goals for the benefit of the entire enterprise. Only then, when corporations take a broader view of the firm, its purposes, and fiduciary obligations to it, will we create a future where business, the environment, and society may all continue to thrive.

Therefore, corporations run amok. Corporations began as organizations set up to accomplish specific projects that benefitted the public. They had a beginning and an end, a birth and a death. When the project was over, the corporation was dissolved. From “Our Hidden History of Corporations in the United States”. Sources include: Taking Care of Business: Citizenship and the Charter of Incorporation by Richard L. Grossman and Frank T. Adams plus The Transformation of American Law, Volume I & Volume II by Morton J. Horwitz

Our Hidden History of Corporations in the United States

When American colonists declared independence from England in 1776, they also freed themselves from control by English corporations that extracted their wealth and dominated trade. After fighting a revolution to end this exploitation, our country’s founders retained a healthy fear of corporate power and wisely limited corporations exclusively to a business role. Corporations were forbidden from attempting to influence elections, public policy, and other realms of civic society.

Initially, the privilege of incorporation was granted selectively to enable activities that benefited the public, such as construction of roads or canals. Enabling shareholders to profit was seen as a means to that end. The states also imposed conditions (some of which remain on the books, though unused) like these*:

  • Corporate charters (licenses to exist) were granted for a limited time and could be revoked promptly for violating laws.
  • Corporations could engage only in activities necessary to fulfill their chartered purpose.
  • Corporations could not own stock in other corporations nor own any property that was not essential to fulfilling their chartered purpose.
  • Corporations were often terminated if they exceeded their authority or caused public harm.
  • Owners and managers were responsible for criminal acts committed on the job.
  • Corporations could not make any political or charitable contributions nor spend money to influence law-making.

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