So, I know this will tick a whole bunch of you off. But, the subject matter needs to be discussed.
We all know that Western Civilizations believe (not necessarily practice) in the concept of law that an individual may only be prosecuted and convicted of a crime should that individual be proven to have willfully or knowingly committed an unlawful act. But, in the corporate world, that practice has not routinely been the law of the land. The governments have been threatening to do so for transgressions of a financial, environmental, or food and drug laws. This is called the “responsible corporate office doctrine”, akin (of sorts) to how the IRS goes after corporate officers and check-signers for trust fund taxes (last week’s post).
About 15 months ago, BP, Halliburton, and TransOcean created one of the worst environmental fiascoes to which we have been exposed. BP agreed to drop $ 20 billion to make that problem go away. But, was Tony Hayward prosecuted? Nah. David Lesar? Are you kidding? Surely, then Steven Newman was prosecuted under this doctrine? Nope, not a single one of them.
We just had some 15 banking companies take down the US economy- and most of the world’s to boot. Well, after we bailed out these firms (we still are not sure what was at risk, but it was trillions of dollars), which CEO did we prosecute? Urrg! You lose. None of them.
But, the US government is now deciding that the “responsible corporate officer doctrine” should be applied to food and drug companies. And, if you think that means William Weldon of Johnson and Johnson ($60 billion in sales), you would be dead wrong.
After all, Weldon just managed- single-handedly- to ruin the reputation of one of the most respected firms in America last year. Instead of recalling bad product and owning up to the problem, J&J sent out salesmen to surreptitiously buy up the bad lots as quickly as they could. Hoping the problem would never find the light of day. (And, then even other problems caught the light of day.)
Now, don’t think this doctrine has never been used. It has been- a lot during the 1960’s and 1970’s, primarily against firms that maintained dirty food warehouses. But, by the 1980’s (when Reagan was President), its use declined to virtually zero. But, now, it’s back- but it seems to apply on to the smaller companies.
Marc Hermelin was sentenced to jail (only for a short stint), fined $ 1 million, and other financial penalties. Because his firm (KV Pharmaceuticals, gross revenue at the time- $ 350 million) produced oversized morphine tablets.
The US government did force Howard Solomon to resign as the CEO of Forest Laboratories, a large ($ 4 billion) generic manufacturer, via a similar law. But, Mr. Solomon was never personally accused of wrongdoing. (Kind of like the “punishment” provided Tony Hayward!)
I am not saying these prosecutions are wrong, per se. I am saying that we need to prosecute the executives of the larger firms, too. The ones that destroyed our economy. Franklin Raines, formerly of Fannie Mae. Richard Fuld of Lehman Brothers. Edward Liddy of AIG. Or, Angelo Mozilo of Countrywide Mortgage. For starters.
How about them, Eric Holder (US Attorney General)?
What do you think should be the out come of prosecution? Do you think large monetary fines are enough restitution? I would not agree with jail time for these types of misdoings but I agree that there has to be some level of accountability.
I think that the CEO’s of these firms need to have their fortunes stripped away. They profited at the public’s expense. And, yes, some of them need to go to jail. In particular, the head (ex-) of Countrywide Mortgage is a prime choice. He definitely was involved in activities that violated the criminal code- including bribery. I could name more, but the concept would be similar.
Roy
The same rules should apply to the bigger firms–especially! It’s unconscionable what those companies have gotten away with. Don’t bail them out. Allow them to fail and shut down like any other company. When they are no penalties for bad behavior (or when the big guys are protected, bailed out, and never called to answer for what they do) then the bad behavior continues…
Right on, Michelle!
It’s not just bad behavior. It’s their ability to have access to Congress that we cannot get- since it’s the lucre of their money that applies. (And, until this last set of laws, they got to write the regulations to which they were to adhere as well.)
Roy
Isn’t the saying something like one rule for them, and another for us. The power and influence of major corporations does seem to place them in the ‘untouchable’ world. Here in the UK there has been alot of publicity about the News of the World phone hacking scandal, but does anyone really think those at the top would ever get touched. There’s always some scapegoat that will take the fall if necessary. It does appear that in what ever country you are from, government and large corporation support means that no matter what disasters these companies are responsible for they will rarely if ever be made to pay for it
Larry:
I am amazed that the Murdoch’s are NOT being prosecuted. And, yes, they have felled certain sacrificial lambs. It will only be if the populace calls this charade for what it is that the Parliament will be forced to act. However, I am guessing that Parliament may also act because they were inveigled in that fiasco.
Thanks for dropping in and leaving your thoughts.
Roy
Wish I could say that I’m surprised but I’m not. Sadly. When will the big corporations have to follow the rules? And pay the consequences when they don’t? Thanks for the post.
Suerae:
This is getting to be a real issue. For example, we just saw UBS have one of its traders apprehended for putting them at risk. He performed unauthorized trades. What about their 20 to 50 traders who put them in exactly the same risk (and the economies of the world, for which we bailed them out) that were following their orders? Why are their supervisors NOT prosecuted?
Roy
The law should act with the same weight over everybody meaning that: the same punishment should be apply to the same negative outcome in every case; otherwise, the public conscience will perceive that there are some groups of people that are allowed to get away with it. I believe this kind of behavior could have being accepted in some antique monarchies. Isn’t republican ideology historically opposed to monarchy?
Gustavo:
This is the primary issue. We don’t expect the “police” to apprehend each criminal. We DO expect (or, in my case, demand) equal treatment to those apprehended. And, the choice to NOT apprehend certain individuals (as opposed to happenstance) is NEVER acceptable.
Roy
Wow- that’s even more than I have 🙂