STWR - Share The World's Resources

A Plan for Democratic Control of Corporate Crime

Dr Michael Dorsey ~ STWR Member
Environmental Studies Program, Dartmouth College

In an explicit effort to further the role of transnational corporations in the implementation of sustainable development the planners of the World Summit on Sustainable Development proposed to:

"Encourage the private sector, including transnational corporations, private foundations and civil society institutions, to provide financial and technical assistance to developing countries;" [and]

"Create partnerships conducive to investment and technology transfer, development and diffusion, to assist developing countries, as well as countries with economies in transition, in sharing best practices and promoting programmes of assistance, and encourage collaboration between corporations and research institutes to enhance industrial efficiency, agricultural productivity, environmental management and competitiveness".

These accolades to firms are made in the face of the grim, growing reality of the extent of corporate concentration of power, malfeasance and criminal activity against individuals and institutions with grave consequences for social welfare, development, human rights, democracy and environmental protection.

In the year 2000, for the first time in the history humanity of the 100 largest economies in the world, 51 are now global corporations; only 49 are countries. Further the combined sales of the world's top 200 corporations are far greater than a quarter of the world's economic activity. Indeed, the top 200 corporations' combined sales are bigger than the combined economies of all countries minus the biggest 9; that is they surpass the combined economies of 182 countries. The top 200 firms have almost twice the economic clout of the poorest four-fifths of humanity. In other words the top five firms had more economic power and clout than the poorest 100 nations combined, as Fig. 1 shows.

Fig. 1

Firms were able to concentrate an enormous amount of power during the 1990s. Fig 2 shows the exponential degree of increase in mergers and acquisitions during the two decades of neo-liberalism and sustainability. This downside of the amazing rise of concentration of corporate power and resources means that we now inhabit a world where a single firm can have a massive effect on environment and development issues and problems, possibly at the expense of the planet.

Fig 2.

According to the environmental lobby Friends of the Earth International (FOEI), just one oil company contributed three times as much carbon dioxide into the air as the current annual emissions from fossil fuels.

A FOEI study notes that ExxonMobil has produced 20.3 billion tons of carbon dioxide emissions in its 120 years of existence. This is approximately three times the annual global emissions now and 13 times the annual emissions from the United States. Such contributions mean that the giant ExxonMobil has caused between 4.7 and 5.3% of all man-made carbon dioxide emissions across the globe, since its foundation as the Standard Oil Trust in 1882. This dramatic impact on planetary resources is presumably a function of “legal” behavior. Yet, illegal firm behavior is perhaps more pernicious and widespread, than previously presumed—but it is hard to say exactly as no single multilateral institution tracks it.

Conservative figures from the United States suggest the financial cost of corporate crimes such as monopoly-pricing, bribery, illegal mergers, tax evasion and fraudulent advertising is 10 to 100 times the financial loss caused by robbery, burglary, larceny and auto-theft combined. The US Federal Bureau of Investigation (FBI) estimates, for example, that burglary and robbery (i.e., “street crimes”) costs the US $3.8 billion a year; whereas healthcare fraud alone costs between $200 billion to $400 billion a year. In 2000, only in the US, the 100 corporate criminals fell into 14 categories of crime: Environmental (38), antitrust (20), fraud (13), campaign finance (7), food and drug (6), financial crimes (4), false statements (3), illegal exports (3), illegal boycott (1), worker death (1), bribery (1), obstruction of justice (1) public corruption (1), and tax evasion (1). (It is notable that “white collar crimes do not even appear in US government aggregate crime statistics.)

The upside, if there is one, to the extent and breadth of the concentration of corporate power and resources as well as the continuing crime is that it might be easier to check, monitor and control, than previously thought.

If we are to move beyond sustainability in terms of controlling firms, less to zero attention needs to be paid to corporate voluntarism or corporate social responsibility. Increasingly, firms need to be made accountable and subject to the rule of law.

As UN researcher Peter Utting notes, “Historically, progress associated with corporate social and environmental responsibility has been driven, to a large extent, by state regulation, collective bargaining and civil society activism. Increasing reliance on voluntary initiatives may be undermining these drivers of corporate responsibility.”

The urgency of this demand cannot be overstated. On 14 May 2004 the Financial Times reported that in an effort to avoid renewed government efforts to contain the spread of corporate malfeasance and bad governance practices many firms are steadfastly considering taking themselves private (or avoiding becoming publicly traded) in order to avoid heighten scrutiny of regulators and being held accountable in any meaningful way. On the very same day in the Wall Street Journal in a standing column (that might be better characterized as a “Corporate Crime Blotter”) called “Executives on Trial” reports focused on four firms on trial concerning revenues of more than one billion dollars on charges for grand larceny, fraud, falsifying business records, amongst other charges. These phenomena take places in a globalized context where “in the most basic sense, corporate crime has disappeared by definition.” As Snider notes,

"Thus even when stock market fraud seems poised to destroy the system of exchange that is the foundation of capitalism, the neo-liberal religion of deregulation retains its hold on financial elites. "If blame is assessed, it falls on so-called "rogue traders", not on the economic system that supports and legitimates their acts."

In the face of these injustices and criminal acts we must craft new forms of globally binding corporate governance and policing. We need to work for democratic control of corporate crime. Such control imposes democratic will and justice over illicit firm behavior. Repeat corporate criminals are subject to stern laws and may even be dismantled--executed. Democratic control of corporate crime imposes a fiscally conservative three-strikes rule on corporate criminal behavior. After three criminal violations, of any scale, firms are liquidated and their assets are returned to the public, in order to mitigate the harm they have caused.

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