Robert Reich: Prosecute CEOs Who Break the Law
|June 19, 2014||Posted by Staff under Editorials|
This 2014 excerpt of Robert Reich’s Blog, Jun 5, is of course by Robert Reich.
Corporations don’t break laws. People do. In the cases of GM and Credit Suisse, the evidence points to executives at or near the top.
Credit Suisse pleaded guilty to criminal conduct. GM may also face a criminal indictment. Yet the government imposes corporate fines.
Such fines are often treated by corporations as costs of doing business. GM was fined $35 million. That’s peanuts to a hundred-billion-dollar corporation.
Credit Suisse was fined considerably more — $2.8 billion. But even this amount was shrugged off by financial markets. In fact, the bank’s shares rose the day the plea was announced – the only big financial institution to show gains that day. Its CEO even sounded upbeat: “Our discussions with clients have been very reassuring and we haven’t seen very many issues at all.” (Credit Suisse wasn’t even required to turn over its list of tax-avoiding clients.)
Fines have no deterrent value unless the amount of the penalty multiplied by the risk of being caught is greater than the profits earned by the illegal behavior.
The people hurt aren’t the shareholders who profited years before when the crimes were committed. Most current shareholders weren’t even around then.
To be sure, corporations can effectively be executed. In 2002, the giant accounting firm Arthur Andersen was found guilty of obstructing justice when certain partners destroyed records of the auditing work they did for Enron. As a result, Andersen’s clients abandoned it and the firm collapsed. (Andersen’s conviction was later overturned on appeal).
But here again, the wrong people are harmed. The vast majority of Andersen’s 28,000 employees had nothing to do with the wrongdoing yet they lost their jobs, while most of its senior partners slid easily into other accounting or consulting work.
Conservatives talk about personal responsibility. But when it comes to white-collar crime, I haven’t heard them demand that individuals be prosecuted. Yet the only way to deter giant corporations from harming the public is to go after people who cause the harm.
Ed. Notes: When a big name talks tough about powerful people, that’s great. An even deeper reform, one that might discourage criminal behavior by executives in the first place, would be to get government to end its practice of limiting the liability of all business people automatically (for a mere filing fee). Without that blanket license to do harm to others, business people would buy insurance and sign contracts with investors. Insurance companies and stockholders would pressure managers to clean up their act.