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The Corporate Criminal: Why Corporations Must Be Abolished
Drawing upon a wide range of sources of empirical evidence, historical analysis and theoretical argument, this book shows beyond any doubt that the private, profit-making, corporation is a habitual and routine offender. The book dissects the myth that the corporation can be a rational, responsible, 'citizen'. It shows how in its present form, the corporation is permitted, licensed and encouraged to systematically kill, maim and steal for profit. Corporations are constructed through law and politics in ways that impel them to cause harm to people and the environment. In other words, criminality is part of the DNA of the modern corporation. Therefore, the authors argue, the corporation cannot be easily reformed. The only feasible solution to this 'crime' problem is to abolish the legal and political privileges that enable the corporation to act with impunity.
226 pages, Hardcover
First published May 12, 2012
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April 15, 2019
The problem with naming corporate harm as a "crime" is that it suggests some kind of deviation from the norm. But the harms perpetrated (and incentivized by regulatory and other economic and legal rules) are, as Tombs and Whyte meticulously explain, "are commonly part of their modus operandi." (p. 144). "The assumption that corporations can be made into responsible, moral decision makers underplays both the routine and pervasive nature of corporate offending."
In the U.S., as William Robert Thomas has pointed out, "The corporate criminal bar has been very effective at marshaling support for an argument that corporate activity is valuable. We don't want to overdeter. We should be very careful about criminalizing and punishing corporations. And likewise, if you punish a corporation too hard, you can't control the punishment. It's going to spiral out of control. You have this worry that any sanction you impose is going to lead to a corporate death penalty." (The iconic example that they always use is Arthur Andersen, which collapsed after it was criminally sanctioned for its role in Enron's fraud -- an argument that failed to take into account the firm's recidivist record, as evidenced by its previous failures, if not complicity, in other giant accounting frauds such as Enron, not to mention the WorldCom case -- which was a form of fraud that was much simpler and larger than Enron, and therefore arguably one that should have never been sanctioned by Bernie Ebbers' auditors). The major downside of the Andersen collapse was, of course, that it left an even smaller cartel of Big 4 accounting firms, which should have led to federal rules that not only separated accounting from consulting conflicts (as Sarbanes-Oxley intended), but put the auditing side of the business into the public domain (as a bill introduced by Rep. Dennis Kucinish proposed). In practice, the next-tier accounting firms do not have the size and global reach to adequately audit most Fortune 500 companies. Thus you have a cartel. The many accounting failures that followed Sarbanes-Oxley in the years that followed showed how inadequate the response turned out to be in terms of deterring fraud and forcing the auditors to police their clients.
The response Thomas suggests (which seems to me more nuanced and practical than Whyte and Tombs' conclusions, although somewhat aligned) is to stop pretending that rehabilitation (making companies better) through such tools as deferred and non-prosecution agreements in which companies agree to a deal to appoint company monitors or police themselves, and instead of corporate retribution (which assumes corporations act like human beings with a moral sense of responsibility), the approach should be what he calls "corporate incapacitation" -- i.e. taking the company out of the line of business where the harms occurred. E.g. like debarment from federal contracts, instead of designing "sophisticated compliance and governance reforms" (which Thomas suggests courts are not well suited for, since they are not experts at business management and governance). Either suspend the line of business, force it to divest certain operations or simply close the company down (if the crime was core to its entire business). "We rarely have the federal government saying to a corporation -- you can no longer participate in this space. But that is a cheaper solution and a more effective solution." (See "William Robert Thomas on Rehabilitating Corporate Retribution and Incapacitation," Corporate Crime Reporter, 2/4/19).
One of the strengths of Tombs and Whyte's book is that they meticulously deconstruct the assumptions behind the regulatory framework and flawed approaches to corporate crime that dominate discourse. The notion that corporations exist autonomously from the state, for example is flawed in that it can never be complete -- states, through regulation (often designed by the companies themselves) - play a crucial role in reproducing the conditions necessary for corporations to function and thrive. Corporations are never entirely "free" nor are the markets within they operate "free." You'd think this would be obvious by now, but it has to be repeated over and over, largely because of the myths that endure in political science and especially economics.
Reviewing the history of corporate creation, service to colonial regimes and war-faring states, along with legal features (limited liability) that advantage companies while shielding the individuals inside (creating a corporate veil and "structure of impunity") -- Tombs and Whyte suggest a depersonalization of property relations in the corporate structure that radiates throughout the organisation, encouraging the removal of responsibility for the consequences of corporate decisions and affects on the society that supports it and so-called external "stakeholders" that really have little say in these questions. The result is a "spirit of organized irresponsibility" and structural impunity. The ascension of Corporate Social Responsibility (CSR) is nothing more, in this context, than a means of preempting laws to address the DNA of the corporation. CSR assumes incentives can be created to nudge and encourage companies to active in the public interest (often conflated with the interests of outside shareholders). But time and time again, it's exposed as a fallacy. "In order to think creatively and effectively about the corporation, we need to think more strategically and theoretically about the nature and dynamics of state-corporate relationships."
First, the harms created by corporations (deaths, injuries, illnesses and theft) are rarely treated as crimes. Instead, victims are treated as abstract collateral. (Risk assessments, for example, is nothing more than a form of murder by pollution that is sanctioned by environmental regulation, as Peter Montague has so eloquently explained.) The push and pull over regulatory responses to crime is, they conclude, more simply a search for "social order maintenance" that may ameliorate the harms of corporations, but never (or rarely) call into question the legitimacy of their status and existence. Corporations and corporate activities, we are reminded, are not a natural or inevitable form. Nor are the laws than endow their structural irresponsibility. (e.g. the conferring of constitutional privileges originally designed for the sovereign human beings who are the supposedly the rulemakers in a democracy - we colonized ourselves by empowering inanimate beings -- long before the creation of robots and AI). Corporations are not (as they remind us over and over) the most efficient means of organizing economic life (a common justification for the status quo). Nor is the relationship between states and corporations antagonistic, especially if we don't wrest control of the government itself.
The history of the modern corporation is the history of conjoined activities -- whether privatization of public services or conducting war by proxy. Corporations are entrenched in a legal terrain in which they are economically and socially entrenched. Our task is to decolonize ourselves (as Richard Grossman used to explain) and abolish corporations. That sounds like a fantasy, and it is if you think of the idea in broad strokes. But reclaiming public services and the commons piece by piece, as David Bollier (the Commons) and P2P and some unions and Food and Water Watch (fighting water privatization) have understood. We need to abandon, once and for all, the tendency to view "states" and corporations as oppositional antagonists if we are to replace the regulatory frameworks that entrench them. Community rights and the rights of nature (see groups like CELDF) are designed to fundamentally challenge the framework. But we need to recognize that crises moments (e.g. Enron) in which the system is exposed for the fraud it is, the fight will be between the scramble to restore the legitimacy of corporations (through regulatory "reforms" like Sarbanes-Oxley) and structural changes that reclaim public space. This is the "shock doctrine" that Naomi Klein describes in her book. Corporations and governments take advantage of war, breakdown of governments, etc. to restructure political economies and privatize the institutions of essential services. This is a major driver of economic polarization and inequality. Corporatization on steroids. We need to organize ourselves to reverse this process. You see the seeds of that in community self-organizing after extreme weather events and other catastrophes. Rather than lapse into reformism and passive expectations of state and corporate rescue (with charitable entities often filling in), we should be thinking of ways to organize sovereign systems of self-support. It won't be easy, and it requires thinking about intervening not just at the community level to succeed, but also at the federal level, which means we need to recognize the importance of long-term organizing for representative democracy and accountability, and how it can complement the organizing of direct democracy on the ground.
In the U.S., as William Robert Thomas has pointed out, "The corporate criminal bar has been very effective at marshaling support for an argument that corporate activity is valuable. We don't want to overdeter. We should be very careful about criminalizing and punishing corporations. And likewise, if you punish a corporation too hard, you can't control the punishment. It's going to spiral out of control. You have this worry that any sanction you impose is going to lead to a corporate death penalty." (The iconic example that they always use is Arthur Andersen, which collapsed after it was criminally sanctioned for its role in Enron's fraud -- an argument that failed to take into account the firm's recidivist record, as evidenced by its previous failures, if not complicity, in other giant accounting frauds such as Enron, not to mention the WorldCom case -- which was a form of fraud that was much simpler and larger than Enron, and therefore arguably one that should have never been sanctioned by Bernie Ebbers' auditors). The major downside of the Andersen collapse was, of course, that it left an even smaller cartel of Big 4 accounting firms, which should have led to federal rules that not only separated accounting from consulting conflicts (as Sarbanes-Oxley intended), but put the auditing side of the business into the public domain (as a bill introduced by Rep. Dennis Kucinish proposed). In practice, the next-tier accounting firms do not have the size and global reach to adequately audit most Fortune 500 companies. Thus you have a cartel. The many accounting failures that followed Sarbanes-Oxley in the years that followed showed how inadequate the response turned out to be in terms of deterring fraud and forcing the auditors to police their clients.
The response Thomas suggests (which seems to me more nuanced and practical than Whyte and Tombs' conclusions, although somewhat aligned) is to stop pretending that rehabilitation (making companies better) through such tools as deferred and non-prosecution agreements in which companies agree to a deal to appoint company monitors or police themselves, and instead of corporate retribution (which assumes corporations act like human beings with a moral sense of responsibility), the approach should be what he calls "corporate incapacitation" -- i.e. taking the company out of the line of business where the harms occurred. E.g. like debarment from federal contracts, instead of designing "sophisticated compliance and governance reforms" (which Thomas suggests courts are not well suited for, since they are not experts at business management and governance). Either suspend the line of business, force it to divest certain operations or simply close the company down (if the crime was core to its entire business). "We rarely have the federal government saying to a corporation -- you can no longer participate in this space. But that is a cheaper solution and a more effective solution." (See "William Robert Thomas on Rehabilitating Corporate Retribution and Incapacitation," Corporate Crime Reporter, 2/4/19).
One of the strengths of Tombs and Whyte's book is that they meticulously deconstruct the assumptions behind the regulatory framework and flawed approaches to corporate crime that dominate discourse. The notion that corporations exist autonomously from the state, for example is flawed in that it can never be complete -- states, through regulation (often designed by the companies themselves) - play a crucial role in reproducing the conditions necessary for corporations to function and thrive. Corporations are never entirely "free" nor are the markets within they operate "free." You'd think this would be obvious by now, but it has to be repeated over and over, largely because of the myths that endure in political science and especially economics.
Reviewing the history of corporate creation, service to colonial regimes and war-faring states, along with legal features (limited liability) that advantage companies while shielding the individuals inside (creating a corporate veil and "structure of impunity") -- Tombs and Whyte suggest a depersonalization of property relations in the corporate structure that radiates throughout the organisation, encouraging the removal of responsibility for the consequences of corporate decisions and affects on the society that supports it and so-called external "stakeholders" that really have little say in these questions. The result is a "spirit of organized irresponsibility" and structural impunity. The ascension of Corporate Social Responsibility (CSR) is nothing more, in this context, than a means of preempting laws to address the DNA of the corporation. CSR assumes incentives can be created to nudge and encourage companies to active in the public interest (often conflated with the interests of outside shareholders). But time and time again, it's exposed as a fallacy. "In order to think creatively and effectively about the corporation, we need to think more strategically and theoretically about the nature and dynamics of state-corporate relationships."
First, the harms created by corporations (deaths, injuries, illnesses and theft) are rarely treated as crimes. Instead, victims are treated as abstract collateral. (Risk assessments, for example, is nothing more than a form of murder by pollution that is sanctioned by environmental regulation, as Peter Montague has so eloquently explained.) The push and pull over regulatory responses to crime is, they conclude, more simply a search for "social order maintenance" that may ameliorate the harms of corporations, but never (or rarely) call into question the legitimacy of their status and existence. Corporations and corporate activities, we are reminded, are not a natural or inevitable form. Nor are the laws than endow their structural irresponsibility. (e.g. the conferring of constitutional privileges originally designed for the sovereign human beings who are the supposedly the rulemakers in a democracy - we colonized ourselves by empowering inanimate beings -- long before the creation of robots and AI). Corporations are not (as they remind us over and over) the most efficient means of organizing economic life (a common justification for the status quo). Nor is the relationship between states and corporations antagonistic, especially if we don't wrest control of the government itself.
The history of the modern corporation is the history of conjoined activities -- whether privatization of public services or conducting war by proxy. Corporations are entrenched in a legal terrain in which they are economically and socially entrenched. Our task is to decolonize ourselves (as Richard Grossman used to explain) and abolish corporations. That sounds like a fantasy, and it is if you think of the idea in broad strokes. But reclaiming public services and the commons piece by piece, as David Bollier (the Commons) and P2P and some unions and Food and Water Watch (fighting water privatization) have understood. We need to abandon, once and for all, the tendency to view "states" and corporations as oppositional antagonists if we are to replace the regulatory frameworks that entrench them. Community rights and the rights of nature (see groups like CELDF) are designed to fundamentally challenge the framework. But we need to recognize that crises moments (e.g. Enron) in which the system is exposed for the fraud it is, the fight will be between the scramble to restore the legitimacy of corporations (through regulatory "reforms" like Sarbanes-Oxley) and structural changes that reclaim public space. This is the "shock doctrine" that Naomi Klein describes in her book. Corporations and governments take advantage of war, breakdown of governments, etc. to restructure political economies and privatize the institutions of essential services. This is a major driver of economic polarization and inequality. Corporatization on steroids. We need to organize ourselves to reverse this process. You see the seeds of that in community self-organizing after extreme weather events and other catastrophes. Rather than lapse into reformism and passive expectations of state and corporate rescue (with charitable entities often filling in), we should be thinking of ways to organize sovereign systems of self-support. It won't be easy, and it requires thinking about intervening not just at the community level to succeed, but also at the federal level, which means we need to recognize the importance of long-term organizing for representative democracy and accountability, and how it can complement the organizing of direct democracy on the ground.
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