The Multinational Monitor

MAY 1987 - VOLUME 8 - NUMBER 5


The Case Against Corporate Crime

In 1979, the U.S. Department of Justice commissioned a groundbreaking study of the prevalence and cost of corporate crime in the United States. Looking at the federal government's criminal, civil and regulatory actions against the 582 largest publicly owned corporations over a twoyear period, the Department attempted to determine the scope of lawbreaking in the country's largest corporate boardrooms.

The results of the study were startling: two-thirds of the top corporations had had federal actions brought against them, and the 300 largest manufacturing corporations had averaged more than three violations each during the two-year period. Even more startling, the penalties assessed against these corporate lawbreakers rarely exceeded a $1,000 fine.

Ironically, the economic costs of lawbreaking corporations far exceed the cost of street crimes. The average economic loss caused by individuals who commit crimes - approximately $8,000 - is dwarfed by the average economic loss caused by the corporate lawbreaker - more than $300,000.

"Corporate crime costs run into billions of dollars," the Justice Department's study concluded. "These costs involve not only large financial losses but also injuries and health hazards to workers and consumers. They also include the incalculable costs of the damages done to the physical environment and the great social costs of the erosion of the moral base of our society."

As the Bhopal tragedy and other industiral disasters have shown, corporations can inflict irreparable damage on large segments of society. Only through tough criminal penalties and meaningful economic sanctions will corporations be forced to enter the economic, environmental and human costs of their actions on their corporate balance sheets. Only by holding corporate executives accountable for the actions of their companies can society begin to force the corporation to obey the law. Corporations, their excutives and their shareholders should bear responsibility for corporate crime.

Last month we looked at seven of the worst acts of corporate crime and violence perpetrated by multinational corporations in the last 50 years. From A.H. Robin's Dalkon Shield to asbestos, Agent Orange, infant formula, thalidomide, Bhopal and Minamata we tried to show in human terms what corporate crime and violence mean and how often the offenders escape appropriate sanctions.

In this issue we look at some of the ways prosecutors, consumers, regulatory agencies and state and federal legislators are attempting to deter corporate crime.

One of the most promising deterrents against corporate offenders is criminal prosecutions in state courts. In "Redefining Corporate Crime," William Maakestad looks at the growing number of cases against corporations and their officials filed by states' attorneys.

In "Audi: Shifting the Blame," Thomas Wathen shows how consumers, not satisfied with the National Highway Traffic Safety Administration's investigation into the growing number of Audi 5000 sudden acceleration accidents, are taking on the giant corporation and winning.

In "Blowing the Whistle: The Consequences of Truth," Louis Clark examines the problems whistleblowers face in trying to publicize corporate and government fraud and shows how Congress is pushing through legislation to strengthen whistleblower protections.

Deterring corporate crime will not be easy, but there are some bold and heartening activities on the horizon. In "Multinationals and Morality: The Corporate Decency Act," we look at how the state of Texas is trying to create a legal framework that will foster corporate decency. State Representative Juan Hinojosa has introduced an innovative bill to encourage corporate accountability. The legislation, which mandates tough penalties for noncompliance with worker health and safety laws - including charter revocation, a limitation on state contracts for corporate lawbreakers, stiff fines, and loss of state subsidies - may soon be considered in both New York and Pennsylvania.

It is time that the laws governing occupational safety and health, consumer safety, and the environment be overhauled so as to bring the full weight of the law to bear on those who engage in corporate violence.

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