Corporate Scandals

Account Balance

Can the government really ensure "corporate accountability"?

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Whatever happened to responsibility? These big corporations pollute our environment, endanger our citizens, trade sensitive information about law-abiding Americans, lie about profits, and screw shareholders. And do any of them pay a price? Heck no! Those CEOs are living it up on the Italian Riviera, spending their corporate "wealthfare," avoiding any accountability for their actions. Why doesn't the government do something?

The preceding tirade resonates for Americans fed up with boardroom hijinx and stock market fraud. It speaks to a particular sense of injustice: Somebody is succeeding while you remain a failure, ergo there must be hanky-panky afoot. The outrage fuels efforts like the Corporate Accountability Project (www.corporations.org), and the Washington, D.C.-based Corporate Accountability Research Group. It provokes demands like those of Jamie Court, in his book Corporateering: How Corporate Power Steals Your Freedom, that companies establish "customer associations" and suffer "three strikes" corporate death penalties.

Like the Seinfeld character Cosmo Kramer's assurance that big corporations "write everything off" (it turns out Kramer doesn't know what a write-off is), the call for more corporate accountability should be measured against reality. Individual executives do in fact get punished, as seen in the recent prison sentence for ImClone CEO Sam Waksal.

But at the corporate level, there is more than accountability. There is a robust form of rough justice for misbehaving companies. Corporations already receive the "death penalty" with no law enforcement needed. Villains of recent years—including Enron, Tyco, ImClone, Global Crossing, and even venerable Arthur Andersen—are all finished or at death's door. WorldCom, renamed "MCI" in an unsuccessful bid to escape the stench of its past, is struggling in a harsh telecom market. Even Union Carbide, a legendary corporate knave, no longer exists; the company was absorbed two years ago by Dow Chemical, which itself is now targeted by anti-Carbide activists.

Do I believe Union Carbide paid a steep enough price for the 8,000 people who died due to the company's negligence in Bhopal, India? I do not. But at least the company isn't around anymore. If only the same could be said for misbehaving agencies of the state—the same state that activists would charge with enforcing accountability on private corporations.

You want indifference to your customer base? The U.S. Public Health Service (USPHS) allowed 400 Alabama men to suffer with syphilis over four decades in order to study the disease's effects. Three decades after the "Tuskegee experiments" ended, Surgeon General Richard H. Carmona, in full Gilbert and Sullivan admiral's garb, steers USPHS into a new millennium.

Unpunished negligence? No agency charged with protecting the United States has been held responsible for intelligence failures prior to the September 11 attacks. As far as we know, nobody's even had a promotion held up.

WorldCom-dwarfing budget shenanigans? George Herbert Walker Bush left Bill Clinton with budget deficits beyond anything his administration ever admitted. Clinton (no stranger to avoiding accountability) in turn left George W. Bush with absurdly rosy projections of future revenues. Rather than cutting spending, Bush is spinning out the kind of deficits Enron CEO Jeff Skilling could only envy.

Massive public fraud? While the search for Saddam Hussein's weapons of mass destruction goes on, the specific claims the U.S. made in justifying its war in Iraq have been looked into and found wanting. Say what you will about Ken Lay's or Martha Stewart's lies; they didn't get anybody killed.

If that's not enough, put this in your Superfund site and dispose of it: The federal government is by far the largest environmental polluter in the country, out-dumping any private company.

If any private corporation had engaged in such patterns of malfeasance, fraud, and megabuck sleight of hand, it would have been punished by its customers, shareholders and employees long before the government got involved. This doesn't mean the market is a perfect or even reliable mechanism for regulating bad behavior. But it does suggest that before we give the job of promoting organizational accountability to the least accountable organization of all, we might remember the line about the fox and the henhouse.