On Mon, Feb 25, 2002 at 09:47:01PM -0600, / dave / wrote:
> L A Hazard wrote:
>
> > What I am
> > looking for is documentation that shows what it would have cost
> > a company to obey the law/regulation, what their actual fines - if
> > any - were for breaking it and how it diminished or increased their
> > "profits." My goal is to determine how much is myth and what the
> > reality is. Any suggestions of where to look, links, references, etc.,
> > would be greatly appreciated.
>
> I realize that this isn't exactly the phenomenon you describe above, but
> I believe the Ford Pinto (with the exploding gas tank) is often held up
> as the archetypal example of corporate cost/benefit analysis run amuck.
> Undoubtedly its prominence in the annals of corporate history
> conveniently serves to mask other former and ongoing examples of same.
> As most people know by now, it was revealed that Ford had worked out
> that it would be cheaper to pay a few accidental death claims than it
> would be to recall all the Pintos and fix the problem that caused the
> fires. A quick Google search even brings up numbers:
>
> "Ford discovered that it would cost $11.00 per vehicle to install rubber
> bladders in 11 million Pintos and 1.5 million trucks, totaling $137
> million; and it estimated that it would cost only $49.5 million if
> instead they paid the compensatory damages of the 360 people they
> anticipated would die or be injured in fires resulting from this design flaw."
>
> (from <http://www.mllassociates.com/REMEMBERPINTO.HTM>)
>
> Justin mentioned the Corporate Crime Reporter, which coincidentally
> touched on this issue in their column this week (maybe this was what
> prompted your question?):
>
> Rotten to the Core
> By Russell Mokhiber and Robert Weissman
>
> Frank Easterbrook and Daniel Fischel are University of Chicago law
> professors who believe that, when it comes to making profits, nothing --
> not even the law -- should stand in the way. (For almost two decades,
> Easterbrook has also been a federal appeals court judge.)
>
> Twenty years ago, writing about antitrust crimes in the Michigan Law
> Review, Easterbrook and Fischel, then both professors at the University
> of Chicago, wrote that managers not only may, but should, violate the
> rules when it is profitable to do so. And it is clear that they believed
> that this rule should apply beyond just antitrust.
>
> In a nutshell, this is the Chicago School view of corporate law that has
> taken hold over the past 20 years.
>
> Under this view, if a Fed Ex truck needs to double park to make a
> delivery -- double park. No problem. Pay the $20 fine. Just as long as
> you are still making money, violate the law.
>
> Or course, when it comes to corporate crime and violence, we aren't
> talking about just double parking.
>
> We're talking about fraud, corruption, pollution, price-fixing,
> occupational disease, and bribery.
>
> The Chicago School says these are "externalities" and related fines and
> penalties should simply be viewed as the "costs of doing business."
>
> We call these activities crimes, and we believe society imposes
> penalties for committing these crimes to deter and socially sanction
> those who would violate society's proscription.
>
> Lawmakers of both parties are shamelessly portraying Enron and Arthur
> Andersen as rotten apples, even though those same lawmakers were just
> until recently on the take from both corporations, and doing the dirty
> work of defeating laws that would have governed both.
>
> But of course we are not talking about a couple of rotten apples here.
>
> As Easterbrook and Fischel so clearly show, the corporate world is now
> governed by an ideology that is rotten to the core. After all, as the
> great Chicago professors teach us, it is the duty of managers to violate
> the law when it is profitable to do so.
>
> Now, the stink has risen. And slowly, but surely, and hardly noticed, a
> counter-Chicago movement in corporate law is bubbling up from law
> schools around the country.
>
> At Boston College Law School, Professor Kent Greenfield points out that
> it used to be that corporations were created by the state to achieve
> specified public goals. The corporation was created to build a canal,
> for example. And then it was to go out of business.
>
> If the corporation decided to sell hot dogs instead, it was acting
> beyond its powers, and a shareholder or the attorney general could file
> an injunction under the "ultra vires" (beyond its powers) doctrine --
> forcing the company to drop the dogs.
>
> Then, the states started to compete with each other for more corporate
> business -- the infamous race to the bottom. As a part of that race,
> states stopped imposing strict limitations on corporate powers.
>
> The corporate lawyers set up Delaware as the Las Vegas of corporate
> chartering. And as a result, virtually no corporate activity was beyond
> a company's defined activity. Ultra vires was dead, was the common view.
>
>
> Greenfield steps in and says -- wait a minute -- illegal activity is
> still "beyond the power" of corporations. State incorporation statutes
> and articles of incorporation almost invariably charter corporations
> only for "lawful" purposes.
>
> He wants attorneys general and trial lawyers to look carefully at the
> possibility of bringing ultra vires lawsuits against officers and
> directors of corporate criminals.
>
> At Washington and Lee University, law professor David Millon says that
> underlying the assorted debates over the nature of the corporation are
> differences of political opinion.
>
> So, those who see the corporation as a creation of the state do so
> because we want to see strong public control.
>
> Those who see in a corporation nexus of private contracts (the Chicago
> School) see it that way because they want to defeat public regulation.
> (The charter of incorporation is like a birth certificate, and nothing
> more, they argue.)
>
> This new breed of corporate law reformers, represented by the likes of
> Greenfield, Millon and Lawrence Mitchell of George Washington University
> Law School, does not go as far as we would in sending the corporation
> back to the public woodshed.
>
> But it is good to note that, after years of bowing in subservience to
> the giant corporatists of the Midwest, a handful of law professors are
> beginning to agitate against the regressive theories of their Chicago
> School colleagues.
>
> Their task is simultaneously difficult and easy. Difficult, because the
> Chicago School has been so successful in winning the academic -- and
> eventually legal -- debate about what corporations are and how they
> should be governed. Easy, because the Chicago School claims are so
> extreme that the reformers can win the debate -- or at least
> significantly shift the pendulum in the field -- by convincingly arguing
> simply that corporations should follow the law.
>
>
> Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime
> Reporter. Robert Weissman is editor of the Washington, D.C.-based
> Multinational Monitor, http://www.essential.org/monitor. They are
> co-authors of Corporate Predators: The Hunt for MegaProfits and the
> Attack on Democracy (Monroe, Maine: Common Courage Press, 1999;
> http://www.corporatepredators.org)
>
> (c) Russell Mokhiber and Robert Weissman
>
> This article is posted at:
> http://lists.essential.org/pipermail/corp-focus/2002/000105.html
>
>
>
> _______________________________________________
>
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> --
>
> / dave /
-- Michael Perelman Economics Department California State University Chico, CA 95929
Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu