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Glasbeek, Harry --- "Shielded By Law: Why Corporate Wrongs and Wrongdoers are Privileged" [2002] UWSLawRw 1; (2002) 6(1) University of Western Sydney Law Review 1


SHIELDED BY LAW: WHY CORPORATE

WRONGS AND WRONGDOERS ARE

PRIVILEGED

Harry Glasbeek[*]

What are we to make of the fact that a huge multinational corporation, such as Shell, can despoil the environment, be complicit in the impoverishment and death of human beings and not suffer any serious consequences? What are we to make of the fact that its directors, managers and stockholders continue to be welcome in the ‘best’ circles, clubs, hotels, spas and neighbourhoods, despite the fact that their riches and prestige stem, in part, from the heinous conduct of Shell in Nigeria and in many other locales?[1] What are we to make of the fact that the directors, managers and stockholders of the corporations which mine and process asbestos have never been held to account personally for the egregious disregard for human life and consequent harm which their profiteering spawned? What are we to make of the fact that, in sharp contrast, demonstrators at Melbourne’s World Economic Forum protests were treated as if they were social vermin when they used the means at their disposal to help those in need rather than just to pursue luxuries for themselves? What are we to make of the fact that some of them were made personally responsible for the conduct of the demonstrations, facing the possibility of serious jail time, something which the directors, managers and owners of Shell and the asbestos profiteering enterprises have never had to confront?

We are to understand that these anti-human, unequal results are structured into our criminal justice system aided and abetted by corporate law. The criminal justice system is designed to achieve these results. They are not aberrations.

Our criminal justice system is there to serve the political economic scheme we have. That scheme, of course, is capitalist relations of production. Capitalism is about the private accumulation of socially produced wealth. The owners of the means of production are few. Very few. One percent of Australians own about 20 percent of all of Australia’s wealth; the top 10 percent of wealth owners own about 55 percent of this wealth; the top 20 percent own 72 percent and the top 50 percent of wealth owners own about 98.4 percent of the nation’s wealth, leaving the bottom 50 percent with 1.6 percent of the wealth.[2] The very few who own most of the wealth - and control much more - appropriate the surplus value of the goods and services produced by the labour of the others who must work for a living. Not only is this scheme about the private accumulation by the few at the expense of the many, it also is about the capacity to exercise power. The employing and employed classes have a different relation to productive activities.

The working classes, by definition, do not own the means of production and do not get to keep the yield of their labour. All they get is a wage for their contribution. They are totally dependent on the ‘goodwill’ of their employers and potential employers. And, not everyone has anything like a steady wage-earning job. These people must look to other sources for their survival. Family and community support, as well as governmental distributions, become central to people’s very existence. In this setting, resistance and rebellion is as natural as breathing. It may take the form of so-called anti-social conduct which, often, is characterised as criminal. At the other end of the wealth chain, the problems are of a different order.

The pressure on wealth owners is not physical survival, but how to win out against competitors and how to remain profitable when there is no market for the surplus value, that is, for the goods and services they have accumulated. This leads to the reduction of productive activities to the detriment of those who are dependent on the maintenance of capitalists’ investments; to vigorous, sometimes illegal, attacks on competitors; to assaults on the wages and conditions of workers; to abuses of ‘free’ goods, that is, abuses of the non-owned assets provided by nature, and the like.

In short, the logic of the system spawns a variety of anti-social behaviours. The kind of deviance engaged in is largely, albeit not completely, determined by the class position of the wrongdoer. The question remains as to why some of this conduct – the conduct of the poor - is punished so severely, whereas other behaviour – that of the rich - is treated as if it were benign, despite its far more harmful consequences A skeletal explanation follows.

Capitalism does not present itself as a brutal system of private accumulation for its own sake. Rather, it is claimed to be a natural way of life. The characterisation of the system we are all deemed to accept is that we are all motivated to engage in exchanges of what we are good at producing – because of our innate talents and our personal resources – for things which we want and which are produced by others just like us who, in turn, are peculiarly good at the production of those wanted things. We are asked to assume that the ensuing market for goods and services is natural. More directly significant to our inquiry is the assumption which goes with this demanded belief in the merit and inevitability of a market economy. It is that such an economy is comprised by a huge numbers of individuals, none of whom is in a position to dictate to anyone else what the price of a particular good or service is to be. We all are deemed to have an equal opportunity to participate in the game and if, therefore, one of us is in a monopolistic position, that is, can dictate to others what the price of a good or service is to be, this is to be treated as a deformation of the system and the law should step in to correct it. Competition is the essence of the system.[3]

More: competition by individuals is the key to the scheme. In that way, all of us will be rewarded for our own efforts. Freedom is guaranteed because no one will tell us how to use our personal talents and resources. Each one of us will decide for ourselves how to maximise our resources and resourcefulness. Each one of us will decide for ourselves what it is that we would like to purchase from other producers. No co-ordinator will need to plan and organise productive activities. No co-ordinator or planner is necessary to tell us what we should ask from others. In sum, the idealised version of market capitalism allows its adherents to claim that it leads to the efficient uses of our aggregate talents and resources and to great freedom for individual decision-making.

Nowhere in this self-characterisation is there a hint that the system is there to accumulate wealth by the few, to maintain power for the few. Nowhere is there an acknowledgment that the sharp division of wealth which has existed throughout the history of capitalism turns the idea that we can all participate in the market as equals into a fantasy. Nowhere is there room for the easily observable truth that we live in a class-divided society where participation in market activities by the majority of people is not voluntary – as the model specifies – but coerced. Nowhere is there even a suggestion that the majority of the population must play the market game as less than equals.

Key to the holding out of what the system can deliver by way of economic welfare and political freedom, then, is the pretence that all individuals are equally sovereign and that the sovereign individual is at the centre of its concerns and operations. The individual is entitled to keep the proceeds of her endeavours and, as a sovereign decision-maker, is to be responsible for all the actions she undertakes. Self-reliance is the lynchpin justification for the system as it presents itself. This is reflected in law and, more particularly, in criminal law.

In law, it is the individual who owns resources. Ownership means that the owner of private property may deploy that property as she decides. No one can tell her what to do with it; she has a right to exclude every other individual or the State from its use. The individual owning property owes no responsibility to anyone (except herself) as to how to use or not to use the property. Her individuality, her private ownership, obligates her to no one, not her family, not her friends, not her community. She is an unlinked person. She enters into contracts (exchanges) as an individual with equally sovereign, equally unlinked, individuals and, therefore, the law is not to inquire into the wisdom of any deal so made. Here we come to the nub of the problem.

As wealth is so unequally divided, there always is an abundance of competitors for any one job created by the owners of wealth. The exchange of wages for work is one which favours the employer as it can choose between many qualified persons and will contract with the lowest bidder. This is why workers have been forced to form trade unions: the primary purpose of a trade union is to diminish competition between workers for scarce jobs. This is why the law represses trade unions so forcibly and frequently: trade unions’ efforts to undermine individual contract-making goes against the very grain of market capitalism. This is why workers have had to use the one thing which they have in abundance: numbers. They have had to resort to the majoritarian electoral political processes which they helped develop. Through electoral participation, often supported by ‘illegal’ concerted actions, they have won some legal rights to form trade unions and some minimal guarantees in respect of their conditions of work. They have taken some matters out of competition. By definition, these gains were hard to win and remain under tremendous pressure: the employing classes are always keen to return to the individual competitive model because their economic power guarantees them victory in that setting.[4] The very fact that all of these struggles have been, and remain, necessary underlines the fact that individualism, rather than collectivism, is the ideological centre of our legal/political system.

Individualism favours the rich and is promoted by law. So it is in criminal law. The most crucial feature of criminal law is that it provides the State with justification for the use of its awesome coercive powers. The criminal justice system is charged with the protection of our most important values. The State can take away people’s liberty, remove them from the country, and, in some jurisdictions, put them to death, whenever it is clear that an individual, as an individual, has transgressed against rules which, the State claims, reflect our shared morality. There are two aspects of this formulation which arrest attention.

First, to attract the wrath of the criminal law, the impugned conduct must be that of an individual who intended to engage in that conduct. The emphasis is on the responsibility of individuals for their actions. This is, of course, a fundamental tenet of a liberal polity, the perfection of which is something to which we claim to aspire. It also dovetails with the basic premise of our preferred economic model, the idealised market capitalism model. The basic notion of both the political and economic model is that we are all sovereign actors, capable of exercising our free will and responsible for how we do exercise it. When it comes to applying criminal law, this premise allows us to excuse people who do not have the mental capacity to make free choices; it permits us to consider defences such as self-defence, provocation and, in very rare circumstances, necessity. All such defences and justifications are based on the idea that the individual should not be held responsible for an apparent breach of our rules because such a breach was not committed with the evil intent of individuals who deserve punishment. But, remarkably, the criminal justice system does not tolerate the argument that lack of money was the reason for the wrongful act to be raised as a defence. The fact that the system has left some people without the means of survival and/or an appreciation of the intrinsic merit of the dominant social mores cannot be considered as a legal justification when a desperately impecunious person is charged with a crime. After all, it would throw doubt on the contention that we are all truly equal, with equal opportunities. It would cause us to question the appropriateness of seeing the world as constituted by atomised individuals. It might lead us to think about the merit of market capitalism, a system which systematically leaves a huge number of people dependent, rather than sovereign.

This leads to the second notable basic feature of this individualistically-based criminal law scheme: the assumption of a consensus on values. How has it come about that the division of property and the division between the classes is ignored by the criminal justice system? What is this shared morality which it purports to defend?

It turns out that there is no easy way to determine what this shared morality, worthy of defence by resort to State coercion, is. We are clear that killing without an appropriate defence of the kind listed above is wrong; so also are physical assaults, including sexual assaults. And even these horrible acts are not always seen to be wrong. For instance, on occasions, citizens are told by their government that they have to kill to serve the greater good. This is how we justify every war. We had to bomb Serbia to save Kosovars and democracy; we had to bomb Vietnam to save it from its barbarous masses, we had to change the regime in Kabul to rid the world of terrorists, and so on. And, when people question the morality of such orders, they are often treated as criminals. To avoid this fate they have to prove that they oppose killing more than the rest of us; they have to show us that their conscientious objection is based on some deeply held belief system which transcends our normal ‘shared’ morality.

Shared morality is, then, an elusive concept. Indeed, this is why it is undefined. If we were to define it–other than by shibboleths, such as ‘we will know what is right and wrong when we are faced with the question’, the basic response of leading conventional thinkers like Lord Devlin[5] – the definitional criteria could be confronted head-on. This cannot be permitted for it quickly would become clear that the basis for criminalising some conduct and not other is like quicksand. Without teasing out the argument in full, some crimes on our books look ludicrous today although, not so long ago, they too were defended as upholding the undefined, but undeniably inherent, shared morality of our society.

Witchcraft was a severely punished offence, not so long ago; so too was gambling which, today is one of government’s favourite past time. It also is the lifeblood of the insurance industry (which, therefore, goes to extraordinarily lengths to describe itself as being based on actuarial science) and, it could easily be argued, is the core of what all the elites engage in when they play the stock markets. Note here – lest it be thought that I am being too cute for words – that the stock markets differentiate between well-regulated markets of the very rich, where the regulation takes some of the gamble out of the system by forcing more disclosures, and the markets for the poorer elites, the so-called penny stock markets, which are known for their high risks, that is, markets in which the odds are longer and the losses and wins correspondingly higher[6] , just as they are at race meetings where there is a paucity of information on which to base one’s bets. Gambling no longer offends our sense of morality or, better, it does not offend the morality of those who tell us what our shared morality is. It appears that our abhorrence of certain behaviours is neither ahistorical, nor apolitical.

If these examples are deemed to be straw ones because they refer to anachronistic situations, here are some more mainstream ones. It is a crime to use proscribed substances. Heroin, cocaine, marijuana and crack cocaine are out. People who use these drugs and those who sell them are moral lepers. People who sell alcohol and tobacco are not criminals. The harm their products cause easily exceeds that inflicted by use of the listed proscribed drugs. So, it cannot be the consequence of selling these drugs which causes us to wage policing wars on sellers and users. Somehow or another we are told that our ‘shared morality’ explains this absurd difference in treatment. It is absurd because it cannot be the case that the peddling of some sources of harm which lead to addiction and disease are morally more reprehensible than others which have the same impacts, often to a greater degree. On another playing field, we find that charging interest on loaned money, to the fullest extent that the legislatively regulated competitive market allows for it, is considered a very respectable way of making money: who is more pompously self-righteous than a banker?

Yet, only a short time ago (in historical terms and still today in jurisdictions with different cultures), usury – the charging of interest – was considered the most despicable of activities. How did our supposed shared morality change so much, so quickly? Or, to use the asbestos industry example, why is the planned exposure of hundreds or thousands of workers to known health risks not perceived as a crime? Imagine an individual who holds another up with a gun and says: ‘Give me your wallet or I will take your life’. Does that offend our shared morality? Obviously so and the brigand will be treated as a criminal. When asbestos miners and processors tell their workers: ‘We want you to work in contaminated conditions or take less pay to allow us to fix them up so that you can avoid death’, are they not saying: ‘Your money or your life’? If so, why does this not offend our shared morality? Why is it not treated as a crime? The answer given, of course, is that the workers did not have to accept the ‘deal’ – the very harmful deal – they made with their employer. But, this quick answer begs the question: the deal made between employer and employee is hardly a deal between equals whose terms are, therefore, to be deemed fair.

The undefined definition of shared morality turns out to have as one of its basic starting points the very pretence which justifies market capitalism. The shared morality which underpins the use of State coercive power that we call criminal law, presumes that we are a polity of equals, that there is no class division which prevents the non-wealth owning classes from making voluntary, sovereign choices. As this presumption is false, the so-called shared morality premise is based on a falsehood and cannot support a coherent system of criminal law. The term ‘shared morality’ is not a scientific term, but a slogan which hides the highly politicised nature of characterising behaviour as criminal or legitimate.

At best, then, the definition of the shared morality which justifies State coercion is a moving target. It is a vague idea. Thus, the Law Reform Commission of Canada, after a major study of Canadian criminal law, noted that criminal law, in a liberal, capitalist democracy such as Canada, sets out to protect the values of peace, order, good government and individual liberties. An Australian study could confidently be expected to reach the same conclusion. None of these values are definable with any exactitude. Typically, one person’s exercise of liberty may infringe another’s and one view of good government is bound to clash with other viable opinions. A criminal code based on contestable principles can hardly lay claim to represent a shared morality. At any one time, the concept of the shared morality will be a political statement by the people who control the political agenda.

In a capitalist State, the criminal law will espouse the ‘morality’ of the capitalists. This is not a moral system at all, but a self-serving scheme. The proof is found in the very same study by the Law Reform Commission of Canada. After noting that the criminal legal justice system defended certain hard-to-define values, such as peace, order, good government and liberty, it went on to say that the primary value which the criminal justice system protected was the right to own and to do as one liked with one’s property, a very easy-to-define value. Values like ‘liberty’ are abstract and require interpretation before they can have any meaning, the meaning depending on who is interpreting the value; not so when it comes to property ownership: it is a concrete concept which has a material, measurable nature. The Law Reform Commission, understanding the basic distinction, went on to say that as, in capitalist polities the protection of private ownership was the most important task of criminal law, theft was the paradigm crime. Nothing else was as important.[7]

There we have it: the protection of those who own property is the focus of the criminal justice system, regardless of the popular portrayal of murder, assaults, rapes and drug-related crimes as the problem of law and order. As, in a class-divided society, only a minority of people benefit from the sedulous protection of private ownership, it is the majority of non-owners who will be the target of the criminal justice system. The focus of the criminal justice system is the protection of the physical integrity of property and the maintenance of the power to accumulate more by those few who own the property. These privileged people will rarely be subjugated to the strictures of a criminal law system devised to protect them. They will be treated like poor people are by the criminal justice system when they commit those offences which are not primarily calculated to affect private property ownership, such as murder in anger and passion or sexual assaults.

Now the apparent uneven treatment of harm-causing activities should begin to make sense: it is meant to be uneven.

Take, for instance, the vastly different treatment handed out to those who cheat the social welfare regimes to that experienced by those who cheat our tax systems. The collection of taxes entails a democratically elected government in the taking of private property owned by individuals. For a government to take the individuals’ money and to deploy it and distribute it in ways not personally chosen by each of these individuals runs counter to the essential principles of market capitalism. Politically, therefore, the taxation of wealth owners is under continuous challenge and the enforcement of such tax rules as do exist is lukewarm, at best. Of course, inasmuch as the taxes are imposed on non-wealth owners who work for a living, the same ideological forces are at play, but they have a vastly different outcome. In their case the enforcement issues do not arise because the tax is collected before these (dependent) wage earners ever get their taxable incomes. The same principles, then, have vastly different impacts when applied equally to very unequally situated classes. This is even more obvious when these principles are applied to the very poor, to those who depend on the State for their welfare because the private economy cannot, or will not, do so.

Welfare benefits come from monies obtained from individuals by the State. The State is seen to be using one set of people’s money to meet the needs of another group of people. Even if this redistribution accords with the wishes of a majority of the population, it will not have the approval of all wealth owning individuals who expect their property rights to be treated as sacrosanct by the legal system which supports market capitalism. Governments are under continuous pressure, therefore, to justify any welfare regime which they have created. The level of benefits and the very existence of the benefits’ scheme are always in contention. More, as welfare benefits – whatever their level – provide some relief from having to work for an entrepreneur for a substandard wage, they have an adverse impact on profit-maximisation by wealth owners. This is why welfare regimes are restricted to recipients who are not candidates for the work-forwages markets (such as the sick, disabled, and the old), and to those who have shown themselves willing to sell themselves to potential employers but have been unable to find one to employ them. This is why welfare recipients must prove themselves eligible and will be treated as criminals if they received benefits even though they had some employment and/or were fit to be employed and claimed otherwise or had a source of private support which they did not acknowledge. The claimants have the burden of proving they are eligible for the State-created benefit.

When it comes to taxation issues, however, the State has to justify its taking and the enforcement of its ensuing rules. The tax payer is treated as innocent; needing to prove nothing. The results of these applications of the same set of principles to totally different situations are dramatic: welfare ‘cheats’ are twice as likely to go to jail than are tax defrauders, even though the latter cost the State far more than the former.[8] In line with this perverse indifference to the difference that class position makes to the impact of ‘equally’ applied criminal law, there is an increasing degree of welfare policing.

Enough. It is clear that the basic principles of market capitalism, having been built into the criminal justice system, systematically yield class-based results. As a consequence, our jails are full of poor people and bereft of rich ones. Not only is prison inhuman, but the differential treatment accorded by law to different classes of people gives imprisonment a disciplinary influence. It is a central part of a scheme which tells people: ‘Work for whomsoever asks you, even for very low wages. Your welfare systems will not support you and will undermine your dignity. And, if poverty forces you to rob, steal or beg, you will be punished.’ In this sense, the workf are programmes, that is, work for welfare, even at demeaning jobs, so beloved by wealth owners-supporting governments, are a part of the factory/prison system. The criminal justice system is linked to the private accumulation regime. This link between criminal law and the exercise of discipline over the property-less is what the English Prime Minister Disraeli was referring to when he noted that the then newly created institution, the workhouse – the forerunner of today’s workf are schemes – ‘announce[s] to the world that in England poverty is a crime’.

We now know why non-wealth owners populate our jails. Overwhelmingly their crimes are manifestations of self-abuse (drugs, alcohol), anger and violence towards other dispossessed people and attempts to reduce their poverty by taking/stealing (petty theft and hold-ups) from other relatively poor people. Their crimes rarely present an immediate danger to the propertied elites. This is why it is relatively easy to whip up anxiety about poor people’s crimes amongst the not-so-well off, why it is so easy for conservative governments to win popular support for law and order campaigns: workers are likely to be the targets of such primitive anti-social behaviour. The term ‘primitive’ is used here to underline the fact that these kinds of crimes are not the result of a consciousness of the need to overthrow a repressive political economic regime. They are just atomistic, often instinctive, sometimes desperate, reactions to a systemically created state of unfairness and inequality.

But, when the poor develop a political consciousness, when they question the exploitative system which has marginalised them, they become a threat. They will be saying: the emperor – market capitalism – has no clothes and neither does the electoral system which only allows us – members of the true majority: non-property owners – to vote once every four years on the acceptability of the system, and then only indirectly (as we are asked to pronounce on several dozens of issues at one and the same time), while money votes every day. This is what the Melbourne (and Seattle, Genoa, Davos, Quebec, and countless other) anti-capitalist street protestors have been saying, loudly and clearly. This cannot be tolerated.

The legal response is standard. The government, the police and the compliant media contend that, while everyone has a right to express an opinion of any kind, it must be done in a ‘proper’ manner. Communication which does not inconvenience anyone is allowed, even welcomed. Participation in controlled electoral and party politics is equally favoured. If these strategies turn out to be ineffective, that is not to be characterised as due to the deficiencies of the political scheme; rather, because the liberal/electoral scheme provides adequate opportunities for everyone, failure speaks to the weakness of the activists’ cause. Causing inconvenience, making demands that politicians respond now, when the rules of the electoral game do not require politicians so to act, are unacceptable modes of conduct, means used by social misfits. They should be restrained. Enter the criminal law.

People without property, whose investment they can withhold to persuade governments to see the light in the way they want it to be seen, are the ones who take to the streets to make their point. People without access to political party machines and institutions must try to get the attention of these decision-makers and organisations by confronting them. As they march down the streets, they ‘obstruct’ traffic and interfere with business activities; as they try to confront politicians ensconced in ‘public’ buildings, which are not public enough to allow every member of the public to enter without permission, they commit trespasses; as their efforts are thwarted by the police charged with protecting the convenience of citizens, the uninterrupted conduct of business, the safeguarding of property, there are physical confrontations, assaults, missiles are thrown, words exchanged and so on. All these inevitable happenings are capable of being treated as violations of the criminal law. And, in the World Economic Forum-type situation, they always are.

The impact of characterising conscious political dissent and action as crimes serves to marginalise and trivialise the activists and their claim that the dominant regime is exploitive and corrupt. Often, and more directly, it cripples such movements by taking their most articulate people out of action by carefully drafted restraining orders and/or jail terms. The framework for analysis offered in this piece should explain why it is so easy to attack the civilly disobedient of this world: the criminal justice system is structurally designed to maintain the status quo by legitimating the use of coercive power by the State against the most vulnerable citizens. Every now and again, this usually denied verity is acknowledged to be true.

In a case heard by the American Judge Miles Lord, he had to sentence some young people who, on 10 August 1984, had broken into the premises of Sperry Corporation, a maker of mass destruction armaments. They had done $33,000 worth of damage to the property of the bomb makers. A few months earlier, Sperry had defrauded the U.S. government to the tune of $3.6 million. Sperry had been asked to return 10 percent of these ill-gotten gains, but no one was charged criminally. The peaceniks, however, had been charged with crimes based on the violation of property rights of a wealth owner. Judge Lord had no choice but to find them guilty and impose a penalty. He did so most reluctantly, while plaintively asking:

Can it be that those of us who build weapons to kill are engaged in a more sanctified endeavour than those who would by their acts attempt to counsel moderation and mediation as an alternative method of settling international disputes?...Why do we condemn and hang individual killers while extolling the virtues of warmongers?... Could it be that these corporate men [the Sperry employees who defrauded the government] .. .received special treatment?... These same actors exert a powerful pressure upon a judge in my position to go along with the theory that there is something sacred about a bomb and that those who raise their voices or their hands against it should be struck down as the enemies of the people, no matter that in their heart they feel and know that they are friends of the people.[9]

This unusual judicial rhetoric tells an important story: the intent to do good will not be a defence to criminal charges whenever the elites’ interests are threatened by the doing of good.

Of course, the legal system, as such, never admits that it is there to maintain the powers that be in their exalted state. While, economically, it is a capitalist scheme, politically it is meant to be a liberal one in which like cases are intended to be treated equally. And, on the surface, it does seem that the criminal justice system does not purport to treat wealth owners differently from workers and the dispossessed. The pretence is that the criminal law is applied even-handedly, to the rich and poor alike. If the wealthy are not as often charged, convicted and jailed, liberal defenders of the status quo say, this must be due to other factors than structurally built-in bias. One such factor could be that they commit less crimes, another that it is too complex to enforce criminal law against the wealthy’s organisations, namely, against corporations. Both these counter-arguments to the allegation of class bias in the criminal justice system are untrue.

The wealthy, hiding behind their corporations, commit loads of crimes and many of these corporations are inveterate recidivists. Clinard and Yeager – commissioned by the U.S. Presidential Commission on Corporate Crime – reported that 40 percent of the corporations listed on Fortune magazine’s 500 top corporations did not commit crimes in any one year; 60 percent did. More, the consequences of the harms inflicted by these corporate violators far exceeded, in both personal and economic terms, the damage inflicted by the poor and dispossessed who fell foul of the criminal justice system.[10] Yet, it is the latter who crowd our State and private prisons.

From the proponents of the even-handed status quo’s perspective, the reason for the less frequent charging, convicting and jailing of the wealthy, must be found elsewhere than in the contention that the poor are more likely to be criminals. They, therefore, claim that even though the system is sought to be applied even-handedly to the poor and rich alike, this is not technically feasible. It turns out that it is true that the criminal law is not easily applied to corporations and the actors who comprise them, but these difficulties are not due to technical difficulties, but because it is intended that criminal law should not be used against the corporate sector. The difficulties of prosecution are not accidental, but a product of a structure which sets out to safeguard the wealth owning class. A short elaboration follows.

A corporation is a legal device. No more, no less. It is formed when a State bureaucrat issues a certificate which says that a group of investors have fulfilled some minor and virtually costless procedural requirements to support their application to create a corporation. To start up the corporation each of those investors contributes some capital to their new creation and they appoint people to manage that capital. In law, the instant the corporation is formed, the contributed capital becomes the exclusive, private property of the corporation, of this non-thing. As a result, the corporation, this artificially created thing, becomes a legal person, like you and I – at least for the purposes of the law. It is the corporation, through its managers, which, as the property owning person, determines how the property should be used. Its legal task is to use it to maximise the profitable use of the capital it now owns; it has no human values to pursue. The investors, each of whom contributes a fraction of the capital, are entitled to share in the profits so earned by the corporation. This is why they are referred to as shareholders. While they have appointment and firing power over the managers of the corporation, shareholders in large corporations, such as the criminogenic Shell, Exxon, Occidental Petroleum, Union Carbide, Dow Chemical, Ford Motors, La Roche-Hoffman, BHP, A.H. Robins, General Electric, Johns-Manville, James Hardie, all corporations whose neglect and/or wilful disregard of well-known standards of behaviour has caused grievous harm, have little incentive to ensure that these managers behave legally, ethically or decently. This is so because, as investors who do not legally own the property of the corporation used to do harm, they have no personal legal responsibility for any such harms caused by the misapplication of that property. That is, those rich shareholders who are always telling the wealth-less and the poor to be accountable and responsible for the way in which they act and live, are, in law, irresponsible for the (often nefarious) conduct of their corporations. It gets worse.

Legally shielded shareholders are unlikely to be seriously affected by the losses incurred by a corporation whose managers have caused it to fail to make profits or to be held responsible for doing harm to third parties. The law gives shareholders, that is, people with sufficient wealth that they can use to pursue profits, the privilege of limited liability. This means that all they can lose is the amount they originally invested. Those hurt by the corporate conduct cannot look for redress from shareholders beyond the amount invested in the corporation and which belongs to the corporation. The shareholders’ private wealth is untouchable. More, because the share certificates they are given upon the contribution of capital to the corporation are tradeable as having a value of their own[11] , a shareholder having held a share at the time of the wrongful conduct may not be - indeed, in widely held corporations, is unlikely to be - a shareholder when the misconduct is discovered. As the criminal law sets out to find the responsible individual, shareholders are safe from arguments that they should have done more to ensure compliance with the law’s tenets. All of this forces the criminal law’s functionaries to look toward the corporation and its hands-on operators for the attribution of responsibility. This turns out to be a difficult, but not impossible, task precisely because the defenders of the status quo will not acknowledge the objective realities of criminal and corporate law.

Immediate legal difficulties arise when the corporation, in its endless pursuit of profits at any cost, violates the law. As emphasised, criminal law is based on the notion that an individual, exercising free will as a sovereign person, must have committed the violating act with the requisite wrongful intent. Now, functionally, although not legally, a corporation is a collective: it is an aggregation of separate capitals, assets, investors, managers and workers. The law’s need to pretend that the corporation is an individual, so that it can hold property as an individual and purport to act as an individual market actor, does not negate the reality: the corporation is not an individual. It is thus only the pretence that the corporation is an individual which permits the application of criminal law to its conduct, to a person which can act and think as an individual. It follows that it does not feel natural for the authorities to use the criminal law against corporations. And, when it is plain that the conduct warrants the invocation of criminal law, the pretence which renders the corporation an individual leads to ridiculous distortions.

Whatever the pretence about the personhood of the corporation, it is just a legal creation, not a human being capable of acting and thinking. Accordingly, to apply criminal law to corporations, the law has had to pretend some more. It holds that the acts and intentions of the corporation’s senior management – but not of its shareholders – are the acts and intentions of the corporation. This is awkward and causes prosecutors who do want to bring charges against corporations enormous problems. Who did the act? Was it the same person who intended that it be done? Was this a senior manager, as defined by the interpretation doctrines, which allow a manager’s acts and intentions to be attributed to the corporation? Added inhibiting factors include the fact that, in large, publicly traded corporations, decisions and actions are fragmented into bits and pieces, a multitude of people playing roles and doing tasks which make up the whole of a corporate act. No one person, let alone any one senior manager, is easily identified as having the requisite intention on which criminal prosecution can be based.[12] All of this makes already reluctant prosecutors shy of launching investigations for the purpose of laying criminal charges.

It is plain that these considerable difficulties arise out of the legal pretence that the corporation is a real person, one legally separated from the flesh and blood human beings who benefit from its prof it-seeking activities which may be criminal in nature. It is the law’s initial pretence, not any fundamental principle of law or logic, which leads to the difficulties with holding corporate actors responsible for the many harms they cause, often while violating the law. The picture is even worse than already painted.

The pretence that the senior managers are, in legal terms, the corporation when thinking and acting on its behalf, means that they are not seen by law as thinking and acting in their own right as ordinary, non-corporate human beings. It follows that, unless they explicitly think or act their own, it will be attributed to be the thought or act of the corporation, for which only the corporation can be held legally responsible. Just as shareholders have limited responsibility, so do senior managers. All of this becomes occasionally embarrassing to governments, especially when a spectacular bit of corporate deviant behaviour – such as the infamous Bhopal incident or the Exxon Valdez spill – hits the headlines. Consequently, the size of fines which might be imposed on the rare occasions when a corporation is prosecuted and convicted is increasing, particularly in the environmental and anti-competition legislative spheres[13] .

More recently, governments have imposed personal duties on directors and senior managers of corporations. The idea is that, should the corporation violate a particular law or regulation, a director or manager might be held personally responsible even if the old doctrine of finding the person with the right intention and connection to the wrongful act would not yield that result. Predictably, this has led to howls of outrage amongst directors and managers and, thus far, these rules have not yielded many convictions.[14] For the most part, it is still only the directors of small corporations that have been held to account because it is easier to equate the acts and intentions of major shareholders who are also directors and workers with the acts and intentions of the corporation than it is to look for the involvement of directors in large diffuse corporate vehicles.[15]

The rather arbitrary reasoning that underlies holding directors personally responsible is manifestly a stratagem aimed at showing that the failure to prosecute wealth owners hiding behind corporate veils is due to a technical set of difficulties, rather than a natural consequence of promoting class divides by means of the corporate structure. The goal of imposing more direct responsibility on senior managers is to cause them to set up new monitoring schemes that will allow them to establish a defence of having exercised due diligence should a law for whose compliance they are made responsible be contravened by corporate conduct. In the upshot, it is hoped, corporations will establish policies that require implementers of policy to work out means to comply with existing standards and to report back to the policy-makers of the corporation as to what has been done and how it has worked. The policy-makers (directors and senior managers) will then act on those reports, making for a form of self-regulation which has the virtue of not telling corporations how to run their enterprises.[16]

Recently, there has been a small explosion of statutory efforts at reform that try to take this logic a little further. In an implicit acknowledgment that directors and senior managers are being singled out because the legitimacy of the corporate vehicle demands that someone ought to be made responsible for conduct that, in other settings, would be perceived to be criminal, legislatures are looking for measures that will hold the corporation criminally responsible by changing the technical hurdles created by the pretence that the corporation is an individual. Here they are aided by serious, often progressive, students of organisational behaviour.[17]

The argument is that the corporation is more than the sum of its parts, a real organism with a dynamism of its own for which it should be held responsible as a collective person. In this way, criminal law could be applied to it without having to find and identify a singular responsible person. In recent times, these academic efforts have been sought to be concretised by legislatures. Most recently, in Victoria, a Bill was introduced to create a crime of industrial manslaughter in the workplace. The immediate genesis of the Bill was the Esso-Longford incident, but the legislative attempt was one of several that have surfaced in recent times.[18] While they are all a little different, what they have in common is that they search for a way to hold corporations criminally responsible for conduct of their employees, whether or not they can be classified as guiding minds and wills.

Thus, in the Victorian Bill, a corporation was to be held responsible for the acts of any of its employees acting within the scope of their employment. That is, for the purposes of the actus reus of the crime there was to be no need to find the act of a guiding mind and will. And, for the purposes of the criminal intent, it was going to be sufficient to establish a corporate culture that permitted or authorised the violating conduct.[19] There was going to be no need to find the intent of a guiding mind and will. The culture of the corporation was to be found by reference to the behaviour of senior managers. Had they set up appropriate monitoring and reporting regimes? Had they shown a willingness to act when deviances were brought to their attention? That is, as is the case with the imposition of direct responsibility on senior managers, the pressure sought to be generated was to motivate the executives of corporations to address the need for compliance with legal standards.[20]

But, as both Tahnee Woolf and Jennifer Hill[21] noted in their discussion of the more modest Commonwealth amendments to the Criminal Code, the probability of successful prosecutions remains low. Their argument is that making decisions as to what is acquiescence, monitoring, permitting, authorising, and so on, that is, how the criteria for determining the existence of a culpable culture are to be read, depend on whether old, pro-corporate judicial attitudes manifest themselves. There is room for them to do so they argue - particularly Woolf - because of the vagueness, often contradictory, wordings of the criteria for finding responsibility in the new statutes. It is beyond the scope of this short piece to evaluate these technical analyses. It suffices that, given the argument of this paper, apart from any technical hitches, I would expect these kinds of attempts to overcome the difficulties created by the pretence that the corporation is an individual, to founder because of the visceral political opposition of the corporate elites and because, on the scholarly and jurisprudential side of things, the organisational approach being urged runs counter to deeply embedded jurisprudential and academic views of the corporation as a fiction and/or as a nexus of contracts between individuals. Certainly, the track record of these reformist attempts supports this pessimistic prognosis.[22]

Summary

The capitalist legal system has structured the corporation, capitalism’s most important vehicle, so as to immunise it as much as possible from the criminal law strictures which, in any event, are intended to apply primarily to the working classes. In the corporation it has created a site of irresponsibility. If we add to this the fact that, as sites of most of the accumulated private wealth, corporations have enormous sway with politicians and are given a major say in what standards of behaviour ought to rule them, we should have a clear understanding as to why our jails are full of poor people whose misdeeds – if that is what they are – do far less harm than does the all too frequent deviant conduct of corporations. Only when the legitimacy of this unequal system comes into plain view, are efforts made to re-justify it. In economies which rely on private profit-seeking to generate welfare for the whole of the population, profit-seeking activities are assumed to be good ones and occasional excesses are to be treated kindly. This is the very opposite of the way in which deviant behaviour by non-property owners is characterised. Law pretends to be neutral, while favouring the rich by giving corporations special treatment. The Shell’s and asbestos miners and processors of the world hurt us because they want money for its own sake. They do not harm us because they are powerless or foolish or feel alienated. They are the truly immoral actors; they are the real criminals. Law ensures that they are not seen in that light. This is source of the aphorism ascribed to the great American advocate, Clarence Darrow: 'A criminal is a person with predatory instincts without sufficient capital to form a corporation.’


[*] Emeritus Professor and Senior Scholar, Osgoode Hall Law School, York University, Toronto, Canada. This paper is a modified version of the public lecture, ‘Shielded by Law: Corporate Crime and the Perversion of Democracy’ at the University of Western Sydney Law School, 7 May 2002. The lecture distilled the forthcoming book, Wealth by Stealth: Corporate Crime, Corporate Law and the Perversion of Democracy, Toronto, Between the Lines, 2002.

[1] The Kiama Declaration, http://www.moles.org/Project Underground/oil/index.shtml; ‘100 Reasons Why the Ijaw Nation Wants to Control Its Own Resources’ reprinted in Niger Delta Today, 4 July 2001, http:// groups.yahoo.com/group.Ijaw National Congress; Press Release, Physicians for Human Rights, 23 July 2002 ‘U.S. Experts Exhume Remains of Saro-Wiwa, 8 Others’ Vanguard, 25 July 2002; African Commission on Human and People’s Rights, Reuters, 16 May 2002.

[2] A. W. Dilnot, ‘ The Distribution and Composition of Personal Sector Wealth in Australia’ (1990) Australian Economic Review 1.

[3] Once a field of contest has been created - and the State, that is, politics always plays a role in this, despite the Economic Rationalists’ endeavours to ignore this fact - all individuals must abide by it. Here the analogy with sporting competitions is obvious and it is often implicitly made by pro-marketeers. It is useful because it suggests that individual striving between human beings is a natural state of being, perhaps one of the reasons that governments spend so much on sports. This is peculiarly true in Australia, where wedded to chauvinistic nationalism, the sporting sphere provides fertile soil for the seeding of pro-market, anti-collectivist/State, policy-making.

[4] In Australia, the conciliation and arbitration machinery was very effective in eliminating competition between individual workers. This had a great deal to do with Australia becoming a nation with one of the most egalitarian income structures in the advanced industrialised world. This machinery is being eroded. Notably, the process began under the federal ALP with its Industrial Relations Act 1988 (Cth) and pushed along by its Industrial Relations Act 1993 (Cth). The more conservative government of the Coalition went further down the employer-favouring path. It did so by privileging private bargaining, both collective and individual, in its Workplace Relations Act 1996 (Cth). Australia now was the fourth most unequal in its distribution of household income, ranking ahead of only the US, Italy and Britain. (Tim Colebatch, ‘Study shatters egalitarian myth’, The Age, 25 February 2002, p.6).

[5] Lord Devlin, The Enforcement of Morals, London, Oxford University Press, 1965. While the text is old, its conceptualisation is contemporary.

[6] Of course, when some of the truly wealthy cheat on the regulations meant to protect them, then the pretence that the speculation in stocks and derivatives is not a form of gambling comes under tremendous pressure. More regulation is inevitably called for to pretend that financial punting is a legitimate productive activity when engaged in fairly.

[7] Law Reform Commission of Canada, Our Criminal Law, Ottawa, Information Canada, 1976, VII. Restraint in Criminal Law.

[8] D. Reynolds, ‘Observations on Sentencing in ‘White Collar’ and ‘Blue Collar’ Fraud Cases’, empirical findings presented at the Federal Prosecutors’ Conference, Toronto, August 1994; A. Freiberg, ‘ Abuse of the Corporate Form: Reflections from the Bottom of the Harbour’ [1987] UNSWLawJl 22; (1987) 10 UNSW Law Journal 67; A. Sutton, ‘The Bottom of the Harbour Tax Evasion Schemes’ in P. Grabosky & A. Sutton, eds, Stains on a White Collar: Fourteen Case Studies on Corporate Crime or Corporate Harm, Sydney, Federation Press, 1989; Kenneth Davidson, ‘Tax cheats should be treated the same as welfare cheats’ The Age, 14 February 2002, p.15.

[9] See www.plowsharesactions.org/webpages/SPERRYSOFTWAREREPAIR.htm . Judge Miles Lord's speech, expressing his dismay at a state of law that permitted the human beings at A.H. Robins (who wilfully inflicted of harm on women by means of their known defective intra-uterine device) to avoid personal liability, drew anger from the board rooms and praise from progressive activists: M. Mintz, At Any Cost: Corporate Greed, Women, and the Dalkon Shield, New York, Pantheon Books, 1985.

[10] M. Clinard & C. Yeager, Corporate Crime, New York, Free Press, 1980; P. Grabosky & A. Sutton, eds, Stains on A White Collar, op cit n. 8; R. Mokhiber, Corporate Crime and Violence: Big Business Power and Abuse of the Public Trust, San Francisco, Sierra Club Books, 1988; E.T. Cullen, W. Maakestad & G. Cavender, Corporate Crime under Attack: The Ford Pinto Case and Beyond, Cincinnati, Anderson, 1987; S. Box, Power, Crime and Mystification, London/New York, Tavistock Publications, 1983; I. Kesner, B. Victor & B. Lamont ‘Board Composition and the Commission of Illegal Acts: An Investigation of Fortune 500 Companies’ Academy of Management Journal, Dec. 1986; L. Snider, Bad Business: Corporate Crime in Canada, Toronto, Nelson Canada, 1993; F. Pearce & S. Tombs, Toxic Capitalism: Corporate Crime and the Chemical Industry, Toronto, Canadian Scholars’ Press, 1999.

[11] The fact that, once a dollar has been transferred to the corporation it becomes a dollar owned by the corporation, is a major cause for crime as well as many other ills. It permits money to be made without regard to the actual operation of the corporation, a sure fire incentive for anti-social practices by corporate managers seeking to please the stock markets.

[12] The doctrine that allows the attribution of the act and intent of a guiding mind and will of the corporation to the corporation is known as the identification doctrine. Who and what a guiding mind and will is depend on the legislative and judicial approach in local jurisdictions. Australian courts, in line with their English counterparts, tend to be more unwilling to go as low in the corporation’s hierarchy to find a guiding mind and will as some American and Canadian courts do. The standard English and Australian approach is to regard as guiding minds and wills only those corporate officers who have policy-making powers, not their delegatees - no matter how senior - who implement them; see Tesco Supermarkets Ltd. v Nattrass [1972] AC153; Trade Practices Commission v Tubemakers of Australia Ltd. [1983] FCA 93; [1983] ATPR 40-358; Entwells Pty. Ltd. v National and General insurance Co. Ltd. (1990-91) 5 ACSR. 424. For the varying approaches in different common law jurisdictions, see Canadian Dredge & Dock Co. Ltd. V The Queen (1985) 19 C.C.C. (3d) 1 (S.C.C.). A more recent decision by the Privy Council - staffed by English judges - has pointed the way towards a more elastic approach by the Australian/English decision-makers: Meridian Global Funds Management Asia Ltd. v. Securities Commission [1995] UKPC 5; [1995] 2 AC 500. Thus far, an expanded view has not found favour in Australian courts, Tesco still ruling the mindset of lower court judges; see R. v. Hatrick Chemicals (unreported, 1995, Vict. S.Ct., Philip Mandie, J., no.1485/950; DPP Reference No.1 of 1996 [1998] 3 VR 352.

The choices as to whether or not to pierce the legal veils of a group vary from jurisdiction to jurisdiction and, again, it clearly is a political choice, rather than a technically mandated choice: H. Collins, ‘Ascription of Legal Responsibility to Groups in Complex Patterns of Economic Integration’ (1990) 53 Modern Law Review 731.

[13] J. Hill, ‘Corporate Criminal Liability in Australia: An Evolving Corporate Governance Technique?’ in Low, ed, Corporate Governance: Theory and Practice, Sweet & Maxwell, Asia, 2002.

[14] See S. Streets, ‘Prosecuting Directors and Managers in Australia: A Brave New Response to an Old Problem?’ [1998] MelbULawRw 30; (1998) 22 Melbourne University Law Review 693; J. Hill, op. cit. n. 13; H. Glasbeek, ‘More Direct Director Responsibility: Much Ado About...What?’ [1995] Canadian Business LJ 416.

[15] That is, such a finding is easier for courts that feel themselves bound by the narrowing logic of Tesco; see R v Denbo Pty. Ltd. (1994) 6 VIR 157.

[16] For a good judicial explanation of how this imposition of responsibility on senior managers is to work, see R v Bata Industries Limited (1992) 70 C.C.C. (3d) 394, 9 O.R. (3d) 329. The due diligence defence is made available lest directors and officers be held criminally responsible not just for wanton, deliberate conduct, but also for routine, if careless, conduct.

[17] C. Wells, Corporations and Criminal Responsibility, Oxford, Clarendon Press, 1993; M. Dan-Cohen, Rights, Persons, and Organizations: A Legal Theory for Bureaucratic Society, London, University of California Press, 1986; P. French, ‘The Corporation as a Moral Person’ (1979), 16 American Philosophical Quarterly 207; Collective and Corporate Responsibility, New York, Columbia University Press, 1984; B. Fisse & J. Braithwaite, ‘The Allocation of Responsibility for Corporate Crime: Individualism, Collectivism and Accountability’ (1988) 11 Sydney Law Rev 468.

[18] Crimes (Workplace Deaths and Serious Injuries) Bill was the Victorian legislation, introduced in November, 2001; the Criminal Code Act 1995 (Cth), was introduced in the federal Parliament in 1995; a promise to amend the Queensland Criminal Code was announced in 2001; a private member’s Bill was introduced to amend the federal Criminal Code of Canada to similar effect in 2001 and a similar Bill is also on the table for discussion in the U.K.

[19] The Bill would also have held senior managers personally responsible if the corporation was found to be criminally culpable and if the senior managers had explicitly or implicitly facilitated the offending conduct.

[20] One of the features of these essays in reformism is that the legislatures are trying to shift the onus for policing behaviour to corporations, attempting to get kudos from the fretting public for their sternness with corporations, while mollifying corporate actors by telling them that they are trusted by government to know the best way to put their own houses in order.

[21] T. Woolf, ‘The Criminal Code (1995) (Cth.) - Towards a Realist Vision of Corporate Criminal Liability’ (1997) 21 Criminal Law Journal 257; Hill op. cit. n. 13.

[22] The Victorian Bill was defeated in the upper legislative house; the 1995 federal statute was given life five years after it was introduced to allow for public discussions. It now exempts a host of legislative regulatory regimes from its scope, leaving corporate criminal responsibility to the old law in those areas. The English bill has been put on hold for a few years ‘for further consultations with business and its lawyers’. Canada’s private member’s Bill made it out of the Committee stage of the parliamentary enactment process but seems doomed to die on the Order Paper.

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