Capital Punishment for Corporations?

Date: 22 Sep 1998 | posted in: From the Desk of David Morris, The Public Good | 0 Facebooktwitterredditmail

Capital Punishment for Corporations?

by David Morris
Institute for Local Self-Reliance

September 22, 1998 – published in St. Paul Pioneer Press

No one should be above the law, our politicians insist. If the President is lying, he should be stripped of office. Drug users should be stripped of their possessions and their livelihoods. Murderers should suffer the ultimate punishment-death.

Only one entity is exempted from this firm principle that criminals should be punished for their criminal behavior: the corporation. It is an odd exception. After all, corporations can wield power and wreak damage a million times greater than can an individual.

Yet today a corporation found guilty of the most heinous crime usually pleads nolo contendere, which means it admits no guilt, pays a trivial fine and promises not to commit the crime again. If only the President could incorporate himself, he’d be home free.

Corporations were not always treated so indulgently. When the corporate form was invented in the 18th century, its proponents realized they had created a potential monster. The introduction of limited liability meant owners were no longer responsible for the actions of their businesses. This posed a dilemma. For as Edward, Lord Chancellor of England said at the time, “Did you ever expect a corporation to have a conscience, when it has no soul to be damned and no body to be kicked?”

Jonathan Rowe, writing in the Washington Monthly, observes, “Individual responsibility is a bedrock principle of the common law tradition. People must stand accountable for their actions and those taken on their behalf. To compromise this principle, something had to be given in return; specifically the enterprise that gained this exemption had to serve the public in concrete ways.”

The vehicle for curbing the amoral power of corporations was the state charter. In return for awarding the corporation the privilege of limited liability, states inserted in their corporate charters certain safeguards. State charters limited the number of business endeavors a given corporation could engage in. Restrictions on size were common. New York, for example, limited corporations to $5 million in capital until 1890. As late as 1903 almost half the states limited the duration of corporate charters to 20-50 years. And if corporations did not live up to their responsibilities, legislatures revoked their charters.

But by the turn of this century, a combination of juridical and legislative mischief eliminated virtually any curbs on corporate power. The Supreme Court declared corporations to be persons, thereby giving them the same constitutional protections as natural persons. State charters were changed to allow corporations not only limited liability but unlimited life and size and reach.

Today corporations dominate national and state economies. Indeed, at the national level, Congress seems ready to eliminate even the weak remaining tools society has to curb corporate power, like hefty fines imposed by juries in civil suits.

But at the grassroots level, anger at corporate misconduct has given rise to a renewed interest in the policies adopted by legislatures in the 19th century. Educated by people like Richard Grossman, co-director of the Program on Corporations, Law and Democracy in Boston, and Jane Anne Morris(no relation), head of Democracy Unlimited in Madison, citizens are seeking to revive the use of state charters as a tool to curb corporate power. Their proposal? States should dissolve criminal corporations, in effect imposing capital punishment on these unnatural persons.

That proposal has begun to find an audience. In April, New York Attorney General Dennis Vacco petitioned a state court to dissolve the Council for Tobacco Research and the Tobacco Institute. He accuses the two organizations of defrauding consumers by posing as non profit research and information organizations while actually promoting smoking.

In September, about two dozen environmental, human rights and women’s rights groups submitted a 120 page petition to California’s Attorney General Dan Lundgren asking him to shut down the oil giant Unocal by revoking its charter. The charges include “environmental devastation…deception of shareholders, usurpation of political power…complicity of human rights violations(as a result of Unocal’s formal partnership with the military junta in Burma and with the Taliban in Afghanistan)…”

“The people mistakenly assume that we have to try to control these giant corporate repeat offenders one toxic spill at a time, one layoff at a time, one human rights violation at a time”, says Loyola University law professor Robert Benson who is acting as the coalition’s lead attorney. “But the law has always allowed the attorney general to go to court to simply dissolve a corporation for wrongdoing and sell its assets to others who will operate in the public interest.”

It’s doubtful that Lundgren, who is running for Governor, will act on the petition. He strongly supports the death penalty and firmly believes anyone convicted of three crimes should be sentenced to life in prison. But when it comes to unnatural persons like corporations, well, I suspect that Dan Lundgren will suddenly become real soft on crime.

David Morris is vice-president of the Institute for Local Self-Reliance

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David Morris

David Morris is co-founder of the Institute for Local Self-Reliance and currently ILSR's distinguished fellow. His five non-fiction books range from an analysis of Chilean development to the future of electric power to the transformation of cities and neighborhoods.  For 14 years he was a regular columnist for the Saint Paul Pioneer Press. His essays on public policy have appeared in the New York TimesWall Street Journal, Washington PostSalonAlternetCommon Dreams, and the Huffington Post.