A poetic reflection on the corporate form: Ruth Knight 'Persons'

"Limited liability is a subsidy for corporations paid not out of government coffers but from the pockets of those hurt by corporate malfeasance. It’s an avoidance of responsibility.”
Kent Greenfield

“Persons”

Ruth Knight

At the top of the city 

in a glass-chromed room 

an attorney assures the board of directors 

that the corporation is the person 

against which any or all action may be taken, 

not against each and every director joint or several. 

The multiheaded person exhales dry-iced victory 

as counsel backs out the door 

descending floor after floor 

to wait for a cab in the cold. 

Nearby a breathing bundle of rags 

sits on a grate of steam 

and waits just waits 

wondering where warmth went.

Ruth Knight's [1] unpublished poem is a precise depiction of the modern corporation and the concept of limited liability, which gives the legally constructed corporation protection from personal liability from unlawful conduct and criminality.

Limited liability is the notion that investors in a corporation should not be liable for bad things the corporation or business does. In effect, the corporation is a legal invention or fiction that allows individuals to personally profit from the activities, without being full liability for unlawful or illegal activities or activities that do harm.

Legal scholar Kent Greenfield has written about limited liability in the following terms[2]:

“When someone does not have to pay for bad behavior, it increases the likelihood and severity of bad behavior. Corporate subsidiaries drilling for oil in the Arctic, making shoes in Vietnam or harvesting hardwood in the Amazon will be more likely to spill oil, exploit child labour and destroy virgin jungle”

[1] We have been unable to find any specific information about Ruth Knight or her poetry.

[2] Greenfield, K (2011) Reforming limited liability law, the Nation, June 27 2011 http://www.thenation.com/article/reforming-limited-liability-law

Cutting 'red tape' and the rise in workplace fatalities

Last week here in Perth, three young men went to work but did not come home.

Benjamin White, Joe McDermott and Gerry Bradley all died at their place of work. 

Joe McDermott and Gerry Bradley were crushed to death by a concrete panel that fell off the back of a truck at a building site run by Jaxon Constructions. Benjamin White was an Alcoa worker who fell off scaffolding at Alcoa’s Kwinana Refinery.

The causes of the deaths are not yet known.

Their deaths bought to five the number of workplace fatalities in the last two weeks in WA, including a mineworker killed when his truck rolled over at a mine site and a 28-year-old contact worker who died of yet unknown causes at the Northern Star Resources Paulsens Gold Mine in the Pilbara.

Since July, there have been 17 workplace fatalities in WA. In 2014, WA had the highest number of workplace fatalities in 7 years and 2015 may be even higher.

Workplace fatalities continue to rise in Australia. Three to four workers die each week in Australia.

In 2014, 185 Australians were killed at work. The most five dangerous industries are 1) transport, post and warehousing 2) farming, forestry and fishing 3) construction 4) mining and 5) manufacturing.

So why is the number of workplace fatalities escalating?

Australia wide, the number of deaths in the mining industry has soared due to cost cutting, pressure to ramp up production, the high number of inexperienced staff due to redundancies and anxiety about job security, all of which impact on workplace safety.

Another factor contributing to the rising workplace death toll is the business inspired “war on red tape” waged by the Abbott/Turnbull and the Barnett Governments, which scraps laws and regulations to allow corporate and business non-compliance and self-regulation.

Reducing the burden of regulation and so-called ‘red tape’ is one of the Abbott/Turnbull Government’s top 5 priorities. The deregulation agenda aims to remove regulation and promote self-regulation by business as the best way to protect worker safety.

These pro-business campaigns aim to reduce and remove any constraints on corporate and business profit taking. As Malcolm Turnbull said in May 2015:

"One of the important things we should do is make sure we remove as many obstacles to enterprise and entrepreneurship as we can. That is one of the reasons the Abbott Government has been so assiduous in culling regulation and red tape”.

Here in WA, the Barnett Government’s Red Tape Reduction Program similarly aims to make it easier for business and corporations to make profits.

However, red tape reduction, combined with funding and staff cuts to regulatory agencies, has the effect of reducing the level of investigation and prosecution of safety regulation violations. Occupational health and enforceable safety regulations and rules and workers compensation are redefined as ‘red tape’ and cut through deregulation.

In the case of workplace safety, cuts to health and safety and removal of regulation and enforceable safety rules and regulations, threatens lives and increases the risk of workplace harm and fatalities.

Tougher enforceable workplace laws and penalties are needed for employers whose negligence results in death. The average fine for a workplace fatality is around $100,000. Company directors need to be made criminally liable and face prosecution and penalties such as jail and serious fines if workers die because of their negligence.

Iceland prosecutes and imprisons corporate criminals

Iceland has shown how to deal with fraudulent banks and bankers who engage in market manipulation, plundering of people's savings and unlawful activity. 

It has prosecuted them as corporate criminals. Twenty six (26) bankers have been sentenced to a combined 74 years in prison for crimes relating to financial fraud and criminality.

It is a lesson other countries, including Australian could learn.

One lesson is that prosecution of corporate fraud and criminality makes good economic sense.

When the global economic crisis hit in 2008, the people of Iceland suffered  more than any other country, largely due to the actions of the country's banks. The savings of 50,000 people were wiped out, plunging Icelanders into debt and placing 25 percent of its homeowners in mortgage default.

Rather than bail the banks out, Iceland decided to prosecute bankers who were held criminally responsible for Iceland's financial collapse. The Iceland government appointed a special prosecutor to investigate the bankers:

In two separate Icelandic Supreme Court and Reykjavik District Court rulings, five top bankers from Landsbankinn and Kaupping — the two largest banks in the country — were found guilty of market manipulation, embezzlement, and breach of fiduciary duties. Most of those convicted have been sentenced to prison for two to five years. The maximum penalty for financial crimes in Iceland is six years, although their Supreme Court is currently hearing arguments to consider expanding sentences beyond the six year maximum.

Iceland's approach to the global financial crises was very different to other countries. Rather than bail out, or fine the banks and impose devastating austerity measures, Iceland let its banks go bust and focused on strengthening its social welfare policies.
 
Bankers who committed financial crimes were indicted and imprisoned.  The Iceland Government paid off loans for consumers, forgave homeowner debt (up to 110% of the property value).

Iceland also introduced capital controls restricting what people could do with their money.

The government imposed a 39% tax on those who send their money offshore.
 
As a result Iceland was able to bounce back.  The Iceland economy has “recovered” and is growing faster than US and European economies. In 2015 the IMF declared that Iceland achieved economic recovery faster than other countries, without compromising its welfare model of universal healthcare and education.

When Iceland’s President, Olafur Ragnar Grimmson was asked how the country managed to recover from the global financial disaster, he replied,

“We were wise enough not to follow the traditional prevailing orthodoxies of the Western financial world in the last 30 years. We introduced currency controls, we let the banks fail, we provided support for the poor, and we didn’t introduce austerity measures like you’re seeing in Europe...........Why are the banks considered to be the holy churches of the modern economy? Why are private banks not like airlines and telecommunication companies and allowed to go bankrupt if they have been run in an irresponsible way? The theory that you have to bail out banks is a theory that you allow bankers enjoy for their own profit, their success, and then let ordinary people bear their failure through taxes and austerity. People in enlightened democracies are not going to accept that in the long run.” 

Oxfam shines the light on the sham of corporate sopcial responsibility

Oxfam's latest report and campaign  Behind the Brands confirms what many of us have argued for years- that corporate social responsibility is a sham; a ruse to conceal and detract attention away from the destructive practice of corporations.

Oxfam's report analyses the practices of the world's 10 most powerful food corporations and shows their destructive impact, despite the corporations deployment of the rhetroic and practice of corporate social responsibility. The report is a damning indictment of the practices of the world's major food corporations and the sham of corporate social responsibility.

The report delves below the surface of corporate responsibility rhetoric to show that the practices of the food corporations destroy not only the natural resources that support a global food system but the lives of food suppliers, employees and their customers.

Articles about the report are here, here and here.

The CEO of Oxfam, Barbara Stocking said:

"It is time the veil of secrecy shrouding this multi-billion dollar industry was lifted. Consumers have the right to know how their food has been produced and the impact this has on the world's poorest people who are growing the ingredients. The hundreds of brands lining supermarket shelves are predominantly owned by just 10 huge companies, which have combined revenues of more than $1bn a day while one-in-eight people go to bed hungry every night."

 The Oxfam Report shows that the major food corporations:

• are overly secretive
• rely on cheap labour
• fail to meet their own ethical standards
• ignore injustices occurring within their own supply chain
• fund and support programmes that are typically tightly focused around publicly appealing issues which fail to address the root causes of hunger and poverty
• conceal sourcing practices and routinely engage in sophisticated marketing and public relations campaigns in order to shape public opinion about food and how it is made.
• lack adequate policies to guide their own supply chain operations.
•  have failed to use their enormous power to create a more just system for farmers and local communities.
• have allowed land to be unjustly seized from poor farmers and rural communities over the last decade
• make claims of sustainability and social responsibility difficult to verify on the ground.

Criminality and excessive executive salaries

 

Excellent article by Raewyn Connell on the need to expose and challenge the theft and plunder perpetrated by corporate executives. Connell writes:

"The very top corporate managers now sit on top of a tall tree of bonuses and incentives, which have become an institutionalised and expected part of income. (Board remuneration committees scrutinise “comparators,” and executive search firms compile the data.) Inside this world, it seems common sense that the top managers’ bonuses and incentives should be higher than all the rest. How could it be otherwise? That would be an insult to the most excellent.

There is also an effect of the “financialisation” of modern capitalism – the growth of finance capital, and its hegemony over the industrial and agricultural capital that ruled the roost in other eras.

The mind-boggling scale and reach of contemporary financial markets hasn’t exactly replaced other forms of economic activity – we still produce the goods and services. But it has changed the frame of reference for corporate elites. They now live in a world where gigantic profits are often made without any commitment to productive investment, and where financial operations constantly impinge on industrial, mining and trading corporations. Even inside corporations, the separation of control from operations has grown. The new head of Rio Tinto, Sam Walsh, made his mark by automating the firm’s iron ore operations in the Pilbara, locating the control rooms down in Perth. (And happily eliminating part of the Pilbara workforce.)

Inevitably the point of comparison for corporate managers shifts from their own businesses to the world of international finance. At the same time, the financialisation of the business world makes the elite packages, of which the larger part is almost always the bonuses and incentives rather than the simple salary, easier to pay and more normal in appearance.

These trends are not the whole explanation of the great rise in executive incomes, but they are a considerable part of it. The neoliberal era, almost everywhere in the world, has seen rising levels of economic inequality. In the developing world, neoliberalism has meant increased unemployment and massive growth in the informal economy. In rich countries there is some informalisation but also a sustained squeeze on welfare incomes (the removal of sole parents’ benefit is a recent Australian example). There are growing gaps in the wage structure, and a much less progressive tax system than a generation ago. Corporate executives are among the most spectacular beneficiaries of this society-wide process.

To put it in a nutshell, the corporate managers are not earning wages. Markets have little to do with it. They are building fortunes. Their organisational power enables them to claim a share of the expanding financialised capital in the modern economy, and convert part of that share into extremely high incomes. Within an environment of privilege, this claim becomes a matter of common sense and routine. And though there are many critics of the result – the anti-globalisation movement, the Occupy movement, and some of the unions – there is not at present any social force that has been able to reverse it.

Connell's arguments remind me of those of criminologist David Friederich who argues that the corporate culture and practices that provide for and justify excessive executive compensation for corporate executives not only creates what he calls "crimogenic conditions" but are likely to lead to the taking of money that belongs to others.

In a paper titled "Exorbitant CEO compensation: Just reward or grand theft" in the Journal Crime, Law and Social Change  David Friedrichs argues that executive compensation packages should be considered as a form of white collar crime.

For Friederichs it is time to criminalize this behaviour. He calls it a form of robbery:

""Walking into a bank with a gun and demanding money from a teller is one way to steal money... Walking into a corporate boardroom and securing from the board's compensation committee, made up of cronies, paid consultants, and even relatives, compensation of millions sometimes tens of millions or hundreds of millions is another way to steal money. The principal differences are that the second way of stealing money pays much better, is all too often legal, and does not result in criminal prosecution and imprisonment. This needs to change"

The practices of excessive compensation have come to be viewed as standard business practice rather than as part of a spectrum of corporate criminal behaviour that goes unrecognized and unpunished. That is how corporate power works. It redefines reality to serve corporate and private interests.

As both Connell and Friederichs argue its time to challenge that.

Wal Mart and the death of 120 Bangladeshi factory workers

The death of 120 garment workers in a fire at a Bangladesh factory that supplied U.S. retail giant Wal-Mart (the largest buyer of garments from Bangladesh) as well as Ikea and other major retailers,  is likely to lead to a global push for genuine reform of the labor practices of big brands and retailers. 

Scott Nova from the Workers Rights Consortium is quoted on Democracy Now  

 “It really is an extraordinary achievement, in an ironic sense, that  the U.S. apparel industry has managed to replicate early 20th century  conditions that were so brutal and cruel to workers now again here in  2012 in factories in places like Bangladesh. It is a shameful record for the U.S. apparel industry. which has a  notoriously poor fire-safety record and has long suppressed worker’s  attempts to improve their conditions'

The factory where the workers died is operated by Tazreen Fashions, a subsidiary of the Tuba Group, which  supplies Wal-Mart, Ikea and other major retailers in the United States  and Europe. The factory made polo shirts, fleece jackets and t-shirts.

On Monday,  2 days after the fire Walmart claimed it did not have a current relationship with the Tazreen factory in Bangladesh. Only after  labor activist Kalpona Akter produced a picture of herself holding up clothing with Walmart's exclusive "Faded Glory" label found at the factory did Walmart admit that the factory was still a supplier; claiming it didn't know that was the case.

 Scott Nova from the Workers Rights Consortium is quoted as saying:

"Walmart’s foundational corporate principle, one they prosecute with religious fervor, is cost reduction through absolute control of their supply chain and production system.  Today, however, they want us to believe that they have so little control over their supply chain that they do not even know which factories are manufacturing their clothes. The bottom line is that Walmart was making goods at the Tazreen factory, but failed to protect the rights and safety of the workers making those clothes. Retroactively blaming this on 'unauthorized' subcontracting is not going to fly.

   "The Triangle Shirtwaist fire [in New York City in 1911] galvanized a reform movement in the U.S. that transformed an industry of dangerous sweatshops into one defined by safe workplaces and decent wages. Now, global outsourcing has allowed retailers like Gap and Walmart to turn back the clock to 1911, recreating in places like Bangladesh the brutal conditions and rock-bottom production costs that prevailed in the U.S. at the time of the Triangle fire.
 
    "Wages of 18 cents an hour and cruel working conditions have led to waves of mass protest and unrest among Bangladeshi apparel workers. The government and the industry there cannot acknowledge that the unrest is a product of their own policies of low wages and lax regulation, so they must find scapegoats. Unsurprisingly, they chose to target labor rights advocates, branding them subversives, accusing them of fomenting the violence, and in the worst cases attacking them physically. 

Corporate power and the political process

"Recent events have shown how much the interests of corporations now dominate the political process. Mining companies mobilized more quickly than the government to challenge the resource rent tax, and effectively bought down a Prime Minister...... But political systems merely reflect the society which gives rise to them. And we live in a society- and a world-where the power of corporations is much greater than that of "ordinary"people. Corporate power can readily be seen in our homes, our workplaces, our public spaces and our national debates."
Josh Fear

The Nemesis Project, which I coordinate, aims to support efforts to wrest power back from corporations. We seek to connect the dots between issues to show the extent to which corporate power and corporate interests dominate across a wide range of policy issues and influence every part of our daily lives.

Josh Fear from the Australia Institute has written a fine piece about the extent of corporate power in Australia. His argument is that the power and interests of corporations dominate and control government decision-making.

He shows the ways that corporations now dominate the political process in Australia. Fear's point is that across a range of public policy issues- the super profits mining tax, emissions trading, carbon tax, executive salaries, banking profits and fees and superannuation- the interests of corporations have dominated.

As Fear points out, and as recent events show, corporate power played a major role in the overthrow of an elected PM and manufactured the demise of a Federal government who were seen to threaten corporate interests. Politicians heed that message, meaning that no real reform is likely when corporate interests are threatened.

Corporations and the the corporate aristocracy

" Wealth privilege remains embedded in the ancient institution of the corporation. It is a privilege out of step with market ideals, which has led to wealth disparities that threaten our political ideals. We can never really have political democracy without economic democracy".
Marjorie Kelly The Divine Right of Capital

I am currently re reading Majorie Kelly's devastating critique of the corporate economy and of corporations. Kelly exposes six aristocratic principles that corporations are built on, and shows how wealth bias is embedded in the structure and operations of corporations.

It is interesting to read Kelly's book in light of the recent failures by the Australian corporate regulator ASIC to prosecute corporate malfeasance and criminality. Three recent cases pursued by ASIC against high profile corporations and corporate leaders have been thrown out of the courts.

ASIC seems more interested in pursuing individual culpability than in addressing the institutional and systemic causes of corporate malfeasance and corporate criminality.

Kelly's book is a reminder that it is the systemic dynamics of corporations and the corporate economy, rather than the action of individuals, that is the root cause of corporate collapses, corporate scandals, corporate criminality, massive executive salaries and remuneration, and the appalling behaviour of Australia's corporate elite.

Decisive moment in corporate accountability: Shell on Trial for human rights abuses

A trial to begin this week in the US Federal Court involving the multinational oil and energy giant Shell is a decisive moment in corporate accountability and should be of interest to all West Australians. Here in Western Australia the multinational corporation Shell is a big player. Shell’s Australian upstream operations to find and supply liquefied gas are based in Perth. Shell has large gas reserves in Western Australia and maintains a substantial portfolio of exploration sites off the WA coast. Shell is also major player in large scale mining and energy operations in WA, including the Gorgon Project, the largest energy project ever considered in Australia.

Twelve years after the first case was filed against Shell, Wiwa v Shell is finally being heard in a Manhattan courthouse. The case is based on Shell’s alleged collaboration with the Nigerian dictatorship in the violent suppression of the Ogoni people of the Niger Delta during the 1990’s.

The trial is being bought against Shell by the family of Ken Saro-Wiwa and several Ogoni people from the Niger Delta in Nigeria where Shell has massive oil operations, which continue to cause displacement, ecological damage, pollution and deforestation. Saro Wiwa who was an internationally respected writer and activist and a native of the Niger Delta was executed by the Nigerian authorities in 1995 He had spent 5 years campaigning against Shell’s oil operations in the Niger delta.

The case alleges that Shell conspired with the government to try Saro Wiwa and other leaders and bribed local leaders to testify against Saro Wiwa. The case will also hear long standing allegations that Shell encouraged and supported the Nigerian Mobile Police Force to commit massacres and violent suppression of Ogoni protestors and villagers.

The law suit alleges that Shell helped to suppress the grass roots Movement for the Survival of the Ogoni people, and its leader internationally respected writer and activist Ken Saro-Wiwa. The case is important because plaintiffs are charging not only Shell but also the former Managing Director of Shell in Nigeria with:

• Conspiring with the Nigerian military to prosecute and finally execute Saro-Wiwa and his eight colleagues
• Arming, financing and transporting Nigerian military which used force to suppress opposition to Shell’s operations and resulted in 2000 Ogoni people being killed and 30,000 made homeless
• Wanton destruction of villages throughout the Ogoni region, where over 3000 oil spills have occurred and gas flares are located on private property

The trial has significant implications not only for Shell, but also for the way energy corporations can be held to account for the social and environmental damage they create and the human rights abuses that result from their activities.

The law suit is not just charging Shell but the former Managing Director of Shell in Nigeria. A reminder that individuals can and should be held responsible for corporate behaviour. If successful this will be the first time in the US a corporation has been found guilty of human rights abuses. No large multinational corporation has ever been found liable of human rights abuses by a US jury

Shell has a long history of social and environmental damage and human rights abuses, as well as concern about its business practices . In recent times the corporation has tried hard to resurrect its reputation and portray itself as a model corporate citizen, however the trial is a reminder of the company’s long dark history.

Further information on Ken Saro Wiwa and the trial can be found at http://remembersarowiwa.com

Further information on Shell's long history of environmental and human rights abuses can be found at a number of sites including:
www.corporatewatch.org
www.shellfacts.com
www.royaldutchshellplc.com
en.wikipedia.org.au/wiki/controversies_surrounding_Royal_Dutch_Shell