At various times in my life I have vacillated on the moral dimension of the death penalty and finally came down on the side of approving of it. There are some human beings who have committed acts which should cost them the right to exist. I suspect most business leaders feel similarly. However, I would doubt most business leaders would support a corporate death penalty.
A corporation is legally an entity like a person. It exists, it pays taxes or passes profits through to individuals. But underlying this fiction is the fact that a corporation’s behavior is the result of the behavior of it’s employees. Therein lies the conundrum. Part of a corporation’s function is to shield the decision makers and shareholders from liability. But, if a corporation’s decision makers through negligence, greed or intent responsible for the deaths of others, why should the corporation itself not suffer the same consequences as someone who shoots and kills a convenience store clerk during a holdup?
What might that look like? A good example is the Bhopal disaster. In 1984 the plant co-owned by Union Carbide and the government of India released 42 tons of toxic gas. This directly or indirectly led to the deaths of an estimated 16,000 people.
Why should a corporation (and the in-depth study of the incident showed clear negligence on the part of Union Carbide among others — see the wikipedia article for more information) be allowed to continue to exist? Why should the corporation itself not be tried for murder and if found guilty put to death? Putting a corporation to death would be the equivalent of a forced chapter 7 liquidation.
Who would suffer? The shareholders, who would virtually always include the decision-makers. For many large public companies, a sizable portion of the shareholders are pension plans, so a lot of people stand to suffer if a major company was liquidated. Do you suppose this might have some impact on who the shareholders elected to the board and the level of oversight the board exercised? I expect it would.
We’re not talking about something like a civil matter which a company or individual can indemnify itself. It would be a criminal equivalent. You can’t buy insurance to protect you if you murder someone. You can buy insurance if someone is killed on your property and sues you. Why should corporations not suffer the consequences of the actions of it’s leaders?
You could make the point that most of the shareholders would be innocent victims of such an action. I disagree. A recent assessment in the news of the Madhoff fiasco suggested that his customers didn’t care how he was doing things as long as he kept paying their big returns. I think most shareholders are the same. As long as the company is making money, the stock is going up and the dividends keep coming, shareholders aren’t going to look too closely at how the company is run. But if they knew their capital was at risk of liquidation they would elect directors who would pay very close attention.
What brought all this to mind was an interview I heard on NPR the other night about a trial which is going on right now in Montana. WR Grace operated a vermiculite mine there for decades which blanketed the town with asbestos fibers. Workers brought the stuff home on their clothes and exposed their wives and children, the town, downwind of the mine was completely contaminated. Hundreds of men, women and children have died from asbestos related diseases. The company insists that the epidemic has nothing to do with asbestos and that they are not responsible. The case has taken ten years to come to trial, and five executives are on trial for very narrow violations of environmental rules. (By the way, the EPA has spent hundreds of millions in an effort to clean up the town.)
Here is a perfect example of a company that should be on trial for it’s life. Why shouldn’t this be a murder trial? Not necessarily for the executives (although I’m not sure they shouldn’t be on trial for their lives), but for the company itself. If proven without a reasonable doubt to be responsible for the deaths of hundreds, the company should be put to death. Its resources should be redeployed to owners more responsible and ethical. The shareholders would receive whatever value was generated from the sale of the companies assets after its debts were paid.
The bottom line is this.
I don’t believe the executives at Union Carbide, Grace, Enron, Worldcom or Exxon for that matter sprang from the womb committed to becoming master criminals. But the ecosystem in which they worked caused them to behave in criminally negligent ways. To a much lesser degree we see this in every company. People behave in ways that are self-protective in their micro-ecology but that might be highly harmful to the system as a whole. If we want people to behave differently, there have to be feedback mechanisms to create that desired behavior. Would a senior executive who has earned thousands of shares of company stock be inclined to stress fiscal, environmental, and safety responsibility more if his or her equity was at risk in ways that could not be indemnified? I think so.
Would there be unintended consequences of such an action? No doubt. Trial lawyers would lick their chops at such an idea. But I think the idea should be studied and as much as possible the consequences could be anticipated. And if companies felt the risks of manufacturing highly toxic materials was too great, that might not be such a bad thing and might lead to some real creativity in discovering ways to get things done in more environmentally friendly ways.
If we create (which we have) a system in which there are no serious consequences for actions, then unpleasant actions will be taken. Or as one of my former clients used to say, “Lead us not into temptation…because we will fail.”