Curbing Crime in the Suites

"Historically, reform of the corporation has affected its external relationships--don't pollute, don't price-fix, don't advertise deceptively. The Corporate Democracy Act would seek instead to reform the internal governance structure so that, consistent with a market economy, companies would exercise their great discretion in more democratic, hence responsible, ways." Ralph Nader

"One can ask of these skeptics about the corporation, who do they think created the unparalled affluence enjoyed by the American people? Ralph Nader? The obvious answer is that the big American corporation has made a vital contribution to this achievement."   Herbert Stein former chairman, Council of Economic Advisers

IT'S NOT THAT it hasn't been tried. In 1787 James Madison fought--unsuccessfully--to empower Congress to supplant state charters of corporations with federal charters when the public good required them. In 1901 President Theodore Roosevelt suggested--to no avail--that "the Government should have the right to inspect and examine the workings of the great corporations engaged in interstate commerce." Thirty-seven years later, populist Sen. Joseph O'Mahoney proposed a more far-reaching program called the "National Charters for National Business." It bombed.

Consumer advocate Ralph Nader is the moving force behind the most recent attempt to inject accountability and democracy into the corporate decision-making process. Backed by a coalition of consumer-interest and labor groups, Nader is using today's Big Business Day events to call attention to the proposed "Corporate Democracy Act of 1980." Nader advocates federal chartering of corporations because state chartering encourages attempts to woo business by relaxing corporate regulations. Deleware, for example, boasts the nation's most lenient business codes and incorporates about half of the Fortune 500 businesses. Madison's reservations about state regulation were probably well-founded in an age of small-scale agrarian enterprises; the need for standardized, federal guidelines for today's ubiquitous business world seems almost axiomatic.

Nader compares giant corporations to self-contained governments, with powers to tax (price fixing), coerce (forcing citizens to live with environmental hazards) and even take lives (concealing information about potentially fatal defects in manufactured goods). And unlike a democratic government, Nader observes, "the 'economic government' is largely unaccountable to its constituencies--shareholders, workers, consumers, local communities, taxpayers, small businesses and future generations."

Because of this almost unbridled corporate autonomy, advocates of industry reform insist on more than federal regulation. The Corporate Democracy Act would:

* establish "independent" boards of directors, composed of individuals nominated by shareholders in the corporation;

* compel publication of corporate statistics on occupational safety, affirmative action and environmental controls;

* and impose strict sanctions on corporate irresponsibility (to the tune of fines double the damages incurred and longer jail sentences) in an effort to fight what Nader has dubbed "crime in the suites." Furthermore, the act would prohibit the abuse of employees exercising First Amendment rights or refusing to engage in illegal activities.

Even when corporations "legally" operate within state-ordained guidelines, the American "economic government" enjoys an influence that a laissez-faire government is helpless to curb. Tiny groups of executives make far-reaching--and often haphazard--decisions about how much to pollute the environment, what minorities to hire and what foreign governments to stabilize or oppose.

The most disturbing tendency of unchecked corporate influence, though, is the blatant corruption rampant among the big business elite. In recent years about 500 American firms have admitted to "illegal or improper payoffs abroad" totalling more than $1 billion. In addition, less obviously illegal--but often more harmful--acts result from unclear and unenforced regulation. Companies usually explain "chemical crime," the deliberate proliferation of toxic wastes and other chemicals into the environment, by pleading ignorance of the consequence of their actions. Ford Motor Company knew that Pintos often exploded on rear-end impact; Firestone failed to disclose evidence that its Radial 500 tires tended to belt-edge separation at high speeds; for 40 years manufacturers suppressed information suggesting that asbestos could cause cancer. Harsher sanctions are necessary to eliminate corporate abuses.

THE GOAL OF adding a majority of "independent" members to corporate boards of directors is to establish an alter-ego for management. At least nine board members would be assigned specific "constituencies," (employee well-being, consumer protection, environmental protection, community relations, shareholder rights, law compliance, technology assessment, anti-trust standards and political relations) and would oversee and inform the board about issues relevant to their fields. The result, at the very least, would be to sensitize management to community issues and interests and raise questions about corporation policies.

But no matter how attractive it is, this bill doesn't have a prayer of passing in its entirety. During economically ailing times, in the face of rising public conservatism, it is highly unlikely that such a progressive program will gain widespread support. The purpose of Big Business Day and the introduction of the Corporate Democracy bill is to call attention to the abuses of corporate power and the means available to put an end to them; but the implications of "free" enterprise are as deeply rooted as the corporations themselves. Although the effects of the Corporate Democracy Act are sorely needed, the age-old corporate mentality sadly prevails. As one businessman said recently, "How can you advocate morality over success?"