BUSH GETS TOUGH ON "LIMITED LIABILITY"
Plan would help corporations become fully human

Governor and likely Presidential candidate George W. Bush announced yesterday a bold new "tough on crime" initiative that would imprison or fine shareholders for corporate crimes committed in their name. Punishment would depend on the severity of the crime and the number of shares owned. (Click here for a few specific examples.)

"We must remove the burden for controlling corporations from big government, from regulation and fines, and place it squarely on the judiciary," Bush said.

The ultimate aim of the program, Bush said, is to help corporations achieve their long-term goals. "Corporations have spent the last century and a half trying to obtain all the legal rights of people," Bush said. "They're now technically persons, but they're not really human. We owe it to them--and to our species--to help them finish their quest."

Bush went on to explain that corporations still, even today, lack one distinguishing human characteristic: a conscience. "Corporations were invented to keep investors innocent of crimes committed with the help of their money, accidentally or not. But now that corporations have become legally almost human, they have to be taught that their actions have consequences."

Bush said that while "tough on crime" policy has been shown to be useless with humans, it would work with corporations. "Corporations are just machines, not like teenage kids. They can be forced to act as if they knew right from wrong."

"Corporate behavior has become a very loud cry for 'tough love,'" the governor said. "We've got to adapt to a changing world, and sometimes that means changing laws."

Appropriate punishments

When the governor spoke in detail about proper punishment regimens for corporate crimes, he tellingly began with what is not punishment.

"Fines are not punishment, they do not build character," Bush said. "What's a ten-million-dollar fine to a giant corporation? Fines seldom if ever affect the pocketbooks of shareholders or managers, those who make the decisions or power the machine. Hitting pockets and people directly is a totally different thing."

Bush outlined his unique two-tiered punishment program, which would punish corporations for legal infractions according to their severity. Bush explained that there would be two "suites" of punishment, for levels of crime roughly corresponding to misdemeanors and felonies.

In one "suite"--for "misdemeanors" like bilking taxpayers of seven-figure dollar amounts, overcharging consumers, attempting monopolies, and contributing to simple human troubles like asthma and brief bouts of homelessness--punishment would take the form of short- or long-term share confiscation. Dividends of confiscated shares would pay for remedial action, where possible, as well as public-good programs like health care.

"My own brother's company was a player in the Savings and Loan scandal," Bush said, "but we're prepared to face the consequences. Remedies for serious problems are never easy, especially when they hit at the root."

The second punishment "suite," for "felonies"--spreading diseases, committing homicide or manslaughter, contributing to national disasters in the U.S. or abroad, large-scale bilking of taxpayers, etc.--would involve direct punishment of the shareholders in question.

The Governor used Union Carbide's 1984 Bhopal massacre, in which thousands of villagers were killed by lethal gas, as an example of a crime that would be classified as a "felony." Others included the German industry forced-labor cases, the Mattel sweatshop fires, etc. (While retroactive prosecutions based on new laws are usually not permissible, these crimes might be, based on the Pinochet case, as well as the Nuremberg cases of 1945.)

In the Union Carbide example, the Governor tallied up the figures on a calculator. Each death would cost the company a "negligent homicide" charge, for approximately twenty years of incarceration each. Twenty years multiplied by 2000 equals 40,000 years in prison, with aggravating factors such as a lack of remorse or compassion tripling the total.

This penalty would be divided among Union Carbide shareholders, each of whom could expect to spend from a few weeks to several years in prison, depending on the size of investment. A minimum penalty could be set by a judge--so that an investor with even a fraction of a share would be liable for, say, two weeks in jail. (This would apply even to those who had invested via "mutual funds," without knowing the precise direction of their investments.)

Although Bush addressed with ease most questions concerning the punishment programs, he admitted that several major problems remain to be solved. The death penalty, for example, while often merited in corporate crime cases, had no obvious application--"We can't talk about 'little deaths' here," said Bush, making an obscure bilingual pun better left untranslated.

Also, the issue of global markets poses some problems, Bush said. "These penalties will eventually have to be agreed on by a global governing body like the WTO, not only here at home in Texas and America. Otherwise we may create a better market here, but the changes will be irrelevant in the bigger picture. And influencing such a powerful and state-independent body as the WTO is a very involved process."

Despite these problems, Bush and his team remain confident that their corporate-punishment program will greatly improve the human landscape. "We feel certain that in this case as in all other free-market cases, the search for the right combination will do nothing but benefit consumers."

Why human?

Bush called corporate efforts to obtain the legal rights of humans "compassionate greed," and said that it was "not entirely about getting richer."

"You'd have to be very cynical to think that corporations, when they won protection as 'persons' under the 'Freed Slave' Amendment, were thinking only of their own wealth," Bush said. He was referring to the 14th Amendment, which had been designed to protect the rights of freed slaves, and which was used in 1886 to establish corporations as "natural persons" under the law.

"It's clear that corporations just admire humans and what we have. We should be good hosts and help them however we can. Right now, that means making them responsible and responsive."

Good for markets?

While some experts dispute whether corporations can actually become human beings, most agree that punishing corporations for the crimes they commit will at the very least have a positive effect on the market.

"Everyone agrees that government regulation makes markets sluggish," said Bush, whose proposals were drafted by a blue-ribbon team of economists and social scientists headed by Yale sociologist David Carruthers.

"Government regulation has been necessary because it's the only controls we've had," Bush said. "But if each shareholder is personally responsible for corporate crimes--from safety errors all the way down to lies about quality--then you've got market controls, just like that."

"Not only will big government and regulation become unnecessary," Bush said, "but you'll also eliminate the need for several layers of management, which will be great for profits."

Bush dismissed concerns that personal liability for corporate crimes might discourage individual investors from taking a risk. "People love to gamble," he said, "and this will make it all very real."

For those who do not thrive on such risks, Bush suggested that the mutual fund industry would easily adopt new decision-making processes, just as it has in the past. "The prime mechanism of regulation will be shareholder judgement. If investment in one company is likely to land you in jail, you'll invest in another instead. Mutual fund companies will find it an exciting challenge to obtain and keep investor confidence--it will reinvigorate the industry, and in fact the whole concept of investment."