CORPORATE FOCUS: Reigning in Corporate Criminals
If you commit a felony, you lose the right to vote.What happens to corporations that break the law? They don't have the right to vote. But do they lose any rights or privileges?In what may be one of its most important corporate accountability initiatives (there haven't been many), the Clinton administration is suggesting that chronic violators of labor, environmental, tax, antitrust or employment laws should be denied the privilege of entering contracts with the federal government.Vice President Gore first floated the idea in a 1997 speech to the AFL-CIO. A business outcry persuaded the administration to put the proposal on hold, but two years later it decided to move forward.In July the administration proposed regulations that would clarify federal procurement officers' duty to ensure that government contractors have a "satisfactory record of integrity and business ethics." Under the regulations, corporations that repeatedly or seriously transgress worker rights, health, safety, environmental, tax or antitrust laws would be deemed ineligible for federal government contracts.Big business is up in arms about the proposal -- a sign that it may be of consequence. The U.S. Chamber of Commerce along with an alphabet-soup full of business trade associations have organized the National Alliance Against Blacklisting to block the proposal.The Alliance is planning a full-blown campaign against the regulations. It is revving up arguments about how the regulations would bestow on procurement officers the power to act arbitrarily, how corporations could be unfairly penalized for failing to comply with confusing and technical federal rules, and how the regulations improperly side the federal government with labor in labor-management disputes.The business groups are right about one thing: the Clinton administration has hit upon a potentially powerful tool to discipline large corporations.The federal government spends approximately $200 billion a year on procurement, buying goods and services from firms that employ approximately 20 percent of the U.S. workforce. Government contracts make up a significant revenue stream for many firms, including many of the largest companies in the country. In refusing to contract with polluting, consumer-cheating, racially or sexually discriminating, tax-avoiding, clearcutting, price-fixing and other miscreant companies, the government can leverage its buying power to promote more responsible corporate behavior.Consider the issues of worker rights and worker safety. A 1995 study by the General Accounting Office (GAO), the congressional research agency, found that 80 federal contractors, receiving more than $23 billion in federal government business in fiscal year 1993, had violated the National Labor Relations Act. Six contractors -- McDonnell Douglas, Westinghouse, Raytheon, United Technologies, AT&T and Fluor -- received almost 90 percent of the $23 billion.A 1996 GAO study found that 261 federal contractors, receiving more than $38 billion in federal government business in fiscal year 1994, received penalties of at least $15,000 for violating Occupational Safety and Health Act regulations. The biggest of these contractors included General Electric, Lockheed Martin, Westinghouse, United Technologies, General Motors, Boeing and Textron.The current U.S. labor law regime imposes virtually no meaningful penalties on businesses that violate worker rights. The standard sanction imposed against a company that fires a worker for supporting a union is an order to reinstate the worker with back pay -- there are no punitive damages available. Serious violators of workplace health and safety regulations typically walk away with small fines.By contrast, the threat of losing major government contracts is a much more serious and costly penalty. The proposed procurement regulations would make federal contractors much more wary of recklessly disregarding worker rights and worker safety.Given the generally weak penalties for corporate law-breaking in the United States, the same holds in other spheres. Too frequently, corporations are able to brush off fines and sanctions for law-breaking.When corporations calculate, overtly or implicitly, whether they should respect the law, they consider the odds of getting caught and the size of the likely penalty if they are caught. Other factors go into such decisions of course -- potential civil liability, the social pressure to comply with the law or simple respect for the law -- but no one seriously doubts that enforcement vigor and the size of sanctions affect corporate adherence to the law.If the regulation, really a very modest step, is enacted, the answer to the question, "Do corporate law breakers lose any privileges or rights?" will finally be, "Yes."Russell Mokhiber is editor of the Corporate Crime Reporter. Robert Weissman is editor of the Multinational Monitor.