March 4, 2004 (Ira Pilgrim)


Corporation, n. An ingenious device for obtaining individual profit without individual responsibility.

Ambrose Bierce, 1911

What prompted this column was a newspaper article about American Airlines. Faced with bankruptcy they convinced their employees to take pay cuts. At the same time, they set up fat bonuses for their top executives. They rescinded the bonuses in response to the outrage of their employees, who found out about it only after they had made wage concessions. The CEO Donald Carty would have gotten $1.6 million. In the last few years, hardly a month goes by without a similar story about one corporation or another being milked by its chief executives.

Many years ago, Robert Townsend refused a fat salary from Avis, a company that was approaching bankruptcy at that time. He was a major factory in turning the company around. In the process he authored a best selling book, Up The Organization. I assume that he accepted a fat salary after the company was on its feet. I doubt that this would happen today since many executives in this country seem to be out for everything that they can get, whether they earned it or not. It borders on larceny. However, there are no laws against unbridled greed and there never have been.

I read about several corporations that were fined millions of dollars for swindling their clients. What will multimillion dollar fines do? The answer is "absolutely nothing!" Why? Because a corporation can't be punished. You can't send a corporation to prison for swindling people. You can get money out of the corporation, but that is all. Will it discourage crime? Of course not. Why? Because the people responsible for it do not experience any real loss, discomfort or pain.

Basically, it is not the corporation that commits a crime. A corporation can't commit a crime and can't be punished. Corporations don't cheat people, people cheat people. If you want to prevent the cheating of people, you have to punish the people who do the cheating. If you fine a corporation, the crooks not only go scot-free, but they are encouraged to cheat people again and again and again. And they do!

We can assume that many of the corporate executives who swindled their clients, employees and retirees are still on the job. If they are not on the job, they are living in luxury at home. We can be reasonably sure that some corporate executives will continue to do the same thing if they think that they can get away with it.

The problem of executive crime is not a new one. Is it possible to put a stop to it? Woodrow Wilson said that, "The way to stop financial joy-riding is to arrest the chauffeur, not the automobile."

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