[corp-focus] Personal Responsibility for the Corporate Elite

[Robert Weissman]

Personal Responsibility for the Corporate Elite
By Russell Mokhiber and Robert Weissman

Before the corporate and political elite consign the "corporate
accountability" proposal issued by President Bush last week to the
dustbin, it is worth highlighting one element: the idea that CEOs sign
and personally attest to the accuracy of the financial numbers their
companies make public.

Here is what is important about this proposal: No one believes the CEOs
are going to actually generate the numbers and track down each and every
figure. Rather, the expectation is that making the CEOs personally
responsible for the truthfulness of their statements will give them the
needed incentive to put in place systems to ensure accuracy.

This is a radical concept.

Don't worry. We haven't lost perspective. We have zero expectation that
the Bush administration is interested in applying the concept seriously.

Our point here is to emphasize the power of the concept.

One of the reasons corporations are so powerful is that they are
entities structured in complex fashion to shield themselves and their
top executives from responsibility for damage they may inflict on
others. One of the perquisites of large size is that -- absent an
Enron-scale debacle -- top management can always claim that "they didn’t
know" about the misdeeds committed by the corporation, presumably
ordered or overseen by a lower-level official.

The Bush proposal, taken seriously, cuts through the protective layering
insulating top executives.

It puts the onus on the CEO, making it the CEO's job to know. Under the
Bush proposal, if a CEO attests to the validity of a grossly inaccurate
financial statement, he or she would be required to return bonuses, and
could be barred from serving as an officer or director of any publicly
traded company.

There's no reason this assignment of personal responsibility to CEOs
should be limited to financial disclosures.

CEOs should be made personally responsible for ensuring their
corporation complies with its specific legal duties, and particularly
their obligation to comply with the law.

Leave aside, for now, the issue of corporate executives' obligations to
shareholders. Under the "business judgment" rule, executives are largely
immune from liability to shareholders for any action undertaken in good
faith. Underlying the business judgment rule is the notion that
executives need discretion to use their best judgment to make corporate
decisions, and that courts should not second-guess those decisions in
hindsight. There are problems with the business judgment rule, but it is
clear that executives do need some discretion when it comes to running a
business.

But that discretion cannot include contravening statutory law and
related regulations. Those rules circumscribe permissible corporate
behavior. Corporations have a legal duty to respect occupational health
and safety rules, environmental laws, workers' labor rights, consumer
regulations and criminal codes.

And just the way President Bush was right to propose tbat CEOs take
personal responsibility for ensuring their corporations fulfill their
legal duty to issue accurate financial statements, it makes sense to
demand that corporations' top officials -- their chief executive
officers -- take personal responsibility for ensuring the companies
comply with legal duties related to worker safety, worker rights, the
environment, consumer protection and avoiding criminal wrongdoing.

The logic here is the same as in the Bush proposal. CEOs of large
corporations cannot be expected to know the details of every action
undertaken in the corporate name. But by being held personally
responsible -- with meaningful penalties in case of company
noncompliance -- they can be given the necessary incentive to put in
place systems to ensure their company respects the law.

"America is ushering in a responsibility era," President Bush said in
issuing his corporate accountability proposal, "a culture regaining a
sense of personal responsibility, where each of us understands we're
responsible for the decisions we make in life. And this new culture must
include a renewed sense of corporate responsibility. If you lead a
corporation, you have a responsibility to serve your shareholders, to be
honest with your employees. You have a responsibility to obey the law
and to tell the truth."

Those are fine principles. Let's give them teeth by holding CEOs
personally responsible not just for their corporation's financial
statements, but for making sure their corporations comply with the law.


Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime
Reporter. Robert Weissman is editor of the Washington, D.C.-based
Multinational Monitor, http://www.essential.org/monitor. They are
co-authors of Corporate Predators: The Hunt for MegaProfits and the
Attack on  Democracy (Monroe, Maine: Common Courage Press, 1999;
http://www.corporatepredators.org)

(c) Russell Mokhiber and Robert Weissman

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