Corporate governance

  • August 31, 2015
    Guest Post

    by Reuben Guttman, partner, Guttman, Buschner & Brooks, PLLC; member, ACS Board of Directors

    This month, former United States Congressman Michael Grimm will begin an extended vacation courtesy of the United States Federal Bureau of Prisons. Mr. Grimm was awarded an eight month getaway as the prize for a scheme to defraud the Internal Revenue Service while running a New York health food restaurant. He pled guilty last December but was formally sentenced in July, 2015.

    A December 23, 2014 press release issued by the United States Attorney’s Office for the Eastern District of New York stated that “Michael Grimm has now publicly admitted that he hired unauthorized workers whom he paid ‘off the books’ in cash, took deliberate steps to obstruct the federal and state governments from collecting taxes he properly owed, cheated New York State out of workers’ compensation insurance premiums, caused numerous false business and personal tax returns to be filed for several years, and lied under oath to cover up his crimes.”

    As Mr. Grimm counts down his final days of freedom, there is no question that the summer of 2015 is for him a far cry from his summer of 2011 when he was a member of the House Finance Committee and hawked legislation requiring whistleblowers to report wrongdoing to corporate internal compliance groups before disclosing information to the Securities and Exchange Commission. Back then Grimm explained that “most companies want to know if an employee is doing something wrong or hurting customers.” Mr. Grimm’s choice of words was telling. Employees doing something wrong? What about their bosses?

    These days Mr. Grimm is a poster child for why employees should not be required to blow the whistle internally before reporting to government regulators. What is the likelihood that one of Mr. Grimm’s employees would have had their grievances fully and completely addressed if they complained about being paid off the books? The truth is that when the boss is the culprit, internal compliance programs are not a viable means of redress for employees. Enron, Tyco and WorldCom all had internal compliance programs, none of which worked.

  • May 22, 2015
    Guest Post

    by Thomas O. McGarity is a Member Scholar and past president of the Center for Progressive Reform, and a professor at the University of Texas Law School. He is the author of Freedom to Harm: The Lasting Legacy of the Laissez Faire Revival.

    The Wall Street Journal recently devoted nearly two pages of its Saturday Review section to an editorial by Charles Murray of the American Enterprise Institute urging American corporations to violate laws that they deem to be “pointless, stupid or tyrannical” as acts of civil disobedience.  The article, which is a capsule summary of his recently published book titled By the People: Rebuilding Liberty Without Permission,” betrays a profound misunderstanding of the concept of civil disobedience and a deplorable contempt for the laws that Congress and state legislatures have enacted to protect their citizens from corporate malfeasance.

    This is, of course, the same Charles Murray who has made millions of dollars writing poorly documented books like The Bell Curve and Losing Ground, which were designed to allow conservative politicians to feel good about reducing welfare for the poor, limiting immigration from Latin America, and eliminating affirmative action policies.  If for no other reason than that Charles Murray is one of almost-candidate Jeb Bush’s favorite authors, his newest salvo bears close scrutiny.

    The essential underlying premise of the article is that the Code of Federal Regulations is chock full of senseless regulations, the violation of which could not possibly lead to any actual harm to anyone.  This premise is an article of faith for critics of federal regulation, but it has little basis in fact.  The one actual regulation he cites (an OSHA standard requiring railings for exposed stairway floor openings to be 42 inches high) may be far more detailed in its specification than it needs to be, but it is by no means senseless.  As Murray recognizes, it is intended to prevent workers from precipitous falls.

    Murray’s big idea is for companies in various regulated industries to get together and agree to engage in acts of “civil disobedience” by consciously violating regulations they deem senseless.  He points out that regulatory agencies have become so debilitated that they do not have nearly enough inspectors to detect violations of any of their regulations.  The agencies therefore depend to a great extent on voluntary compliance with their regulations.  Murray suggests that if companies just quit voluntarily complying with what they deem to be pointless, stupid or tyrannical regulations, the agencies would probably not penalize them (just as the traffic cop stationed next to a crowded freeway does not try to pull over speeders who are traveling with the flow of traffic), and the world would be a better place.  Those violators that the agencies did prosecute should fight the government tooth and nail to send the message that corporate America will no longer tolerate the injustice of senseless regulation. What’s more, he proposes that as part of this conspiracy to break the law, the corporations should create “defense funds” to which they’d all contribute, to pay the legal fees of the ones who get caught.

    Murray’s idea is a gross perversion of the concept of civil disobedience as the nonviolent violation of a law that the violator deems to be unjust and the willingness to suffer the legal consequences to demonstrate the law’s injustice.

  • May 1, 2015
    Guest Post

    by Rena Steinzor and Thomas McGarity, past presidents and founders of the Center for Progressive Reform. Steinzor is a professor at the University of Maryland Carey Law School, and McGarity is a professor at the University of Texas Law School. Steinzor is author of Why Not Jail? Industrial Catastrophes, Corporate Malfeasance, and Government Inaction. McGarity is author of Freedom to Harm: The Lasting Legacy of the Laissez Faire Revival.

    With the announcement that GM Chief Executive Officer Mary Barra received the outsized compensation of $16.2 million in 2014, what should have been a year of humiliation and soul-searching for that feckless automaker instead ended on a disturbingly self-satisfied note.  Purely from a public relations perspective, Barra worked hard for her money.  Appearing repentant, sincere, and downcast, she persuaded star-struck members of Congress that the company was committed to overhauling a culture characterized by what she called the “GM shrug,” loosely translated as avoiding individual accountability at all costs.  Even as she blinked in the television lights, GM fought bitter battles behind the scenes to block consumer damage cases and exploit corporate tax loopholes.

    Largely on the basis of her political adeptness, Barra has been taking victory laps in the business press, hailed as the rare (female) CEO who has led her corporation out of a morass that could happen to anyone.  This performance and the accolades it inspired provide a troubling coda to what was a destructive year for American drivers.  Dubbed “the year of the recall,” automakers recalled an unprecedented 64 million vehicles ‒ about one in five cars on the road; GM led with 26 million of this total.

    To restore justice to GM’s beleaguered customers – and the scores of families who lost loved ones in crashes caused by the defective switch – we can only hope that the Justice Department’s criminal investigation of the company and its senior executives results in prosecutions that could offset the unjust favors the legal system is already prepared to bestow.

  • August 14, 2014

    by Caroline Cox

    ACS Board Member Reuben Guttman and Traci Buschner write for McClatchy DC on how the recent $97 million settlement between the U.S. Department of Justice and Community Health Systems serves as a reminder of why government oversight matters.

    Paul Campos discusses the “scam” of for-profit law schools in The Atlantic. “[T]he odds of a graduate of one of these schools getting a job that arguably justifies incurring the schools’ typical debt level are essentially 100 to 1.”

    Slate’s Jamelle Bouie argues against the escalating militarization of Ferguson, Mo.

    The Huffington Post reports on the detention of journalists Wesley Lowery and Ryan J. Reilly in Ferguson, Mo last night. In light of these arrests, T.C. Sotteck of The Verge details the right of individuals to record the police.

    Garrett Epps of The Atlantic warns against labeling Roane County Circuit Judge Russell Simmons a bigot because of his recent ruling on same-sex marriage in Tennessee.

    Thomas Geoghegan argues in Politico that President Obama should challenge Republican gerrymandering. 

  • May 21, 2014

    by Jeremy Leaming

    For more than a decade, General Motors kept secret an ignition switch defect in its cars that reports have linked to numerous fatalities. GM has now recalled 13.5 million cars this year. A bipartisan bill has been recently introduced in Congress aimed at making it more difficult for corporations to keep court documents secret in product-liability litigation.  

    The Sunshine Litigation Act of 2014, introduced by Sens. Richard Blumenthal (D-Conn.) and Lindsey Graham (R-S.C.), would, for example, bar a court from enforcing any settlement provision that restricts parties from disclosing public health or safety information to a government agency, state or federal, that has authority to enforce consumer regulations.

    In a press statement about the bill, Sen. Blumenthal said, “Too often in product liability cases, victims are pressured to pay for a settlement with their silence, even when public interest outweighs corporate confidentiality. The Sunshine in Litigation Act will ensure that courts permit sunshine when product liability cases involve information vital to public health and safety. Concealment can kill, and so can secret settlements.”