Does C. Wright Mills (1956) theory of the distribution of power explain how Corporations avoid criminalisation; and are there policies being developed that will redress the balance?

Introduction:The corporation is a relatively new legal and political construction in society. It emerged in the 17th century in England and was established under Royal Charter to enable colonisation of India and the Americas. (Muncie et al, 2010). Since that time the corporation has developed further and today’s dominant form is a limited liability company, whereby shareholder or owners losses are limited to the original sum they invest. From what William Jennings Bryan (1912) described ‘the handiwork of man and was created to carry out a moneymaking policy’, has now come an entity in its own right, imbued with legal status, rights and obligations. More than that, C Wright Mills (1956) argues that the corporation has become the dominant force within a ‘Power Elite.’ So given that it could be argued that corporate crime has the greatest impact and causes the most fundamental damage to society (Mokhiber, 1999; Punch, 2000) the following paper will consider whether C Wright Mills theory of the distribution of power enables corporations to avoid criminalisation. The paper will consider a number of harms that corporations inflict on society such as violence, fraud and theft. It will also aim to find a better understanding of how corporations leverage their power to avoid criminalisation and will question as to whether the theory of distribution of power fully explains this. The paper will then consider policy responses to corporate power with especial reference to globalisation.

The ‘hidden figure’ of corporate crimeThe view one takes as to how to define corporate crime has real consequences. Thus the majority of corporate harms remain either unregulated or non-criminalised. The following selection of statistics highlights the real scale of corporate crime:

Globally over 350,000 workers die in incidents at the workplace (ILO, 2005) 2.2 Million people per year die as a result of work related injuries or disease

(UN REPORT, 2007) In the UK there are 1200-1500 work related fatal injuries each year (Tombs

and Whyte, 2008) In the UK there is an estimated 50,000 deaths per year due to work related

injuries or disease (O’Neal et al, 2007) 37% of the US population have been the victims of some form of corporate

fraud or theft (Rebovich et al, 2002) In the UK there has been an estimated 2.4 million victims of pension fraud

between 1988 and 1994) (FSA, 1999) It is estimated that $50 billion per year in tax revenues are lost per year to tax

havens (Pusey, 2007) 24, 000 people in the UK are estimated to die as a result of poisoning by

various forms of environmental air pollution (UK Department of Health, 2001)

50% of all food poisoning cases in the UK can be attributed to food consumed outside the home (UK Parliament, 2003)

Between 100 and 200 people in the UK die each year directly as a result of salmonella and campylobacter. (Helms et al, 2003)

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Even from this brief review of a small subset of corporate harms it is possible to draw two unequivocal conclusions:

1. People are killed globally each year on a huge scale by corporate activity.

2. Even on the basis of a small number of ‘known’ corporate frauds and thefts, the extent – in terms of numbers of people affected and total economic losses – of such harms is vast

ReviewDISTRIBUTION OF POWERIt can be argued that distribution of power is either pluralist or elite (education forum, 2010). The classic pluralist position as suggested by Dahl (1961) argues that power is diffuse rather than concentrated, whereas elite pluralism recognises that not all individuals and sections of society are represented. Elitist theories therefore see power as concentrated in the hands of the few and it is these few that take all the important decisions in society. C Wright Mills (1956) suggests that there is a Power Elite, comprising of the business community, the army and the government and these elites dominate and run society in their own interests: ‘Their private decisions, responsibly made in the interests of the feudal-like world of private property and income, determine the size and shape of the national economy, the level of employment, the purchasing power of the consumer, the prices that are advertised, the investments that are channeled. Not 'Wall Street financiers' or bankers, but large owners and executives in their self-financing corporations hold the keys of economic power. Not the politicians of the visible government, but the chief executives who sit in the political directorate ... hold the power and the means of defending the privileges of their corporate world. If they do not reign, they do govern at many of the vital points of everyday life in America, and no powers effectively and consistently countervail against them, nor have they as corporate-made men developed any effectively restraining conscience.’ (Third World Traveler, 2010)

In different ways and levels corporations can affect and influence the processes of criminalisation and regulation. Muncie et al (2010) suggest a number of ways that corporations operate to affect the process of criminalisation: Corporations can and do engage in direct interventions in policy making, lobbying of governments and policy makers being a prime example. Corporations can also work actively within government, representing interests on quasi-government organisations and committees. Covertly, corporations can also intervene in the policy making process by agenda setting, mobilising bias and by not making decisions. The case of asbestosis is a prime example of this. Although the UK government were aware in 1907 that asbestosis was terminal it was not until 1969 that any effective legislation was put in place (Tweedale, 2000). Tweedale (2000) suggests that a number of covert methods were used to do this including the co-opting of the medical profession, suppression of knowledge, manipulation, financial pressures as well as lying to workers and regulators. Finally corporation’s ability to influence regulation also enables them to avoid criminalisation. As well as corporations defining their own regulations (Mokhiber, 1999) regulation is contingent on the economic, political and social context within which it takes place (Tombs, 2004). Corporations are therefore

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viewed as being law abiding citizens, responsive to the logic of the business case and more likely to respond to compliance by indirect commercial power. Regulation is often introduced to manage conflict. Perhaps the current initiatives concerning the regulation of the banking system is a good example of this. As a result therefore it is plausible to suggest that regulation can be economic or social (Goetz, 1997) and understood better through power.

THEFT AND FRAUDMcBarnet (2006) calls it “creative compliance, Pussey (2007) calls it “financial crime” and Sutherland (1983) calls it “white collar crime”. Whatever the name given to it, the cost of theft and fraud is significant. Donald Rebovich and John Kane (2002) have estimated that 37% of the US population have been victims of some form of corporate theft or fraud. Mohkiber (1999) asserts that every year healthcare fraud costs Americans between $100 and $400 billion. Research by Clinard (1990), uncovered a number of corporate crimes in the defence and pharmaceutical industries in the US during the 70’s and 80’s covering areas including: fraudulent overcharging and illegal gifts to government personnel. Further research has identified corporate price fixing (Slapper and Tombs, 1999; Croall, 2001). Guinness was found guilty of manipulating markets and even following a number of convictions still remains successful and respected (Punch, 2000). Evidence here would seem to suggest that corporations commit acts of theft and fraud, yet as in the case of Guinness they escape being criminalised.

Is corporate fraud and theft an example of the distribution of power enabling corporations to avoid criminalisation? Enron was a high profile case, with reported losses in excess of $70 billion yet only six people have been sent to prison for periods of three to five years. (McBarnet, 2006). In the case of Enron the ability of corporations to keep things off the agenda can be clearly seen in: the circumvention of the financial reporting used in its accounts, the problems with regulation, especially around tax, and the collusion amongst some of the world’s leading organisations. (McBarnet, 2006). However, the distribution of power does not fully explain the how corporations avoid being criminalised. McBarnet (2006) cites ethics as part of the problem. Many leading corporations were involved in the Enron scandal and although they may have operated within the word of the law it can be argued that they acted against the spirit of the law. The banking crisis in the UK government may be seen in a similar light, where unethical business practices were challenged.

VIOLENCEFrom the explosion of the Union Carbide factory in Bhopal, India (Shrivastava, 1987) to the Ford ‘Pinto’ automobile case (Swiggert and Farrell, 1980/81), to the Herald of Free Enterprise in 1987 to the issue of Thalidomide (Knightley et al, 1980) there is a plethora of evidence that indicates that business kills, maims and poisons (Punch, 2000). Estimates from the Independent Labour Organisation (ILO) are that 2.2 million people die as a result of work-related injuries or disease per year, that there are approximately 270 million occupational injuries and 160 million victims of work related illnesses annually (Independent Labour Organisation, 2005). Add to this the 125 workplace-related deaths per hour worldwide (Mokhiber) and the 345,000 workers that died in different regions of the world (Centre for Corporate Accountability, 2004) and the scale of the harm becomes overwhelming. Is it therefore then that: ‘Companies then get away with “murder” because the law and the

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courts are not geared to organisational deviance and corporate violence’ (Punch, 2000 p 243) or as Tombs (2007) suggests a result of the distribution of power?

Thousands of workers and members of the public die in Britain every year in work related incidents (Tombs, 2007; Muncie et al, 2010) yet few are ever reported and some not even investigated. This ability to keep things off the agenda is a key factor in corporations avoiding criminalisation. Similarly the lack of convictions following the sinking of the Herald of Free Enterprise (Punch, 2000) suggests that in the current political economy a dominant value is not occupational safety (Tombs, 2007). Punch (2000) and Mokhiber (1999) assert that corporations are seen as legitimate businesses and clean cut executives pursuing business are not seen as criminal and they also have the financial, legal and social power to bargain their way out of trouble. Punch (2000), Mokbiber (1999) and McBarnet (2006) all see the use of corporate power as an enabler to avoid sanctions and criminalisation: be it through plea-bargaining into civil courts, self and increased regulation, mobilisation or making deals with the government. Punch goes further than this though, and suggests that there are more facets to the distribution of power that enable corporations to avoid criminalisation. As well as the distribution of power Punch (2000) highlights a number of other key factors such as: legal systems have great difficulty in tracing decision making from the boardroom to the scene of the disaster or accident, it is very difficult to make an explicit connection between corporate policies and violent outcomes. Punch also notes that the law is fundamentally focused on the individual and not the organisation at a structural as well as ideological level. To criminalise corporations will therefore require significant cultural, ideological and structural change.

MEDIAIt could be argued that the British newspaper industry was built on the foundation of business and commercial news (Lloyd, 1999). From the inception of the British press in the 17th century, the establishment of the Economist in the late 19th century to the rise of the popular press there has been a strong watchdog tradition, often referred to as the fourth estate. Muncie et al; (2010) suggest that reporting on corporate crime is much less visible in the media and if reported it tends to be done so in the more specialist financial and business pages. In terms of distribution of power and corporations avoiding criminalisation this therefore can be viewed as an effective way of screening out corporate crime.

Lloyd (1999) and Punch (2000) both cite defamation laws and possible legal action as strong reasons for the lack of investigative journalism thus pointing very clearly at the distribution of power. Lloyd goes further though and suggests that current value systems and culture have changed. Rather than corporations screening out corporate crime there has been a shift in the publics’ taste from investigative journalism to what he terms ‘celebrity journalism’. This is the culture of venerating business leaders such as Alan Sugar and Richard Branson rather than look at businesses operatingcriminally. Instead of investigative journalism there is market driven journalism. In terms of value systems there has also been a drive towards more ethical standards of privacy, both in individual terms and corporate terms thus the media has to act with restraint. Finally crime, especially financial, can be hugely complex and technical and crime protection agencies, let alone the media are finding it difficult to deal with (Lloyd, 1999)

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GLOBALISATIONThe concept of globalisation in corporate terms can be used to imply the way that economic forces have shifted power and authority away from national governments towards external, transnational capital. (Drake et al, 2010). Greider (1997) argues that as capitalism has become increasingly globalised even states such as the US have found themselves subjugated to the imperatives of the global market. Held (2004, p10) states: ‘The notion of globalisation implies the centralisation of power in the hands of just a few major organisations’ Elite corporations with revenues in excess of some countries GDP operate around the globe and it could be argued that these corporate empires have replaced political ones. (Held, 2004). Nader (1999) goes even further and suggests that the world is ‘witnessing its subjugation to the large corporate model of economic development, the large corporate model of technology and the large corporate model of culture itself.’ This concept of globalisation resonates with C Wright Mills work the Power Elite (1956) where he views a world where a few corporations make decisions upon the military and political as well as the economic developments around the world. In terms of the global economy, many transnational corporations are now operating in the ‘global south’, exporting goods and services there, leveraging the inequalities of power in labour and consumer markets and operating in countries where the laws in relation to the workplace and environment are less well developed than in most westernised economies. (Muncie et al, 2010). The distribution of power in part explains corporations ability to operate in Export Processing Zones (EPZs) such as Saipan, where immigration controls and labour rights are controlled differently, it enables corporations to pressure countries into removing worker rights (Michalowski et al, 1987), it can influence government decision making to make economies more attractive to them by influencing social and environmental regulations, taxes and so on. Further to this: “There is evidence, however, that companies take decisions that will lead to what might be considered the dispersal or export of suffering – as in the transfer of hazardous technology to third world countries, in the huge advertising drives for an increased market share of cigarette and tobacco consumption in Eastern Europe and the Far East, and in the dumping of out of date drugs in developing countries.” (Punch, 2000 p 251). From the formation of what Muncie et al (2010) calls the space between laws and Export processing zones to Giddens (1999) view of globalisation as in part economic, it would seem that globalisation enhances and affirms the unequal distribution of power.

Corporations operating across the globe commit a number of criminal acts yet fail to be criminalised. The ability of transnational corporations to influence countries into reducing its regulatory standards could be attributed to the distribution of power. However, Tombs and Whyte (2003) argue that ‘it is governments that still decide when, how and to what extent corporations should be regulated.’ Muncie et al (2010) suggest that EPZ’s reflect a wider phenomenon known as the ‘race to the bottom’. Regulatory standards are deliberately reduced because developing countries are suffering from pressure and this pressure could come from institutions such as the International Monetary Fund or World Bank loan agreements. The recent financial crisis where governments around the world have intervened to support the economy shows how much power the state retains in controlling business and capital flows. Globalisation and the increasing power of transnational corporations therefore does not fully explain how corporations avoid criminalisation. As much as it is a strong example of the distribution of power, the political, social and economic situation is

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just as important. As is the power of the nation state which has as much if not more impact in either criminalising or enabling the corporation to avoid being criminalised.

PolicyA number of policies have been introduced to redress the balance of power between corporations and society. McBarnet (2006) suggests that Enron had put ethics, culture and the spirit of the law on the corporate professional and regulatory agenda, and as a result of this and other financial issues, the US government introduced the Sarbanes-Oxley Act on corporate governance. Pussey (2007) also suggests that as a result of the high profile financial cases such as BCCI and Barings both the United Nations and The Basle Committee on Banking came together to produce the Vienna Convention 1988 and the Basle Concordat which addressed the issue of money laundering. Further policies from The Financial Action Taskforce were introduced to further combat money laundering and after the terrorist attacks of September 11th. This was then enlarged to include the issue of terrorist financing. In many ways these policy responses are highly technical and are narrowly focused on one type of crime, that is financial and I would challenge that, rather than a policy response targeted at reducing or redressing corporate power, this is a tightening of fiscal controls.

Of perhaps wider impact and of more relevance in terms of how corporations have been able to avoid criminalisation is what Muncie et al (2010) describe as the attempt to close the ‘space between laws’. If powerful corporations can leverage their financial, political and economic power to influence government and government policy, if they can operate across borders and ignore or flout the laws and conventions of their resident country, then how can policy redress the balance?

In terms of policy Muncie et al (p159, 2010) state that: ‘International law has so far failed to develop universal legal stands for corporations.’ However the establishment of the Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regards to Human Rights, published by the UN Commission on Human Rights and adopted by the UN in 2003 provides a policy response that attempts in someway to redress the balance in the distribution of power between corporations and society. The Norms include:

General obligations: States have primary responsibility for ensuring that transnational corporations and other businesses respect human rights. Corporations also have an obligation to promote and respect human rights, including vulnerable groups and indigenous peoples:

Rights to equal opportunity and non-discriminatory treatment: Corporations have the responsibility to ensure equality rights are derived from international instruments and national legislation, including international human rights law.

Rights to security of person: Corporations should not benefit from war crimes, crimes against humanity, genocide, torture, forced labour and security provision shall observe international human rights norms.

Rights of workers: Corporations shall not use forced labour, shall respect the rights of children, provide a safe working environment, provide wages commensurate with the

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provision of adequate living conditions and finally corporations shall ensure freedom of association.

Respect for national sovereignty and human rights: Corporations shall recognise and respect international laws, national laws and the regulatory environment and respect the countries’ policies which they operate in and do so with transparency. Corporations shall not offer, condone or engage in any acts of bribery and corruption. Corporations shall refrain from any activity which supports or encourages abuses of human rights nor should they provide goods or services that can be used to abuse human rights. Corporations shall respect the rights of people and contribute to the realisation of a better and improved standard of physical and mental health as well as improved education, housing and civil rights.

Obligations with regard to consumer protection: Corporations shall market their products in line with fair business standards and not produce, distribute, market or advertise harmful or potentially harmful products for use by consumers.

Obligations with regard to environmental protection: Corporations shall observe national laws and regulations relating to the preservation of the environment and also seek to conduct their activities in a manner contributing to the wider goal of sustainable development.

(Adapted from UNCHR, 2003)

From reviewing these obligations it is possible to note responses to the power that corporations can leverage. In terms of corporations leveraging their ‘economic attractiveness” to influence countries to relax their employment and equality laws we can see that there are obligations concerning equal opportunity and non-discriminatory treatment. In terms of pollution and incidents such as the Union Carbide factory there are obligations concerning the environment. Instruments such as Export Processing Zones can now be challenged as the obligations cover workers rights, standards of living. The policy also covers consumer protection, thereby addressing incidents such as the Cadbury’s and salmonella outbreak in 2006. There is a very clear link between the act and the corporate harms that corporations inflict.

It must be noted though that these are obligations not legal sanctions. Corporations comply voluntarily with the principles of the policy and these principles must be legally sanctioned in national courts or through international instruments. A number of significant challenges can therefore be made. The first challenge concerns the use of Export Processing Zones: as an example of what Muncie et al (2010) has referred to an Export Processing Zone such as Saipan operates within and without of the US. Within, in terms of labelling, without, in terms of external to the rules, regulation and enforcement of the American jurisprudence systems. Saipan though, can only operate because the American government allows it to do so. The principle of the norms can only be sanctioned by national or international law and here is a prime case of a nation state saying one thing, i.e. adhering and supporting international human rights, and doing another. Examples of this can be seen in China, and Nielsen (2007) asserts that there are over 260 EPZs in 67 countries. Another significant challenge facing the norms is the ‘economic” need that, those developing countries have and the pressure that loans from the IMF and the World Bank impose. Many developing countries need to encourage large corporations to come into their markets to drive prosperity,

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build infrastructure and so on. A method of doing this is to make the regulatory system as amenable as possible, thus negating many of the obligations concerning workers rights and consumer’s rights. At the same time pressure from loan agreements can induce countries to provide what are considered more favourable business conditions. Finally, it can be argued that underpinning the norms would require a global or international form of jurisprudence. Given the variance in laws between countries, the variance in the value sets between people, the variance in the uptake or interpretation of human rights between countries there is, and will continue to be great difficulty in harmonising what is criminal and what is not in a global business environment.

Conclusion‘The corporate culture is a century or more in the making. It will take a while before we figure out how we got ourselves into this soup – from a situation where we controlled corporations, to where corporations are controlling us.’ (Mokhiber, 2009). The evidence suggests that there are significant harms created and inflicted by corporations on society and that corporations do leverage power to avoid criminalisation. The challenge though is that the distribution of power alone does not explain fully how corporations avoid criminalisation. Corporations are expert in agenda setting, lobbying and ‘managing’ regulation, yet I would suggest that in tandem with this there has been an ethical shift from what is the right thing to do, to what can be gotten away with or ‘gaming’ the system as McBarnet (2006) puts it. In line with this ethical shift there has also been a move in value sets and consumer demand. The media was once viewed as the fourth estate, the watchdog of corporate intransigence but now a different form of journalism is demanded, market driven consumer journalism. Rather than an expose on high level corporate fraud the news is about how many millionaires there are. Value sets also appeared to have changed, its okay to defraud the taxman, yet global economies lose $billions of dollars each year. These frauds are not necessarily the result of corporate power; they are more of cultural and ethical stance. Policies such as the norms and principles set out by the United Nations can address the balance of power but in a global economy where nation states continue to wield significant amounts of power it is difficult to see how a voluntary code will ever be truly effective.

ReferencesUN Commission on Human Rights (UNHCR) (2003) Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights, Geneva, UN Commission on Human Rights. Centre for Corporate Accountability (2009) Number of Worker Deaths Around the World, London, Centre for Corporate Accountability.Clinard, M. B. (1990) ‘Corporate Corruption: The Abuse of Power’. New York, PraegerCroall, H. (2001) Understanding White Collar Crime, Buckingham, Open University Press.Drake, D., Muncie, J., Westmarland, L. (2010) CRIMINAL JUSTICE: Local and Global, Willan Publishing, Culmcott House, Devon

Education Forum: How is Power Distributed in Society: http://www.educationforum.co.uk/sociology_2/Power3.htm, accessed April 2010)

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Giddens, A.(1999) ‘Runaway World’. Profile Books Ltd, 58A Hatton Garden, LondonGrieder, W. (1997) One World, Ready or Not – The Manic Logic of Global Capitalism, New York, Simon ScusterHeld, D. (2004) ‘a globalizing world? Culture, economics, politics’. Routledge, The Open University, 11 New Fetter Lane, LondonLloyd, C. (1999) ‘Corporate Culture; Financial reporting; Media Whitleblowing’, Corporate Communications; An International Journal. Vol. 4, pp43-48McBarnett, D. (2006) ‘After Enron will “whiter than white-collar crime” still wash?’, British Journal of Criminology, vol. 46, no. 6, pp.1091–109.Muncie, J., Talbot, D., Walters, R. (2010) ‘ Crime: Local and Global’. Willan Publishing, Culmcott House, DevonMills, C. W. (1956) ‘The Power Elite’. New York, Oxford University PressMokhiber, R. (1999) ‘Although it is corporate crime which most fundamentally affects society, transnational corporations are allowed to get away with murder’. The Ecologist, vol. 29 num. 4Nielsen, J. (2007) Export Processing Zones or Free Zones – The Experience seen from a Trade Union Point of view (online) www.labour-inspection.org/EPZ.experiences.tradeunionpoint.htm (accessed16 January 2009)Punch, M. (2000) ‘Suite violence: why managers murder and corporations kill’, Crime, Law and Social Change, vol. 33, pp. 243–80.Pussey, I. (2007) ‘The Role of the regulator in combating financial crimes – a Caribbean perspective’. Journal of Financial Crime, vol. 14, num.3 pp299-319Rebovich, D. and Kane, J. (2002) ‘An eye for an eye in the electronic age: gauging public attitude towards white collar crime and punishment’, Journal of Economic Crime Management, vol 1, no 2.Sutherland, E. (1983) White Collar Crime: The Uncut Version, New Haven, CT, Yale University PressThird World Traveler, The Chief Executive from the book The Power Elite. ((http://www.thirdworldtraveler.com/Book_Excerpts/ChiefExecutives_PE.html, downloaded April 2010)Tombs, S. (2008) ‘A political economy of corporate killing’, Criminal Justice Matters, vol. 70, no. 1, pp. 29–30.

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