Friday Dec 13

Everybody’s Business: High Standards, Poor Behavior

It is amazing how much attention has been paid to the Statement on the Purpose of a Corporation issued in August by 181 chief executives of large corporations under the auspices of the Business Roundtable. We were meant to to think it was a major breakthrough that big business was claiming to do more than maximize returns for shareholders.

In fact, Corporate America has long given lip service to the notion that it has an obligation to other stakeholders such as employees, communities and suppliers and that it needs to promote sustainability in its operations. The language of the Roundtable statement could have been taken from similar pronouncements that have been made by the vast majority of large companies under the rubric of corporate social responsibility or a similar phrase.

The website of Exxon Mobil, for instance, contains a page on its Guiding Principles, which are said to include adherence to “high ethical standards.” One has to wonder what happened to those standards when the company spent years publicly denying that climate change was a problem when it had internal research to the contrary.

The question, of course, is whether these previous high-minded statements or the Business Roundtable document have any real meaning—whether they result in more responsible practices or are designed mainly to let corporate executives pretend to be moral exemplars.

The answer seems clear. If large corporations truly had a commitment to their employees, they would not engage in so many exploitative practices and fight so hard against unionization. If they truly cared about the environment, they would take more aggressive steps to reduce pollution and address the climate crisis. If they truly cared about ethical supply chains, they would stop sourcing from low-road producers.

Not only are most large corporations far from ethical leaders—in many cases they cannot bring themselves to adhere to their most basic responsibility: obeying the law and complying with regulations.

For the past few years, I’ve spent most of my time documenting corporate lawlessness by building the Violation Tracker database, which now contains more than 360,000 examples of misconduct that have resulted in $470 billion in penalties since 2000.

I ran the names of the 181 companies whose CEOs signed the Roundtable statement through the database, and the results were eye-popping. The signatories and their subsidiaries together account for more than $197 billion in cumulative penalties, or more than 40 percent of the total penalties from tens of thousands of companies.

Twenty-one of the signatories have penalty totals of $1 billion or more, and three with $25 billion or more. At the top of the list is Bank of America, with more than $58 billion in penalties from 128 cases largely involving mortgage abuses and toxic securities. JPMorgan Chase comes in at $30 billion from similar cases. As a consequence of its role in the Deepwater Horizon oil spill and other disasters, BP ranks third with $27 billion in penalties.

The list continues with other big banks (Citigroup, Goldman Sachs, Morgan Stanley, etc.), big utilities (American Electric Power, Duke Energy, etc.), big pharmaceutical manufacturers (Pfizer, Johnson & Johnson, Abbott Laboratories, etc.), and big oil companies (Marathon Petroleum and Exxon Mobil).

Other signatories with $1 billion or more in penalties include: Boeing, whose total will grow even larger from cases relating to its 737 Max debacle; the rating agency S&P Global; AT&T; and Walmart, whose scandals are too numerous to list here.

Another four dozen corporations that lent their names to the Roundtable statement have total penalties of more than $100 million each. These include numerous household names such as General Motors, CVS Health, Western Union, IBM, MetLife, American Express, Dell Technologies, United Parcel Service, Coca-Cola, Apple and Whirlpool.

It is significant that two of the worst corporate miscreants of recent years, Wells Fargo (because of offenses such as creating phony accounts to generate illegal fees) and Volkswagen (because of its emissions cheating), are missing from the list of signatories. Perhaps they or the Roundtable realized that their inclusion would have been too obviously hypocritical.

Yet, as the penalty data show, the track records of many of the other signatories are not much better. Large corporations that repeatedly break the rules concerning consumer protection, environmental protection, workplace protection, investor protection and every other kind of protection cannot profess that they are committed to serving the well-being of all their stakeholders. Until they change their behavior, their purported principles mean little.

Philip Mattera heads the Corporate Research Project in Washington, DC, and writes the blog Dirt Diggers Digest.

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