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Read Interview: Tom Strickland | Luke Danielson
Tom Strickland has practiced law in Denver for many years, has run for US Senate, and he was US Attorney for Colorado from 1998 to 2000. In his work as a lawyer and as US Attorney he dealt quite frequently with issues relating to corporate responsibility. Here is are some of his responses to questions about corporate issues during an interview on April 12, 2003:
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1. In general, how much trust do you have for executives of major businesses?
2. When you were US Attorney for Colorado, did you personally deal with any cases of corporate irresponsibility?
3. What do you think is the best way to foster responsibility and integrity in big corporations?
4. Do you think that American corporations that have assets in third world countries often exploit workers and the environment?
5. Based on your experiences, why do you think that corporations lie and defraud investors?
6. What is the worst crime you have seen a company commit, either as US Attorney or that you have heard about in the news?
7. Can you think of a company that has done an exceptionally good job being responsible and showing it?
8. Since it seems like most people no longer trust corporations, especially with the most recent scandals, how do you think that companies can prove to their investors and the public that they are responsible?
In general, how much trust do you have for executives of major businesses?
“I think the United States, historically, has had the greatest integrity over the last 50-75 years. There is a term called transparency, and what that means is the transparency in our financial markets, which means that you can actually see what’s going on. There isn’t a game being played by the people who are in the know and everybody else and the investors are left out in the dark…Traditionally there hasn’t been bribery, traditionally there haven’t been kickbacks, for the most part in American businesses. As a general matter, the United States has been the model for the rest of the world in terms of honesty and integrity in business practices…I think we have an honest and fair system, but I do think we’re going through a major crisis of confidence right now.”
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When you were US Attorney for Colorado, did you personally deal with any cases of corporate irresponsibility?
“Yes, we had many cases when I was there, in a lot of different areas. Let me just hit a couple of highlights: Probably the most dramatic case was the Summitville Gold Mine Case, down in Southern Colorado.”
(The Summitville Gold Mine was started in 1986 by a man named Robert Friedland, in the San Juan Mountains. After his mine poisoned 27 miles of the Alamosa River with cyanide, he sold all his stock and fled. Mr. Strickland was involved with the investigation of the mine and getting a huge sum of money in damages to pay for the expensive cleanup.)
“That was probably the most egregious cases that I dealt with. But we had other crimes, involving corporate executives in the health care area. We had cases we brought against pharmacies that would return to stock medicines people on Medicaid didn’t pick up but still charge the government as though the medicines had been picked up. Basically these drug stores and grocery stores were stealing from the federal government…Sometimes we’d go after these people just for damages in a civil case, other times we’d go after them criminally, where they could go to jail. But when you go after a corporation criminally, generally then you’re seeking to hold the company accountable in a criminal context but there’s no individual per se.”
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What do you think is the best way to foster responsibility and integrity in big corporations?
“Well that’s a great question. I think you need tough laws. I think that what we saw in the late nineties and early part of the twenty-first century was a culture of playing ‘fast and loose.’ And so, there was this emphasis on enormous paychecks and a culture of greed. Everybody, well not everybody, but a lot of people who were making business decisions just were trying to maximize their immediate wealth and not being concerned about their shareholders or their customers or anything but grabbing as much as they could…I think we found that we had gaps in our oversight and regulatory systems. You know, as the world changes, the government needs to change and as the business world gets more complicated, as technology speeds the rate of transactions, you have to have systems in place to have oversight. A lot of times government is slow to keep up with the changes in the real world. So what we found with some of these recent corporate scandals was that we didn’t have enough cops on the street, we didn’t have enough securities regulators, we didn’t have enough people in the Securities Exchange Commission, and we didn’t have the tools available to law enforcement. So with the Sarbanes-Oxley Bill one of things that was done was the budget for some of these law enforcement agencies was increased considerably…You’ll never be able to find every bad guy but it will help if you’re able to make examples out of enough bad guys.”
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Do you think that American corporations that have assets in third world countries often exploit workers and the environment?
“I think it is a real issue when American companies that exploit workers in other countries. And it’s not an easy issue to get your hands around because in a lot of situations these countries welcome these jobs because otherwise their people would starve to death. That’s a consideration, because often companies can supply some benefit.”
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Based on your experiences, why do you think that corporations lie and defraud investors?
“Well again I think it’s the minority that do. But I think that greed is as good an explanation as any. We do have an issue in terms of the growing disparity in the wealth of this country. I read the other day that the average corporate executive makes five hundred times what the average worker makes. It’s not a good trend at all. You see these corporate executives, that when their company loses money or their stock prices go down, the board gives them a giant pay raise. Just because they can get their hands on more money doesn’t mean they should. But I don’t know if it’s something you can legislate. It’s not possible to close every loophole, have a cop on every corner, because our system only works when people have ethics and integrity and morality. Those are values that are taught first and foremost in the family and then in professional schools and are part of the quality of a society. That’s a tougher challenge, that’s a harder thing to solve, because we have a very successful business model in the United States, but we have a huge disparity in wealth, and we have examples of lots of greed. I think in many cases, these chairmen and CEOs hand pick their board members, and then the board members get compensated very handsomely, and they in turn set the salary of the corporate executive. So it’s a very cozy environment, you know, ‘I scratch your back, you scratch mine.’ As a result, the interests of the shareholders and the interests of the workers kind of get left in the dust. And that’s what happens in a lot of these egregious situations… But in many cases, even if what was done was not right, it may not by criminal. So this issue of the culture of greed is a real and serious issue. What needs to happen is the press should make a big deal out of it when this happens and people ought to invest in those companies.”
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What is the worst crime you have seen a company commit, either as US Attorney or that you have heard about in the news?
“The worst corporate crime that we have seen as a society is the ongoing crime of the tobacco industry. In terms of the number of lives affected, I don’t think anything comes close. Their knowledge that their product causes cancer and is addictive, their efforts to make the nicotine level such that people would get addicted to their product, their attempts to hook young people, knowing they would have customers for life, knowing their product is dangerous, knowing it would kill you. That’s the most egregious ongoing corporate crime.
But in my experience as US attorney, the Summitville Gold Mine case was the worst I saw. They just ravaged a beautiful mountain valley, left these giant cyanide ponds, and just walked away, without one ounce of remorse; they took the money and ran, and left the public to deal with it.”
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Can you think of a company that has done an exceptionally good job being responsible and showing it?
“Well, I think it’s important to keep this in context. I believe that most companies are honorable, and treat their employees well, and are responsible. But I tell you there’s one company, you’ll get a kick out of this, and that’s the New Belgium Brewing Company, which makes Fat Tire Beer. They are now the fastest growing microbrewery in the world. They’re incredible. Every worker gets a mountain bike to bike to work, all their energy comes from renewable and alternative energy, every worker gets stock in the company, they give generously to civic and community and environmental causes. They really are environmentally responsible, they put a lot of money back into the community, and they take care of their workers.”
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Since it seems like most people no longer trust corporations, especially with the most recent scandals, how do you think that companies can prove to their investors and the public that they are responsible?
“That’s a good question. I think that public confidence in our business leaders is way down. A lot of people and investors have gotten hurt... It will take a while for these companies to regain the public’s confidence. There isn’t any shortcut, but I think the way to do it is to reign in their greed, reign in their bad conduct, play by the rules. They need to show that they have something that motivates them besides maximizing their profits at any and all expense. In a free market world, it is the job of a company to make money, but you can make money in different ways. We can have a free market system that’s still honorable, that still treats people with dignity, that still respects the land, and that still has a broader notion of the public good besides maximizing profits. Again, you can’t legislate that kind of thing, you need enlightened corporate leaders, and you need investors who won’t invest in companies that exploit Third World workers. That kind of highlighting of corporate conduct and bringing it forth to people, that is part of the system of accountability.”
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Luke Danielson is an environmental attorney from Colorado who has done an incredible amount of work in fields relating to developing countries, international law, and environmental issues. Most recently he worked for the International Institute for Environment and Development based in London, which, according to its website, is “an independent, non-profit organization promoting sustainable patterns of world development through collaborative research, policy studies, networking and knowledge dissemination. We work to address global issues, for example; mining, the paper industry and food systems.” (www.iied.org) Mr. Danielson was helping them prepare for the World Summit on Sustainable Development in Johannesburg, organized by the United Nations. The following is what he wrote to describe the work he did and describe how global corporations are involved in developing countries:
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1. Can you describe, in brief, the work you have done to regulate international corporations?
2. What was the greatest challenge you faced when dealing with irresponsible enterprises?
3. Of the companies that neglect to deal responsibly with employees, customers, and natural resources, are most of them American?
Can you describe, in brief, the work you have done to regulate international corporations?
“There is a global economy; enterprises often operate outside the realistic control of national governments. This is much like the situation in the U.S. several decades ago, where most regulation of business was done at the state level – when the economy became truly national, states had trouble dealing with it because:
Activities were occurring outside their jurisdiction that they could not control but that affected them;
States were competing to attract business so that they could have jobs, tax revenues, etc. This often provoked a ‘race to the bottom’ where the states with the weakest requirements were seen as having an advantage in attracting business.
This was bad in terms of protecting the environment, giving rights to workers, preventing fraud, and the like. It was also bad in terms of what business needs and wants: ensuring that there is a reliable banking system with clear rules, that they aren’t going to be hurt by ‘surprise’ tax provisions, etc.
The solution in part was to move regulation to the national level and have the federal government do it, through the complex apparatus of the SEC, FCC, ICC, and other regulatory bodies set up during the Roosevelt Administration, supplemented by others like the FAA and EPA created later.
But this model does not work at the level of the globalized economy, because there is no global government to turn to. It’s just a jungle out there. We have over 200 national governments, some of which are run fairly well, others of which are poorly resourced, incompetent, or hopelessly corrupt.
These national governments have jealously guarded their sovereignty, agreeing to cooperate only at times or great crisis and pressure. It took World War I to create the League of Nations, and even then the U.S. wouldn’t join. It took World War II to create the United Nations and the “Bretton Woods Institutions” – the World Bank and the International Monetary Fund. And even then, these are hardly governments with the authority to raise taxes or impose regulatory requirements on anyone.
So if the honest players – including the honest business players – want and need some kind of global ‘framework’ of minimum rules of how to do business, how can we do it? How do we prevent the “free riders” – the people who want to benefit from such a system without helping to pay the cost of having it? Since we don’t have government or government-like authority behind it, how do we make its requirements effective? Without some system of inspection and enforcement, how do we create incentives for those who follow the rules and disincentives for those who don’t?
This is really the area in which I have been working.
Here are come of the options:
1) Treaties. Governments can come together to reach a common agreement on how to deal with common problems.
Some of these seem to work reasonably well – some of the International Labour Organization (see their website) Conventions such as the ones on prevention of forced labor, on prevention of child labor, on the rights to form unions – seem to have had a very positive effect over time.
The Aarhus convention on citizen access to information may be one of the truly revolutionary events of our times.
In the environmental area – the Convention on International trade in Endangered Species (CITES) and the Montreal Protocol designed to deal with the Ozone Hole are really good examples.
The problem is that it takes a long time (one estimate is an average of 10 years) to negotiate these treaties. Governments have a limited amount of attention and can only focus on a certain number at a time. And where powerful economic interests are involved, there may be people who simply throw grit in the gears to try to prevent anything from happening.
2) Voluntary Initiatives.
We have seen these for quite some time. Companies with a common interest come together to agree on a set of requirements. They then pay for the creation of a body that inspects what they are doing and certifies it. The Underwriters Laboratory, which does electrical appliances, is an example. Internationally, perhaps the most famous is the International Standards Organization.
Up until recently when Congress acted to pass a law for such a system, that is what we had for organic produce here in the U.S. – private voluntary bodies that agreed standards for what was ‘organic’ and let you use their label if you complied. There are international analogues. The Forest Stewardship Council develops and applies standards for the sustainable management of forests. The Marine Stewardship Council does the same for fisheries. Sometimes these are coupled with labeling standards.
The Fair Trade movement, which is labeling coffee produced according to certain standards, is an example.
But there are problems in this area as well – among them, multiplicity of standards.
Overall, the keys are: Independent monitoring, transparency, periodic reporting, and meaningful systems of positive and negative incentives
3) Suits in home country courts.
Where, let us say, a U.S. corporation does misdeeds in Indonesia, it may be very hard for those who are injured to get redress in the Indonesian courts, which may be corrupt, under control of powerful economic interests, or simply not capable of dealing with complexities. (In India, lawsuits may take 20 years to get to trial).
So there is an increasing tendency to try to sue transnational corporations in the courts of the U.S., England, France, Australia, etc. to hold them to account for injuries done abroad.
There are some real issues: different values, for example. We wouldn’t like it if Japanese courts started awarding damages against companies doing business in the U.S. for doing something that was legal here but illegal there.”
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What was the greatest challenge you faced when dealing with irresponsible enterprises?
“We take for granted some things here that are not always the case: freedom of speech, the idea that the government will not kill you for saying unpopular things, access to a certain amount of basic information about government activities.
The greatest challenges are trying to document, publicize, and do something about company misbehavior in countries that lack these basic freedoms.”
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3) Of the companies that neglect to deal responsibly with employees, customers, and natural resources, are most of them American?
“I don’t think there is much difference in the frequency of good (or bad) corporate behavior among the major developed countries – the OECD countries -- (U.S., Europe, Canada, Japan, Australia). If you get to companies from somewhere like Indonesia, Russia or Hong Kong, I am not sure this holds.
Among the corporations from the OECD, I do see the U.S. companies as standing out in one respect: companies from the other countries seem in general much more willing to enter into cooperative arrangements, and to dialogue with those they don’t agree with. U.S. companies – perhaps reflecting our overall culture – tend to shy away from such arrangements in favor of ‘devil takes the hindmost.’”
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“I think we have an honest and fair system, but I do think we’re going through a major crisis of confidence right now.”
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