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.17 :!’t4/1A -4\(iitiiil liability it .1’stat6 IVW -for a felony is a .. ”$10000 fine. At this rate, crime pays. Limited punishment combined with the probability that no prosecution will ensue positively encourages wrongdoing. While an appropriate state strategy for dealing with corporate misdeeds is likely to become part of a law ‘n order package this spring, the Texas criminal justice system is increasingly viewed as inadequate to the task. Judges are reluctant to imprison white-collar criminals, and fines seem to be passed on to shareholders. In Where the Law Ends, an important analysis of the limitation of legal action, Chris Stone points to new ways of controlling the enormous power of corporations. One approach within the criminal justice system is that of corporate rehabilitation. As a society, we claim to be concerned with rehabilitating individual wrongdoers through supervised probation, yet we assume corporations will rehabilitate themselves. Corporations are specifically exempted from the probation requirement. While current modes of probation would be inappropriate for them, a hybrid form in addition to \(rather modest penalties would prove helpful. , ’04P.t. ;.:V0.1.0g:-: .,34?P.;,i -e4F.0″ .;1RXY :.0Cli free f. …………744:\(04:fhereby :.**:t0i0. -f::Af.:.A:04:6::f Smith some modern -. .. . .. . .:`4.ft.i0i..*4fiiild like to suppress. 64:thi ,se is the isolation of directors eiryees from the consequences of ate action. How do we pierce the Orate veil to learn who is responsible . 1;’:R socially harmful corporate action? ……numerous commentators have noted, ;’rather frequently picks directors rather than the other way around, and shareholders rarely have much say about, or interest in, corporate conduct beyond what is reflected in the next quarter’s dividend check. Directors themselves frequently serve on boards without knowledge of basic corporate functioning. Perhaps state and federal laws mandating the appointment of more outside directors with realistic salaries and staff help would ensure that corporate boards know what is going on in their names. Where legal action is taken against individual officers or directors, the corporation in question usually has insurance to indemnify directors for lawyer’s fees and fines. Texas does not even require that shareholders be advised that such indemnification policies exist, and this omission suggests further remedial legislation. In addition to limiting indemnification, Texas law should treat corporate officials found guilty of serious misconduct the same way elected officials convicted of certain offenses are supposed to be treated with suspension from office.’ Raising the cost of corporate crime is also desirable. Since a corporation can ’29U.S.C. 504 authorizes the suspension of labor union officials convicted of certain offenses, and Texas Civil Statutes Ann. art. 5958 prohibits continued service by public officials convicted of a felony. On the other hand the officer of a corporation can continue indefinite service despite repeated wrongdoing. An excellent review of how well those who made illegal corporate contributions to the Nixon campaign have done since is provided in “Watergate Donors Still Riding High,” New York Times, Aug. 24, 1975. Political pollution . The advisability of establishing effective legal weapons for countering corporate misconduct is amply demonstrated by Gulf Oil Corporation’s pollution of the political process with $12.3 million in campaign contributions. Attorney General John Hill, taking the sort of creative approach that has so often benefited consumers during his administration, sued Gulf for $1.05 million for illegal contributions it made in Texas. The only other tool available to Hill was corporate dissolution. Would the attorney general seek forfeiture of the corporate charter? “Too extreme,” he said, and given the jobs and shareholder interests at stake, how could he be expected to? However, if a corporate rehabilitation statute had existed, the attorney general might have employed any number of tools to ensure that illegal activity was permanently Diana Sperberg ended. Meanwhile, Gulf board chairman Bob Dorsey retired comfortably to Austin with a purse of $1.6 million in benefits and an annual pension of $48,158. Another topic of concern for corporate accountability advocates should be the comfortable relationship too often existing between state regulatory agencies and the businesses that they monitor. My initial plunge into the consumer movement involved the study of just such a relationship between small loan February 11, 1977 25 u 0 ,4 :ifiareholder democracy is a myth. Man…