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Halsey Minor
CNET Founder, Entrepreneur and Investor
Posted: June 15, 2010 03:48 PM
The Risk of Eliminating Risk
Corporate America has been good to me. Over the past 20 years, I've made hundreds of millions of dollars in innovative tech companies I either launched or financed -- including CNET, Salesforce.com and the service now called Google Voice.
But over those same two decades I've grown disgusted by what corporate America has become. Several words come to mind: venal, corrupt, conniving, irresponsible, unaccountable, amoral. All are accurate, but none alone captures the extent of decay that has left us with a truly rotten system.
Corporations have mutated from organizations that once generated jobs, products and prosperity for the country into voracious, impenetrable monsters legally required to put their own selfish interests first. The result: Corporations now enjoy powers and privileges historically reserved for monarchs, and, like monarchs, the people who run them are largely insulated from the consequences of their actions.
Let me give you a personal example. I recently won an $8.57-million court judgment against the auction house Christie's. The jury found Christie's guilty of fraud, among other things, because it refused to return artwork it failed to sell on my behalf.
Fraud is serious. If a jury had found me guilty of fraud, I'd probably be sent to jail and it would stick with me for the rest of my life. I would be ruined. For Christie's, whose namesake founder has been dead for hundreds of years, it's just a cost of doing business. No one from Christie's will endure any serious consequence because they are protected by a cloak of corporate immunity and obfuscation.
Corporate law makes it so Christie's, a faceless legal entity, is responsible rather than the individual human beings who actually committed the offense. It's the same for many of the corporate banks and financial institutions that brought the global economy to the brink of ruin -- and now are reaping record profits while millions of ordinary Americans remain out of work, struggling to make ends meet and in danger of losing their homes.
I appreciate that few Americans would consider me a "little guy," but when dealing with ossified and entitled corporate infrastructures, we're all little guys. Anyone who has tried to argue with their insurance company or renegotiate their mortgage comes away with the distinct feeling that the deck is stacked against them.
It is.
And it's getting worse.
Just look at the oil washing ashore on the Gulf Coast. Despite appropriately contrite statements from BP executives, the past may be a more telling predictor of what lies ahead. More than two decades after the devastating Exxon Valdez spill, just one person -- the captain of the ship -- has faced criminal prosecution. For its part, Exxon and its army of lawyers repeatedly appealed punitive judgments against the corporation.
Thousands of the original plaintiffs who sued Exxon died before they collected compensation. The corporation meanwhile lives on, and quite profitably: the $507.5 million Exxon was ordered by the U.S. Supreme Court to pay in 2008 represented a measly 1.1% of that year's profit.
Already, residents and business owners along the Gulf Coast are discovering that there are definite limits to BP's public promises to make whole those affected by the oil spill.
To be sure, the concept of limited liability is an important part of corporate law and a key driver of 20th Century progress. It encourages responsible risk and promotes innovation, which necessarily requires failure. And it provides investors funding new ventures with the assurance that failure will wipe out only their investment, not their entire net worth.
But we have moved beyond limited liability to an era of almost no liability.
"It makes sense to protect the shareholder; it doesn't make sense to protect the managers," Joel Bakan told me recently. Bakan is a professor and author of The Corporation: The Pathological Pursuit of Profit and Power, a compelling and sometimes frightening look at the rise of corporations.
In the five years since Bakan's book was published, corporations have grown even more powerful and irresponsible, as the financial crisis demonstrated. When the federal government stepped in to prop up institutions it deemed "too big to fail," it created a collusive environment not seen since World War II.
This time, the threat was not to democracy and freedom, but to an entirely undemocratic corporate system in which the guys at the top play by their own rules -- and, even then, ignore them.
It's time to impose new rules.
Let's start by removing the broad legal shield individual corporate employees hide behind -- and subject them to the same laws as the rest of us. In California, I can be fined as much as $25,000 if I throw batteries out with the trash. Yet when Wal-Mart agrees to pay $27.6 million because its employees dumped toxic chemicals at hundreds of stores, the corporate entity pays the fine, issues a blanket corporate apology and moves on with a corporate promise to do better next time.
Instead, individual employees and managers -- all the way up to the CEO -- must answer when they screw up in the same way they are rewarded when they succeed. The threat of public prosecution can be a powerful check on the corporate culture of pathological recklessness that is rapidly devouring America. Only then will we see companies pursuing profit responsibly and ethically -- recalling cars before people are killed, bolstering safety before a mine explodes or accurately calculating risk before a financial instrument melts down.
http://www.huffingtonpost.com/halsey..._b_611744.html
CNET Founder, Entrepreneur and Investor
Posted: June 15, 2010 03:48 PM
The Risk of Eliminating Risk
Corporate America has been good to me. Over the past 20 years, I've made hundreds of millions of dollars in innovative tech companies I either launched or financed -- including CNET, Salesforce.com and the service now called Google Voice.
But over those same two decades I've grown disgusted by what corporate America has become. Several words come to mind: venal, corrupt, conniving, irresponsible, unaccountable, amoral. All are accurate, but none alone captures the extent of decay that has left us with a truly rotten system.
Corporations have mutated from organizations that once generated jobs, products and prosperity for the country into voracious, impenetrable monsters legally required to put their own selfish interests first. The result: Corporations now enjoy powers and privileges historically reserved for monarchs, and, like monarchs, the people who run them are largely insulated from the consequences of their actions.
Let me give you a personal example. I recently won an $8.57-million court judgment against the auction house Christie's. The jury found Christie's guilty of fraud, among other things, because it refused to return artwork it failed to sell on my behalf.
Fraud is serious. If a jury had found me guilty of fraud, I'd probably be sent to jail and it would stick with me for the rest of my life. I would be ruined. For Christie's, whose namesake founder has been dead for hundreds of years, it's just a cost of doing business. No one from Christie's will endure any serious consequence because they are protected by a cloak of corporate immunity and obfuscation.
Corporate law makes it so Christie's, a faceless legal entity, is responsible rather than the individual human beings who actually committed the offense. It's the same for many of the corporate banks and financial institutions that brought the global economy to the brink of ruin -- and now are reaping record profits while millions of ordinary Americans remain out of work, struggling to make ends meet and in danger of losing their homes.
I appreciate that few Americans would consider me a "little guy," but when dealing with ossified and entitled corporate infrastructures, we're all little guys. Anyone who has tried to argue with their insurance company or renegotiate their mortgage comes away with the distinct feeling that the deck is stacked against them.
It is.
And it's getting worse.
Just look at the oil washing ashore on the Gulf Coast. Despite appropriately contrite statements from BP executives, the past may be a more telling predictor of what lies ahead. More than two decades after the devastating Exxon Valdez spill, just one person -- the captain of the ship -- has faced criminal prosecution. For its part, Exxon and its army of lawyers repeatedly appealed punitive judgments against the corporation.
Thousands of the original plaintiffs who sued Exxon died before they collected compensation. The corporation meanwhile lives on, and quite profitably: the $507.5 million Exxon was ordered by the U.S. Supreme Court to pay in 2008 represented a measly 1.1% of that year's profit.
Already, residents and business owners along the Gulf Coast are discovering that there are definite limits to BP's public promises to make whole those affected by the oil spill.
To be sure, the concept of limited liability is an important part of corporate law and a key driver of 20th Century progress. It encourages responsible risk and promotes innovation, which necessarily requires failure. And it provides investors funding new ventures with the assurance that failure will wipe out only their investment, not their entire net worth.
But we have moved beyond limited liability to an era of almost no liability.
"It makes sense to protect the shareholder; it doesn't make sense to protect the managers," Joel Bakan told me recently. Bakan is a professor and author of The Corporation: The Pathological Pursuit of Profit and Power, a compelling and sometimes frightening look at the rise of corporations.
In the five years since Bakan's book was published, corporations have grown even more powerful and irresponsible, as the financial crisis demonstrated. When the federal government stepped in to prop up institutions it deemed "too big to fail," it created a collusive environment not seen since World War II.
This time, the threat was not to democracy and freedom, but to an entirely undemocratic corporate system in which the guys at the top play by their own rules -- and, even then, ignore them.
It's time to impose new rules.
Let's start by removing the broad legal shield individual corporate employees hide behind -- and subject them to the same laws as the rest of us. In California, I can be fined as much as $25,000 if I throw batteries out with the trash. Yet when Wal-Mart agrees to pay $27.6 million because its employees dumped toxic chemicals at hundreds of stores, the corporate entity pays the fine, issues a blanket corporate apology and moves on with a corporate promise to do better next time.
Instead, individual employees and managers -- all the way up to the CEO -- must answer when they screw up in the same way they are rewarded when they succeed. The threat of public prosecution can be a powerful check on the corporate culture of pathological recklessness that is rapidly devouring America. Only then will we see companies pursuing profit responsibly and ethically -- recalling cars before people are killed, bolstering safety before a mine explodes or accurately calculating risk before a financial instrument melts down.
http://www.huffingtonpost.com/halsey..._b_611744.html
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