Understanding and Investigating Transnational Corporate Crime - Literature review Example

UNDERSTANDING AND INVESTIGATING TRANSNATIONAL CORPORATE CRIME Introduction With the high rate of globalization, there has been a net increase in transnational corporations. The world continues to absorb more and more of these corporations everyday. However, there have been marked difficulties in conceptualizing corporate crimes. It is important to note the fact that corporate crime has become rampant in the global scene. Transnational corporations may engage in activities which while these may be illegal in their home nations; these may be legal in the host countries. Whether the crimes have a legal or illegal source, the effects of these actions may range from social to health, economic and even law enforcement problems and issues. For instance, there has been a massive exodus of transnational corporations from the western highly industrialized countries to the less developed nations. The companies most of the time are involved in high pollution industrial activities, these activities are therefore transferred to the less developed countries where they exert their negative effects on the environment and wildlife and a corresponding effect on human health1 Furthermore, there is an international outcry for a number of offences bordering on safety and health offences not forgetting the breaches on regulations that have seen numerous deaths and injuries in what has become to be termed as corporate violence. All these result from human error and sheer negligence as well as wrong choices and decisions made by management of organizations.2 Despite all these offences and breaches to the regulations, it still becomes quite difficult to protest because maybe there is nothing mentioned about this offences in the constitution of the corporation's host country. As such, judges are in dire and urgent need for a thorough and superior education as well as context training. This education and training should be on business law and the evils caused by the corporate, wrongdoing, undoing and plunders. These are urgent for judges in the host nations. These, in Canada have hitherto focused on the blue collar issues but the white collar and corporate crimes and undoing have totally been ignored3. It is high time that the transnational corporation's crimes are brought to book these crimes need to be stopped because of the immense effects on the environment, wildlife, climate and human health as well as the social stability. This paper seeks to understand and investigate transnational corporate crimes. A single case and scenario will demonstrate why it is necessary that the transnational corporate crimes are shown the red light so as to bring back sanity, ethics and humanity in the transnational corporations. This insanity and madness has to stop because so far the social, health, climatic and the environmental negative impacts cannot be healed. It is high time that the transnational corporations became responsible for their transgressions against humanity, wildlife, climate and even the environment. Literature Review A number of authors have spent time to highlight the issue on transnational corporate crimes. It is disheartening at times when you watch most transnational multi-million corporations take advantage of the lack of legislation in the host country so as to milk them dry in terms of environmental and labour issues. These corporations pay their workers lower than what similar positions are paid for in the mother country. Why should two people doing the same thing for the same amount of time be paid differently? Discrepancies in wages, damage to the environment and lack of health and safety regulations are only the tip of the iceberg that the transnational corporate crime is. According to Margarte E. Beare, 2003 the transnational corporations are not exceptions in the transnational organized crime such as money laundering, fraud and corruptions. These crimes are often not committed by individuals but with a group of people who are well organized and who often use the most renowned organizations and corporations to make good of these crimes and arrangements. The book notes the problems that result when the working definitions of organized crime disregard completely the white collar and corporate crimes which debatably are potentially more harmful. The book goes ahead to enumerate some examples of the transnational organized crimes. The examples offered in each individual chapter are things like corruption, bribery, money laundering, corporate crime, and drugs. The most potent concept presented in the book is the changing nature of organized crime where corporate crime is inclusive. As the global economic status coalesces with trend in human migration, innovations in technology and political changes all over the world, corporate crimes are bound to change so as to exploit the opportunities presented by the mentioned changes4. Most judges all over the world have had their focus on the blue collar crimes and ignored the corporate crimes totally as if corporate crime is victimless. Puri, 2004 proposes some Corporate Crime Education for Judges who have seemingly appeared to be bereft of understanding and interest in this kind of crime whose harm is apparent and affects a lot of people across the board: public, stakeholders, employees, customers etc. In her article Judges Require Better Corporate Crime Education: Judicial Training Has Historically Keyed on Blue-Collar Wrongdoing, the professor categorically states that corporate crime is not victimless and the harm caused by corporate misconduct has been witnesses to cause substantial harm and injury to a range of stakeholders. This she says in light of the recent witnessed corporate scandals such as the Enron and WorldCom scandals5. Further, Puri, 20046 enumerates the effects of corporate crimes to stakeholders to show the weight of corporate crimes and why the judges should no longer continue to be lenient to corporate criminals. With corporate crimes, the shareholders stand to lose all their savings, employees may lose their jobs and creditors may as well forget about their investments. Don Holmes, a fraud investigator with Ernst & Young estimates a massive $20-billion annual white-collar crime costs incurred by the Canadian government. Therefore, the professor says that the judiciary needs to recognize the not only the magnitude of corporate crimes but also the impact of corporate crime and undoing on the larger population and citizenry. On a broader perspective, corporate crime had serious ramifications on thee economy of the nation ion which the crimes occur. The author sounds a wake up call to the judiciary in Canada and those all over the world to reckon the magnitude and effects of corporate crimes. She further recalls how the judges have been lenient in sentencing corporate crimes as compared to blue collar crimes/ offenders. Between robbery and burglary and fraud and embezzlement, which crime(s) will receive stiffer penalty in a court of law? One can bet that regardless of the country in which the court of law is found, robbery and burglary will receive stiffer punishment as compared to fraud and embezzlement. All practices of dirty business tricks (Yemen & Conner, 2002) have failed to get their befitting judgement in the courts of law. This demonstrates the orientation of the judges in judging blue crimes more stiffly as compared to white collar/corporate crimes which may be more serious consequences to a wide population. The professor therefore calls for a serious educating of the judges so that they can realize that corporate crime are more serious and need to be punished more stiffly more than any crime not only because of their magnitude but also because of their grave impacts on the stakeholders, public and the economy of the state in which the crimes occur7. According to Castells8 corporate crime has been a thorn in the flesh for a number of governments. When it occurs, the impact is so big that the effect will remain for a very long time before recovery occurs. Corporate crime has no distinct boundary because it overlaps with white collar crimes, organized crime and state-corporate crime. White collar crime overlaps corporate crime because most of the time the employees who act to represent the interest of the corporate are employees of the corporation and belong to the higher social class. Organized crime on the other hand overlaps with corporate crime because the criminal group may set up an organization to serve as a vehicle for money laundering, actually, organized crime has become too big that nowadays it is considered as the illegal division of capital. It was predicted that mid 90s the gross criminal product would have hit its highest making the organized crime the 15th richest organization in the world in 20th century. This is more that the GDP of 150 countries9. Finally, there is a strong overlap between corporate crime and state-corporate crime since most of the time the prospects for crime materialize from the affiliations between the corporation and the state. Hartley10 in his book Corporate Crime: A Reference Handbook, ventures into the controversies and raging debates surrounding corporate crimes. The book entirely covers the issue of corporate crime not only in the US but also corporate crime all over the world. According to Hartley Richard, the increased coverage of the corporate scandals around the world, the public is now more aware about corporate malfeasance and pays closer attention to business activities. The shareholders and management have also never been more careful about the way fiscal records are kept and how general business activities. Of great interest is the validity of the reported profits by most organization since the WorldCom and Enron incidences. The legitimacy of the reported profits in the public eyes is questionable since some organizations have been seen to doctor their books to reflect more profits than it is true. A good example of such organization is WorldCom which manipulated its accounting books and records to reflect a fictitious profit of about $3.8 billion. The most recent in the list of rogue organizations is Xerox which recently tried to doctor its financial records to reflect a massive $1.4 billion in excess of the actual profits realized. Richard goes on positing that corporate crime continues to grow and soon in future it will be normal for corporations to cheat so as to survive in the market because no investors or shareholders leave alone customers want to be associates with organizations that are running at a loss or are posting minimal profit margins11. Case Demonstrating Corporate Crime Corporate crime can at times be in form of a decision of the board of directors or management of a corporation on either the operations of the corporation or position on a given issue or problems at hand. Corporate crime is a crime because of the far reaching impact of the crime on the health of people, environment, employees and other stake holders. Take Coca Cola India chapter for instance. The board just decided to ignore the levels of pesticide residues in the soft drinks it manufactures until an NGO revealed this. The effects of the pesticide are harmful to human health if they are above a given level. This decision to ignore the levels of pesticide residues is reminiscent of negligence and sheer lack of integrity. Integrity requires that all things are carried out right12. It doesn’t matter how much a right thing costs but provided it is the right thing to do it has and must be done. This is what integrity is all about and apparently the Coca Cola management lacked it Ethical issues arise in aspect of organizations especially in their decisions, marketing and management styles. Contravening ethics results in a corporate crime. For instance, in 2003 the Indian NGO, Centre for Science and Environment (CSE) based in New Delhi claimed presence of pesticide residues such as DDT, malathion, chlorpyrifos and lindane in the aerated waters used by Coca Cola to prepare its soft drinks. The residues were 30 times more than the European Union’s regulated levels13. Coca-Cola in its response evoked objectivity by saying that its plant water filters were designed to remove potential contaminants and its brands were tested for pesticides to ensure that they met minimum health standards prior to distribution14. Coca Cola's Response to CSE's Report Coke and Pepsi (in a rare display of solidarity) were quick to respond to CSE's report. They both indicated that that the validity of thee results was questionable and threatened legal action against the NGO that released the report. In response to the report, the Indian government banned Coke and Pepsi products. The state governments on the other hand launched their independent investigations where they sent samples of the soft drinks to labs for testing. Despite Coca Cola's early response, a survey was initiated in New Delhi days after the CSE's announcement. The survey established that majority of the soft drink consumers believed in the CSE's findings and supported parliament's move to ban the soft drinks. After, the survey, it was now clear that the more than $1billion Indian soft drink market (ruled majorly by Coca Cola and Pepsi) was at stake, this is the point where Gupta, Indian's Coca Cola Chapter's CEO, realized that he had to act. As can be inferred from the case above, is obvious that Coca Cola India knew very well about the residues being 30 times more than the European Union’s regulated levels15. The management chose to do nothing about it. This amounts to corporate crime because it is contravention of the internationally agreed regulations. The pesticides residues end up causing cancer, stroke and other health hazards if they are consumed above the levels. Coca Cola prepares the soft drink in the same way as its sister companies in Europe. The European chapters are able to ensure that the levels of the pesticides are up to the recommended levels which cannot be harmful to the consumers. What makes Coca Cola India fail top adhere to the regulation about pesticide residue levels is sheer negligence which presents soft drinks which are not fit for consumption in the Indian market. The result of the 2003 incident was not limited to the Indian market. It went right across the board affecting the share prices of Coca Cola in the NYSE Law against Corporations Needs Policy for its Enforcement Corporate crime is now sensitive politically in majority of the countries in the world. The activities of corporate crime have caused so many disasters thus attracting political intervention. The United Kingdom, for instance, has seen many disasters such as the rail network disasters the sea disasters thus affording the term corporate manslaughter in reference to these disasters. Therefore, there have been subsequent debates that question technological hazards the business enterprises posses to the public16. This debate has largely been political. The debates are necessary because the general public is concerned how safe it is if the organizations that they thought considered human safety as their priority can ignore such a very important aspect as safety of its clients. Such debates are not limited to UK alone but also some have been witnessed in India since the 1985 Bhopal based Union Carbide accident17. As mentioned earlier, most judges shy away from corporate crime while concentrating more on blue collar crimes. The definition of corporate crime itself has become quite difficult to agree upon among those who are concerned with its definition so as to make the legislation against corporate crime. It is common knowledge that the road towards a corporate crime free society is a hazy path and this state is compounded given the fact that most countries lack elaborate laws to counter corporate crime. For the few countries that have elaborate laws to check the rapid progression of corporate crime, the policy necessary for the enforcement of this law is apparently missing18. Since corporate crime is such serious issue, the law that counters needs a competent policy to oversee the enforcement this kind of law. Generally, the function of law is to regulate some activities so that they do not move to the other side of what is believed to be legal. Anything that is illegal has its consequences on the society, public and the environment. However, in absence of such an elaborate law and regulations, it becomes hard to control the potentially dangerous illegal activities especially by corporations. It is not only illegal corporate activities that can cause harm. Many organizations have managed to perpetuate crime within the legal context. This may be called legal crime. For instance, organizations may use the organization as a vehicle for money laundering. Based on this, it is the responsibility of the judiciary to device polices that will enable regulation of corporations and revising laws that regulate corporations whenever a loophole is noticed. History has proved that crime was not very rampant in the past. Corporate crime was even rarer. According to Lea, 200119 crime used to be exceptional event that only came once in awhile to disrupt the normal socio-economic practices. However, as time went by crime has become more rampant and quite frequent. As crime becomes more frequent it lost its exceptional status to assume a standard status. Crime now is frequent and it is more like a standard feature lurking in the background of human life and daily activities. Garland, 1996 has defined crime in general and corporate crime in particular as an element of late modernity which has been taken for granted20. Media and Corporate Crime As mentioned earlier, it is only after serious legislation that the currently rampant corporate crime can be stopped. The penalty to be imposed for those found guilty of corporate crime heavily depends on the public opinion on the extent of societal responsibility involved. The media has all along been silent reporting on the issues of corporate crimes and if they have had, they have exercised self control lest they attract unnecessary responsibility. There are two reasons as to why the media is not in the forefront reporting corporate crime. First, anything that is in the court of law or is likely to end up there should not be in the public domain. This is because of the potential compromising of the trial by influencing as well as contaminating the perception of the jury. Secondly, the media stays away for corporate crime because of the potential probability of defamation court proceedings against them. For example, when Coca Cola India was discovered to have 30 times more pesticide residue in the soft drinks in India as compared to those in European countries, the company management threatened to sue the NGO that has conducted the laboratory analysis21. Normally, organizations will be more skewed to defamation proceedings to reports of its undoing as opposed to objective listening and response. The question that remains is how the threat of defamation proceedings against media house proof to be successful in deterring media reporting on corporate crime? Corporate crimes are not only technical but also complicated. Unlike crimes against property where one can provide graphic evidence of the vandalism or injury to an individual, showing evidence of corporate crime is an uphill task. More significant though is the fact that most media houses are owned by people in high social standing and such people may as well own prisons. This has been the biggest impediment on the war against the currently rampant corporate crimes22. Most common acts reminiscent of corporate crime is are things like antitrust violations, environmental damage, exploitation of labor, contravention of the health and safety regulations and insider trading among other negligent acts. Despite the continued effort to stamp out corporate crimes, the corporations continue to perpetuate the above listed acts of crime under the very nose of the judiciary and authorities that are judged with the responsibility of enforcing the laws against corporate crime. Conclusion In conclusion, corporate crimes are often in great magnitude and their effects are not only severe but also affect a larger profile of the population: the public, stakeholders, investors, employees and even the economy of the country in which the crime is conducted. The environment and the climate have also been adversely affected by the criminal choices that the organizations adopt23. The numbers of offences bordering on safety and health offences by corporations have greatly increased not forgetting the breaches on regulations that have seen numerous deaths and injuries in what has become to be termed as corporate violence. Despite all this, judges all over the world have had their focus on the blue collar crimes and ignored the corporate crimes totally as if corporate crime is victimless. As such, judges are in dire and urgent need for a thorough and superior education as well as context training so as to stop this corporate madness that continues to make employees lose their jobs, investors, their investments, consumers and the public, their likes and good health and the host countries, the stability of the economy. The media and the jury have no moral reason to continue shying away fro castigating the perpetrators of corporate crime in a bid to get the society of this quite costly crime. The negative impact of corporate crime is more than any fear or safe position taken by any individual or media house. The frequency of corporate crimes had proved that it is fast becoming a standard feature lurking in the background of man's everyday activities. The government on the other hand has moral responsibility of making sure that people, environment, climate, and economy are safeguarded against the monster that corporate crime has eventually become. Ethical integrity is no longer a strong pillar in business activities and we can no longer rely on corporations to manage their ethical orientations. These orientations need to be governed by the general public through the legislation of laws against corporate crimes which will reign in the unethically wayward corporations. The only thing that seems difficult but is likely to help stop the madness that corporate crime represents is the embrace of ethical integrity especially at the management level of all organizations24. 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