Dear _________,
I continue to look for a forum, such as the ECOA, in which to present my ideas about a significant disconnect between the law and the propagation of ethical business behavior, which disconnect is explained at length here.
I am currently working on contacting chief executive officers (the office of the Chairman of Bank of America called me after reviewing this email), general counsel and ethics officers at the credit card companies and the banks that are defendants in this currency conversion fee class action litigation. I have brought my activities to the particular attention of Ms. Lisa A. Rickard, President of the Institute for Legal Reform of the US Chamber of Commerce, and will advocate to her that the Institute make outreach to corporate ethics officers. I hope my efforts will result in a dialogue between top level corporate management and ethics officers on this disconnect between law and ethics, which seems to be excellently exemplified by this particular litigation, as I discuss in a letter to the judge.
I hope you think that such a dialogue would be desirable, and that this is meritorious for consideration in a forum such as the ECOA. If there is any way you can help me out in my efforts, and you wish to do so, please contact me.
Thank you.
Sincerely,
Robert Shattuck
Saturday, March 22, 2008
Enron; Professor John Coffee
Overlawyered.com had this post about the Enron attorneys fees and Professor John Coffee of Columbia being supportive of fee request.
I sent Professor Coffee the following email:
Subj: Enron attorney fees
Dear Professor Coffee,
I saw you referred to and quoted in a March 17, 2008 entry in overlawyered.com as being supportive of the Enron attorney fees request and to the effect that you often testify for fee requests.
Do you have any writings in electronic form that you could send to me, or are there any books or articles you have written not in electronic form that you could cite me to, in which you lay out your positions and arguments relative to tort reform and plaintiffs' lawyers?
For what it is worth, I am squarely in Walter Olson's camp and have my own blog to show for it. I am interested in finding cogent statements of the case on the other side from Mr. Olson and myself, but have not found much yet. I hope you can help me out.
Thank you.
Sincerely,
Robert Shattuck
I discuss Enron is this blog here.
I sent Professor Coffee the following email:
Subj: Enron attorney fees
Dear Professor Coffee,
I saw you referred to and quoted in a March 17, 2008 entry in overlawyered.com as being supportive of the Enron attorney fees request and to the effect that you often testify for fee requests.
Do you have any writings in electronic form that you could send to me, or are there any books or articles you have written not in electronic form that you could cite me to, in which you lay out your positions and arguments relative to tort reform and plaintiffs' lawyers?
For what it is worth, I am squarely in Walter Olson's camp and have my own blog to show for it. I am interested in finding cogent statements of the case on the other side from Mr. Olson and myself, but have not found much yet. I hope you can help me out.
Thank you.
Sincerely,
Robert Shattuck
I discuss Enron is this blog here.
Saturday, March 15, 2008
Credit card currency conversion class action
[Email I am sending out in a targeted fashion]
Subj: Super legalized scams
To Whom It May Concern:
It is human nature to scheme and scam, right? That is almost daily in the news.
There is, however, a super legalized form of scamming that goes on in the United States regularly that you may or may not know about and fully appreciate.
I am involved with one of these scams right now, and I want to tell you about it.
This particular super legalized scam is piggy backed on the business practice of the credit card companies (MasterCard, Visa, etc.) to charge credit card holders currency conversion fees on foreign transactions. The super scammers I am talking about claim that the companies and their banks hid these fees (in the 1% to 3% range) from cardholders and bilked them out of probably more than a billion dollars over a decade long period from 1996 to 2006. You can find more info at the following link: In re Currency Conversion Fee Antitrust Litigation.
I don't like being taken advantage of anymore than the next person. I believe that I, as well as everyone else, needs to be constantly on the lookout for scams and sharp business practices. Criminal law enforcement is important. For example, if an auto repair shop regularly tells car owners they need repairs they don't actually need, the police should do a sting operation to catch the shop owner and put him in jail. Another area is that I think society needs to spend a lot more money on tracking down identity theft gangs and putting them away for a long time.
I am dubious about this credit card currency conversion case I am involved with. I think it is just a matter of sharp business practices that, both on a big and small scale, millions of upstanding red blooded Americans frequently participate in in their own businesses and employment. If there was serious fraud in the credit card currency conversion fee case, the serious response of society would be to go after and punish the officers and employees who concocted and implemented the fraud. That would be a serious lesson to all officers and employees at all companies not to participate in serious corporate fraud, and that would ultimately curtail serious corporate fraud.
In the credit card case, no one thinks there was a serious billion dollar fraud that people should be put in jail for, but it is fodder for the super legalized scammers, to wit, the plaintiffs lawyers, to go to work on. So for a couple of years some fifty plaintiffs lawyers have gotten together and beaten their chests about the credit card companies and their banks skimming probably more than a billion dollars in the form of small amounts from millions of credit card holders. With enough chest beating by these fifty lawyers, they have gotten the officers of the defendant companies to have the defendant companies agree to pay about $336 million, which is skimmed in small amounts from tens of thousands of innocent stockholders. The overriding objective is so the plaintiffs lawyers can do their own skimming of $90 million (of the $336 million) for themselves. In the end, no officer or employee of the defendant companies is to be in any way punished for having done anything wrong, they have gotten good salaries and bonuses for the skimming they helped their defendant companies do, and all officers and employees at all companies are encouraged to concoct and implement new skimming schemes for their companies for which they will be paid more good salaries and bonuses, with the psychological comfort that if anything goes awry, nothing will happen to them personally. When this super legalized scam is complete, there will have been a shifting around of funds among innocent shareholders and cardholders (which could get re-shifted back later by the credit card companies upping their fees and charges on cardholders to make it up to the stockholders), the plaintiffs lawyers will have skimmed off a cool $90 million, and many more millions of dollars will have been skimmed from the innocent shareholders and card holders and put into the pockets of the defendants' attorneys that the defendant companies have had to hire to try to defend them against the scamming plaintiffs lawyers.
A hearing for the court to approve all of the foregoing is scheduled for March 31, 2008.
Last September, I wrote a letter to the judge in the case saying he should be ashamed to put his stamp of approval on these shenanigans, You can read my letter here: Letter to Judge Pauley.
There is delicious irony in this case in the way the plaintiffs lawyers beat their breasts about the defendants' skimming hundreds of millions of dollars in small amounts from millions of credit card holders, the lawyers have no interest in stopping the skimming, and they only want to exploit it so they can do their own super legalized skimming and scamming, in this case to the tune of $90 million for the plaintiffs attorneys and many millions more for the defendants' attorneys, and all with the legal stamp of approval of Judge Pauley.
I am sending this email to you to make sure you and other persons and entities with whom you are affiliated know and fully appreciate this super legalized form of scamming that goes on regularly in the United States.
Thank you.
Robert Shattuck
Subj: Super legalized scams
To Whom It May Concern:
It is human nature to scheme and scam, right? That is almost daily in the news.
There is, however, a super legalized form of scamming that goes on in the United States regularly that you may or may not know about and fully appreciate.
I am involved with one of these scams right now, and I want to tell you about it.
This particular super legalized scam is piggy backed on the business practice of the credit card companies (MasterCard, Visa, etc.) to charge credit card holders currency conversion fees on foreign transactions. The super scammers I am talking about claim that the companies and their banks hid these fees (in the 1% to 3% range) from cardholders and bilked them out of probably more than a billion dollars over a decade long period from 1996 to 2006. You can find more info at the following link: In re Currency Conversion Fee Antitrust Litigation.
I don't like being taken advantage of anymore than the next person. I believe that I, as well as everyone else, needs to be constantly on the lookout for scams and sharp business practices. Criminal law enforcement is important. For example, if an auto repair shop regularly tells car owners they need repairs they don't actually need, the police should do a sting operation to catch the shop owner and put him in jail. Another area is that I think society needs to spend a lot more money on tracking down identity theft gangs and putting them away for a long time.
I am dubious about this credit card currency conversion case I am involved with. I think it is just a matter of sharp business practices that, both on a big and small scale, millions of upstanding red blooded Americans frequently participate in in their own businesses and employment. If there was serious fraud in the credit card currency conversion fee case, the serious response of society would be to go after and punish the officers and employees who concocted and implemented the fraud. That would be a serious lesson to all officers and employees at all companies not to participate in serious corporate fraud, and that would ultimately curtail serious corporate fraud.
In the credit card case, no one thinks there was a serious billion dollar fraud that people should be put in jail for, but it is fodder for the super legalized scammers, to wit, the plaintiffs lawyers, to go to work on. So for a couple of years some fifty plaintiffs lawyers have gotten together and beaten their chests about the credit card companies and their banks skimming probably more than a billion dollars in the form of small amounts from millions of credit card holders. With enough chest beating by these fifty lawyers, they have gotten the officers of the defendant companies to have the defendant companies agree to pay about $336 million, which is skimmed in small amounts from tens of thousands of innocent stockholders. The overriding objective is so the plaintiffs lawyers can do their own skimming of $90 million (of the $336 million) for themselves. In the end, no officer or employee of the defendant companies is to be in any way punished for having done anything wrong, they have gotten good salaries and bonuses for the skimming they helped their defendant companies do, and all officers and employees at all companies are encouraged to concoct and implement new skimming schemes for their companies for which they will be paid more good salaries and bonuses, with the psychological comfort that if anything goes awry, nothing will happen to them personally. When this super legalized scam is complete, there will have been a shifting around of funds among innocent shareholders and cardholders (which could get re-shifted back later by the credit card companies upping their fees and charges on cardholders to make it up to the stockholders), the plaintiffs lawyers will have skimmed off a cool $90 million, and many more millions of dollars will have been skimmed from the innocent shareholders and card holders and put into the pockets of the defendants' attorneys that the defendant companies have had to hire to try to defend them against the scamming plaintiffs lawyers.
A hearing for the court to approve all of the foregoing is scheduled for March 31, 2008.
Last September, I wrote a letter to the judge in the case saying he should be ashamed to put his stamp of approval on these shenanigans, You can read my letter here: Letter to Judge Pauley.
There is delicious irony in this case in the way the plaintiffs lawyers beat their breasts about the defendants' skimming hundreds of millions of dollars in small amounts from millions of credit card holders, the lawyers have no interest in stopping the skimming, and they only want to exploit it so they can do their own super legalized skimming and scamming, in this case to the tune of $90 million for the plaintiffs attorneys and many millions more for the defendants' attorneys, and all with the legal stamp of approval of Judge Pauley.
I am sending this email to you to make sure you and other persons and entities with whom you are affiliated know and fully appreciate this super legalized form of scamming that goes on regularly in the United States.
Thank you.
Robert Shattuck
Thursday, February 28, 2008
Currency conversion case
[sent by US Mail on February 23,2008]
Memorandum
To: Chief Ethics Officers
VISA U.S.A.
MasterCard
CitiGroup
Bank of America
J.P. Morgan Chase & Co.
Washington Mutual
From: Robert Shattuck
[my city]
[my email address]
[my tel. no.]
Re: Credit card currency conversion fee antitrust litigation; business ethics
Date: February 23, 2008
I would be interested in your views, as chief ethics officers of the defendants in the above litigation, about a letter I wrote to Judge Pauley in that litigation, which letter can be found on the web at http://robertshattuck.blogspot.com/2007/11/september-2007-credit-card-currency.html, and a related general article I wrote “Is the Law an Impediment to Business Ethics?”, which article can be found on the web at http://robertshattuck.blogspot.com/2007/11/i-thought-this-would-be-effective-email.html.
If my letter or article provokes a reaction on your part that you would like to communicate to me, you may contact me at my email address or my telephone number set forth above. If you would like to receive this memorandum in electronic form, please email me, and I will send it to you in electronic form.
I hope very much that I hear from you.
Thank you.
Memorandum
To: Chief Ethics Officers
VISA U.S.A.
MasterCard
CitiGroup
Bank of America
J.P. Morgan Chase & Co.
Washington Mutual
From: Robert Shattuck
[my city]
[my email address]
[my tel. no.]
Re: Credit card currency conversion fee antitrust litigation; business ethics
Date: February 23, 2008
I would be interested in your views, as chief ethics officers of the defendants in the above litigation, about a letter I wrote to Judge Pauley in that litigation, which letter can be found on the web at http://robertshattuck.blogspot.com/2007/11/september-2007-credit-card-currency.html, and a related general article I wrote “Is the Law an Impediment to Business Ethics?”, which article can be found on the web at http://robertshattuck.blogspot.com/2007/11/i-thought-this-would-be-effective-email.html.
If my letter or article provokes a reaction on your part that you would like to communicate to me, you may contact me at my email address or my telephone number set forth above. If you would like to receive this memorandum in electronic form, please email me, and I will send it to you in electronic form.
I hope very much that I hear from you.
Thank you.
Sunday, February 17, 2008
60 Minutes: Bayer withheld info; 22,000 patients died
Dear ____________,
Tonight's 60 Minutes will report that renowned researcher Dr. Dennis Mangano calculates that 22,000 patients could have been saved if the Food and Drug Administration removed Bayer's heart surgery drug Trasylol two years ago, when his study revealed widespread death associated with it, and that Dr. Mangano says Bayer failed to tell the FDA about negative results of their own Trasylol study, placing the drug's success before patient well-being.
As you know from previous emails, I think that the law undermines the institutionalized practice of ethical business conduct by corporations and other organizations, and I believe ethics officers, academics and consultants ought to take greater cognizance of this phenomenon. I continue with my efforts to disseminate my ideas and have started a blog that covers this matter. See F. Ethics Organizations.
I hope my blog will advance my efforts. You could help if you cared to post a comment on my blog or to send me an email.
Thank you very much.
Sincerely,
Tonight's 60 Minutes will report that renowned researcher Dr. Dennis Mangano calculates that 22,000 patients could have been saved if the Food and Drug Administration removed Bayer's heart surgery drug Trasylol two years ago, when his study revealed widespread death associated with it, and that Dr. Mangano says Bayer failed to tell the FDA about negative results of their own Trasylol study, placing the drug's success before patient well-being.
As you know from previous emails, I think that the law undermines the institutionalized practice of ethical business conduct by corporations and other organizations, and I believe ethics officers, academics and consultants ought to take greater cognizance of this phenomenon. I continue with my efforts to disseminate my ideas and have started a blog that covers this matter. See F. Ethics Organizations.
I hope my blog will advance my efforts. You could help if you cared to post a comment on my blog or to send me an email.
Thank you very much.
Sincerely,
Tuesday, December 18, 2007
Email to National Association of Attorneys General
[Below is form of email I sent today to members of Executive Committee of National Association of Attorneys General]
To Attorney General ________, NAAG Exec. Comm. member
Dear Attorney General ________,
I am writing this email to you in your capacity as a member of the NAAG Executive Committee.
I have ideas I am trying to propound about how the law undermines business ethics and about what state attorneys general can do in order to lessen this untoward consequence in the law. My ideas are set out in an article I have written that is appended below.
I hope you will read my article, and, if you think it is meritorious of presentation to and consideration by NAAG members, I would be very interested in speaking at a NAAG meeting or having my article published on or linked by the NAAG website and otherwise participating through the auspices of NAAG regarding the same. I hope you will write me back.
Thank you very much.
Sincerely,
Robert Shattuck
3812 Spring Valley Circle
Birmingham, AL 35223
(205) 967-5586
rdshatt@aol.com
State Attorneys General and Business Ethics
Does the Law Undermine Business Ethics?
By Robert Shattuck
I address this article to state attorneys general.
I believe that an important role of those officials is to use their legal powers to promote the practice of ethical business behavior. I doubt that any would disagree with that.
I further think the law is an impediment to the achievement of the societal goal of ethical business behavior and that state attorneys general can make a contribution to lessening the impediment.
What impediment am I talking about here? What do I have in mind about state attorneys general?
The law undermines business ethics
Let me first turn to my contention that the law undermines business ethics.
Not all of the law does, but certain aspects do, in a material way, I believe.
I base this contention on common knowledge about human nature and a common sense analysis of what is needed for society to obtain ethical behavior. The work of state attorneys general provides them with first hand, real world experience to evaluate my contention. I hope, among other things, that they will take the time to reflect on my contention and decide what they think. Their opinion will carry much weight.
Human nature; how society regulates behavior
The starting place for my contention is human nature and why and how society tries to regulate behavior that grows out of human nature. Let me lay out what I think we commonly know.
Probably growing out of the self-preservation instinct, self-seeking motivations in the human species are powerful and predominant; altruism is weak.
Societal organization entails a suppression of some of an individual’s self-serving motivation and action in favor of a greater common good. This is because promotion of the well being of a group can contribute to the well being of the individuals in the group.
Society has various mechanisms to mitigate self-seeking behavior and to alter it to promote a greater common good. These include religion; the promulgation of codes of conduct; bestowal of honors and esteem on exemplary individuals; formal education programs that teach ethics; and systems of shame and legal punishments for individuals who violate society’s strictures.
In evaluating these mechanisms, and their effectiveness, one needs to articulate a little about the organizational structures and substructures in which behavior regulation is sought, and how the human motivators work in those contexts.
The organizational structures include families, corporations, political parties, churches, and labor unions. An entire nation can be considered a smaller unit within the world community. The family is the smallest unit in which an individual is called on to subjugate self for the good of the group. At this smallest unit level, there can develop a strong sense of identity between the individual and family interests. As one moves up the organizational scale, the individual’s interests and those of the larger unit are less susceptible of conflation, and the more cognate tools referred to above are employed to articulate and implement society’s prescriptions relative to self-seeking behavior.
An individual’s powerful self-seeking motivators are money, power, material possessions, social standing, sex, honor, esteem, aesthetic refinements, recreational pleasures and ego gratification. The first listed motivator of money can contribute significantly to the procuring of the other desired objects. Much of the motivation at a larger unit level, such as a corporation, is a collective expression of the constituent individuals’ motivations to obtain money and other objects of their desires.
Lying, cheating, stealing, defrauding, misrepresentation, concealment, breach of fiduciary obligations, bribery, blackmail, harassment, and lack of proper regard for the interests of third parties, have great potential for individuals and larger units such as corporations to obtain money. This is done, however, at the expense of other individuals and other units in the society.
The role of human intelligence is a very significant factor. Equipped with that intelligence, the human species is excellently endowed to conceive and implement dishonest activities and to exploit knowledge and information that others are lacking.
The extent and pervasiveness of dishonest, self-seeking activities by human beings is difficult to gauge.
Dishonest activities that are carried out successfully are concealed, and any researcher trying to estimate the quantum of dishonest behavior by human beings is ignorant of what has been concealed.
Dishonest activities on a large scale that are discovered get reported in the news. There is an unending procession of publicity about wrongdoing in the commercial world. It seems extensive and exhibits interesting combinations of novelty and repetition, and sometimes surprising audacity and scope. In the “boom and bust” cycle of the past decade, we have been inundated during the “aftermath” past four years with exposures of many instances of large scale wrongdoing that was perpetrated during the “boom” part of the cycle.
In the daily news about commercial wrongdoing, gauging the aggregate amount is complicated by the presence of large swaths of gray areas of right and wrong and varying degrees of culpability of involved individuals. Also, to repeat, one never knows about wrongdoing that has taken place and that is not found out.
Dishonesty that occurs on a smaller scale is not newsworthy. Sometimes many small-scale activities of a similar, wrongful nature get reported in the aggregate. Most of us are aware of significant amounts of fraud that occur related to car insurance and car repairs, Medicare and Medicaid claims, identity theft and credit cards, cheating on taxes, overbilling on government contracts, and bribing of government officials to obtain commercial contracts. From lots of everyday experience, people are distrustful in hundreds of commercial transactions they enter into over their lifetime. All in all, it is fair to say that the total quantum of small-scale dishonesty is unknowable but that there is a lot of it that goes on.
Business ethics and the role of the law
Business ethics is supposed to counter and lessen the perpetration of dishonest activity in the commercial world.
As referred to above, business ethics, along with other forms of moral instruction imparted through religion and other institutions, are taught in society, and society has practices for bestowing honors and awards on exemplary individuals.
It is submitted, however, that, without legal punishments for individuals who violate society’s strictures, society would be feckless in its efforts to lessen dishonest commercial activities, and that society needs to be rigorous and exacting in designing and implementing its regime of legal punishments for this purpose. In this regard, it would be a troublesome sign if society was fooled into thinking that its system was functioning effectively.
What is needed in the law for it to be rigorous and exacting?
One component is close attention to whether something is done deliberately and intentionally, or whether it is done negligently, or whether it is without fault. If a party who is without fault is punished and forced to pay a cost, that can undermine the regime of legal punishments. First, it can deflect attention from making sure that intentional wrongdoers are punished (i.e., the potential for societal self-deception to the effect, well, costs were paid so punishment must have been meted out so the law must have been doing its job). Further it offers opportunity for guilty parties actively to avoid punishment by accomplishing a shift to innocent parties. Would be wrongdoers will be encouraged by the idea that the responsibility can be shifted away from them if they decide to go forward with their wrongdoing and it is found out. When innocent parties are punished while guilty ones escape responsibility, a general disrespect for the law is engendered, and that disrespect is detrimental of the law performing a purpose of fostering ethical business conduct.
As to intentional wrongdoing versus negligent wrongdoing, a regime of legal punishments might rightfully be less strict with negligent wrongdoing. This is on the basis that people, as regards intentional wrongdoing, can and should be required in an absolute way to choose consciously not do the wrong, whereas everyone is negligent to some degree from time to time and “zero tolerance” is not a realistic objective. In the case of negligence, the law can and should look closely where, for example, the negligence is slight and other intentional or other more negligent actions (including of the plaintiff) caused a loss, and the law might also take into account that available resources for investigating and punishing wrongdoing are limited, and intentional wrongdoing should have priority.
Further, the law needs to be a definite as possible in advance about what is wrongful and what is not wrongful. Unless a person is able to know what is wrongful and what is not wrongful, there the person is disabled from being able to make a decision not to do something that is wrongful, and the law will fail as a tool for fostering ethical behavior.
Differentiating among intentional wrongdoers, negligent wrongdoers, and parties who are without fault should be in the foreground in dealing with entities that represent conglomerations of individuals, such as corporations. Any corporate act of wrongdoing is designed and implemented by particular individuals in the corporation, but lots of other individuals may be wholly without fault and costs and punishments imposed on the corporation will be ultimately borne by these latter individuals. The discussion above about the importance of punishing guilty individuals, and of not punishing innocent individuals while guilty ones escape, applies in the context of a corporation, and the legal system needs to strive to impose costs and punishments on individuals who design and implement a corporate wrongdoing and to try to be sparring in imposing them on innocent individuals.
The environment in which corporate wrongdoing happens
A corporation’s main objective is to operate as profitably as possible. The greater the profits, the more shareholders and employees can be rewarded monetarily. There are pressures on a daily basis for employees to advance the corporation’s business. Time frames are relatively short, typically for the corporation to achieve the current year’s revenue and profit goals. Bonuses for the contributions that employees make are paid on an annual basis. The employees’ jobs are their means of livelihood and of providing for their families. Plugging away every day to keep the business running profitably and to give security for this year’s source of income is a top priority for employees.
A corporate wrongdoing will be something intended to benefit the corporation financially by increasing revenues, reducing expenses or avoiding or lessening losses in the business. The corporate acts that comprise the wrongdoing are conceived of, authorized by, and carried out by officers and employees of the corporation, frequently a small fraction of all the corporation’s officers and employees. Of the perpetrating group, some have fuller knowledge of the wrongful activity and others will have very limited awareness. Many employees will be completely ignorant of the wrongful actions of the corporation, as well shareholders and customers being ignorant that wrongdoing is going on.
The officers and employees who know what is going on participate as part of their job to do things to benefit the corporation’s business. Their participation evidences their value to the corporation, and their assumption is that they will be rewarded for that in the compensation they receive from the corporation.
If an officer or an employee who is part of the group that perpetrates the corporate wrongdoing thinks the activity is questionable or that it is a clear wrongdoing that has risks of being discovered, and if the officer or employee has qualms about what is being done, there is significant internalized pressure nonetheless to go along with what the corporation is doing and to not try to block the activity. Raising objections can be viewed negatively by one’s peers in the corporation or by higher ups and result in adverse impact on the employee’s status and compensation in the corporation. The actions in question may be in a gray area and not clearly wrong. A tipping factor for the employee to go along can be a perception that, if something untoward happens as a result, only the corporation as a whole will bear the brunt and the employee will escape any personal punishment for his role in the corporate wrongdoing.
In short, all corporations are in the business of earning profits, by going along the employee is just doing his job and what others want him to do, the requested action is possibly in a gray area anyway, his employer will not punish him for what he did, and any other corporation that might learn of his willingness to go along with what others wanted to him to do will not hold that against him in getting another job.
Where and how the law undermines business ethics
Let us focus on where and how the law goes awry in trying to attack corporate wrongdoing. As previously stated, not all of the law goes awry but a very significant component of it does. This is a component in the law that has, by and large, been wrought by lawyers, and in particular by plaintiff’s lawyers. Let us consider them, their motivations and what they have wrought in the law.
Plaintiffs’ lawyers are part of the human species and their most powerful motivations are the same self-seeking motivations that are the most powerful for the rest of us. For plaintiffs’ lawyers, the big money is in suing the corporation. This big money comes in small bits out of lot of different pockets, many of which are entirely innocent of the wrongdoing, including shareholders who may receive slightly reduced dividends, innocent employees who may suffer slightly reduced wages, or customers of the corporation who wind up paying slightly higher prices.
To the extent that is all that happens, and no special punishment is ever imposed on the group of officers and employees who have personal culpability in the wrongdoing, there is going to be a substantial failure of deterrence effect, to wit, the officers and employees who were responsible are confirmed in their previous view that the wrongdoing they participated in had short term favorable financial results for the corporation, they the officers and employees got rewarded for the year in the compensation they received, the wrongdoing might never come to light and everything would be the rosier for it, and it is too bad the wrongdoing was discovered, but the officers and employees have come away basically unscathed, and either their current employer corporation may try a new trick next time, or else they have proved their mettle and the next corporation that employs them will be interested in seeing what they can come up for it.
The question presented is the extent to which plaintiffs’ lawyers have an effect of undermining society’s efforts to be rigorous in fining, jailing and otherwise punishing corporate officers and employees who are responsible for conceiving, authorizing, designing and implementing corporate wrongdoing.
Insight into answering the foregoing question can be obtained through a comparison of plaintiffs’ lawyers with governmental regulators, criminal prosecutors, state attorneys general and legislators, with a focus on their respective manners of compensation. The latter parties work on behalf of the public to design, implement and enforce laws and regulations and a regime of legal punishment to curtail dishonest commercial practices and conduct. The compensation they receive is reasonable for the work done, and in particular it is not geared to the dollar amount of economic activity that their public work affects (i.e., legislators and regulators don’t get paid millions of dollars because they put into effect large governmental budgets, levy commensurate amounts of taxes, and write and enforce laws and regulations that affect billions of dollars of economic activity and that impose and allocate large economic costs on and among businesses, consumers and other parties.)
Plaintiffs’ lawyers perform a similar public role in the design, implementation and enforcement of legal punishments to curtail dishonest commercial practices. Their compensation, which is huge, is geared to the amounts of economic activity that their work affects and to the economic costs that they get shifted around among various parties; the larger the scope of their lawsuits and the greater the dollar amount of the costs they can get shifted around, the greater their compensation. This manner of compensation of plaintiffs’ lawyers creates very powerful incentives for them to seek the objectives of (i) expansion of harms or detriments for which a payment should be made, (ii) higher rather than lower amounts that should be paid, (iii) expansion of liability where there is no fault, (iv) disregard of distinctions between intentionally culpable, negligently culpable and faultless parties, especially in the context of corporations comprised of a conglomeration of employees, shareholders and customers , (v) disregard of culpability of plaintiffs in their own injuries and harms, (vi) not having clear rules in advance about what is wrongful and what is not wrongful, so that a person does not know what is wrongful and cannot make a decision not to do a wrongful act, and exposing every decision and action to an ex post facto determination that it was wrongful and for which there is liability, (vii) disregard of rational cost/benefit principles, (viii) the invocation of junk science, and (ix) usurpation by them and the courts of the powers of the legislative branch and the executive branch regulatory apparatus.
These objectives of plaintiffs’ lawyers are inconsistent with the need, as discussed, for the law to be exacting in punishing and imposing costs on guilty individuals and in not punishing innocent individuals while guilty individuals are not held responsible, and of providing clear rules in advance about what is wrongful and what is not, in order that people may make a decision not to do a wrongful act. The plaintiffs’ lawyers have been very successful in achieving their objectives. This has bred contempt and disdain for the law, swallowed up large amounts of resources that could be available for other activities more effective for promoting business ethics, and has been otherwise distractive and undermining of society’s use of legal punishments to curtail commercial wrongdoing.
The Vioxx case as an example of how the law fails business ethics
Take for example the Vioxx litigation that now seems to be playing out its endgame in the judicial pipeline.
Let us start with all the shareholders who purchased Merck stock in the weeks leading up to the Vioxx announcement and who suffered an immediate 30% or so decline in value following the announcement. Profits that Merck made from Vioxx did not accrue to those shareholders, and they are entirely innocent of whatever wrongdoing Merck committed regarding Vioxx; nonetheless the legal liability system that is entrenched will give no consideration to those factors and results in that 30% being taken from them and contributed to the recovery that the plaintiffs eventually make.
Next consider, if Merck is guilty of wrongdoing, whether any officer or employee of Merck will be personally punished for his participation in the wrongdoing. There has been no indication that this is going to happen.
Next consider the hundreds of millions of dollars that plaintiffs’ attorneys will receive in the Merck litigation. Think how those sums might be alternatively expended in order to pay for programs and activities that would concretely advance protective and preventive objectives related to drugs such as Vioxx. These might include: greater FDA funding for post-drug approval monitoring and studies to detect adverse drug effects; design and implementation of better safeguards at the physician and patient level relative to decisions for a drug to be prescribed in a particular case; development of concrete protocols and guidelines for testing of drugs that drug companies could follow that would protect them against subsequent liability; development of concrete “conflict of interest” rules for researchers and physicians involved in testing or promoting a drug and punitive enforcement of the rules against researchers and physicians individually.
Ultimately, there is a question of what exactly the wrongdoing of Merck was, articulated with sufficient specificity, that Merck and other drug companies can have advance notice of such specifics so they can avoid “wrongdoing” in the future. For the billions of dollars that will wind up getting paid in the Vioxx litigation, no such concrete guidance may be forthcoming at all from the litigation, and, if that is so, all that happens is effectively a huge transfer from one set of parties without fault to other parties who have suffered a harm not caused by any wrongdoing of the first parties.
The problem of the plaintiffs’ lawyers
The situation with Vioxx is emblematic of how plaintiffs’ lawyers cause a huge consumption of manpower, economic resources and mental attention and effort that has little or nothing to do with accomplishing reduction of corporate wrongdoing and is a corresponding enormous diversion of those resources from society’s efforts to reduce corporate wrongdoing.
In evaluating this argument that plaintiffs’ lawyers undermine the promotion of business ethics, we should not listen to the plaintiffs’ lawyers. Our country has seen enough in recent years of baneful effects of large amounts of compensation that create conflicts of interest and that that cause the recipient to advocate or follow a course of action that will increase that compensation and contrary to the better interests of other individuals and groups. Corporate executives standing to gain fortunes from stock options committed massive accounting frauds that contributed to maintaining and increasing lofty stock price levels that would enormously benefit them under their stock options and other compensation arrangements. Accountants have been charged with faulty accounting work arising from the conflict of having lucrative consulting work with the audit client. Stock analysts have been inappropriately influenced in their stock reports by reason of getting compensation based on investment banking business their employer gets from companies the analyst covers. Brokerage firms corrupted the IPO market by allocating stock in hidden exchanges for inflated commissions on unrelated transactions. Mutual funds and insurance brokers have acted in wrongful disregard of conflicts of interest in order to increase their revenues and profits.
Plaintiffs’ lawyers are no different. They are conflicted to the core by their compensation arrangements and are incapable of rendering to society any honest evaluation of how well the current civil liability system is in serving society’s objective of promoting ethical business behavior.
What can state attorneys general do
The above is a very descriptive, common sensical, common knowledge based explication of how the current state of the law undermines the promotion of ethical business conduct, and how the law results in a significant diversion of economic resources away from beneficial ethics programs and activities and misallocates those resources to wasteful and counterproductive uses.
State attorneys general are in a special position to judge the validity of my arguments. They have first hand, real world experience that specially enable them to discern circumstances and factors that abet or that impede the inculcation and practice of ethical business behavior. They have experience that should allow them to evaluate my descriptions of how the law affects the psychology and thinking of employees when it comes to deciding to engage in an unethical activity or not.
I hope state attorneys general will take the time to reflect on the matter and decide what they think. Their opinion will carry much weight.
If they agree with my contention, they can, within the constraints of their official positions, articulate first within their attorney general office and to others in the executive branch of their state government their views and opinion on this subject.
A next further step is attorneys general can articulate publicly such views and inform their state judges and legislators of those views. The judges may have their own judicial thinking and actions modified by what state attorneys general say. The state legislatures are the branch of government that has the duty and authority to set out the significant rules related to the operation of the legal system, and to alter the same as the legislature deems in society’s best interest, and they may be persuaded by what state attorneys general have to say.
Finally, state attorneys general need to evaluate their own conduct in light of the discussion made in this article and particularly the alliances they have made with the plaintiffs’ lawyers.
I hope that there are state attorneys general who will take me up on my suggestions.
To Attorney General ________, NAAG Exec. Comm. member
Dear Attorney General ________,
I am writing this email to you in your capacity as a member of the NAAG Executive Committee.
I have ideas I am trying to propound about how the law undermines business ethics and about what state attorneys general can do in order to lessen this untoward consequence in the law. My ideas are set out in an article I have written that is appended below.
I hope you will read my article, and, if you think it is meritorious of presentation to and consideration by NAAG members, I would be very interested in speaking at a NAAG meeting or having my article published on or linked by the NAAG website and otherwise participating through the auspices of NAAG regarding the same. I hope you will write me back.
Thank you very much.
Sincerely,
Robert Shattuck
3812 Spring Valley Circle
Birmingham, AL 35223
(205) 967-5586
rdshatt@aol.com
State Attorneys General and Business Ethics
Does the Law Undermine Business Ethics?
By Robert Shattuck
I address this article to state attorneys general.
I believe that an important role of those officials is to use their legal powers to promote the practice of ethical business behavior. I doubt that any would disagree with that.
I further think the law is an impediment to the achievement of the societal goal of ethical business behavior and that state attorneys general can make a contribution to lessening the impediment.
What impediment am I talking about here? What do I have in mind about state attorneys general?
The law undermines business ethics
Let me first turn to my contention that the law undermines business ethics.
Not all of the law does, but certain aspects do, in a material way, I believe.
I base this contention on common knowledge about human nature and a common sense analysis of what is needed for society to obtain ethical behavior. The work of state attorneys general provides them with first hand, real world experience to evaluate my contention. I hope, among other things, that they will take the time to reflect on my contention and decide what they think. Their opinion will carry much weight.
Human nature; how society regulates behavior
The starting place for my contention is human nature and why and how society tries to regulate behavior that grows out of human nature. Let me lay out what I think we commonly know.
Probably growing out of the self-preservation instinct, self-seeking motivations in the human species are powerful and predominant; altruism is weak.
Societal organization entails a suppression of some of an individual’s self-serving motivation and action in favor of a greater common good. This is because promotion of the well being of a group can contribute to the well being of the individuals in the group.
Society has various mechanisms to mitigate self-seeking behavior and to alter it to promote a greater common good. These include religion; the promulgation of codes of conduct; bestowal of honors and esteem on exemplary individuals; formal education programs that teach ethics; and systems of shame and legal punishments for individuals who violate society’s strictures.
In evaluating these mechanisms, and their effectiveness, one needs to articulate a little about the organizational structures and substructures in which behavior regulation is sought, and how the human motivators work in those contexts.
The organizational structures include families, corporations, political parties, churches, and labor unions. An entire nation can be considered a smaller unit within the world community. The family is the smallest unit in which an individual is called on to subjugate self for the good of the group. At this smallest unit level, there can develop a strong sense of identity between the individual and family interests. As one moves up the organizational scale, the individual’s interests and those of the larger unit are less susceptible of conflation, and the more cognate tools referred to above are employed to articulate and implement society’s prescriptions relative to self-seeking behavior.
An individual’s powerful self-seeking motivators are money, power, material possessions, social standing, sex, honor, esteem, aesthetic refinements, recreational pleasures and ego gratification. The first listed motivator of money can contribute significantly to the procuring of the other desired objects. Much of the motivation at a larger unit level, such as a corporation, is a collective expression of the constituent individuals’ motivations to obtain money and other objects of their desires.
Lying, cheating, stealing, defrauding, misrepresentation, concealment, breach of fiduciary obligations, bribery, blackmail, harassment, and lack of proper regard for the interests of third parties, have great potential for individuals and larger units such as corporations to obtain money. This is done, however, at the expense of other individuals and other units in the society.
The role of human intelligence is a very significant factor. Equipped with that intelligence, the human species is excellently endowed to conceive and implement dishonest activities and to exploit knowledge and information that others are lacking.
The extent and pervasiveness of dishonest, self-seeking activities by human beings is difficult to gauge.
Dishonest activities that are carried out successfully are concealed, and any researcher trying to estimate the quantum of dishonest behavior by human beings is ignorant of what has been concealed.
Dishonest activities on a large scale that are discovered get reported in the news. There is an unending procession of publicity about wrongdoing in the commercial world. It seems extensive and exhibits interesting combinations of novelty and repetition, and sometimes surprising audacity and scope. In the “boom and bust” cycle of the past decade, we have been inundated during the “aftermath” past four years with exposures of many instances of large scale wrongdoing that was perpetrated during the “boom” part of the cycle.
In the daily news about commercial wrongdoing, gauging the aggregate amount is complicated by the presence of large swaths of gray areas of right and wrong and varying degrees of culpability of involved individuals. Also, to repeat, one never knows about wrongdoing that has taken place and that is not found out.
Dishonesty that occurs on a smaller scale is not newsworthy. Sometimes many small-scale activities of a similar, wrongful nature get reported in the aggregate. Most of us are aware of significant amounts of fraud that occur related to car insurance and car repairs, Medicare and Medicaid claims, identity theft and credit cards, cheating on taxes, overbilling on government contracts, and bribing of government officials to obtain commercial contracts. From lots of everyday experience, people are distrustful in hundreds of commercial transactions they enter into over their lifetime. All in all, it is fair to say that the total quantum of small-scale dishonesty is unknowable but that there is a lot of it that goes on.
Business ethics and the role of the law
Business ethics is supposed to counter and lessen the perpetration of dishonest activity in the commercial world.
As referred to above, business ethics, along with other forms of moral instruction imparted through religion and other institutions, are taught in society, and society has practices for bestowing honors and awards on exemplary individuals.
It is submitted, however, that, without legal punishments for individuals who violate society’s strictures, society would be feckless in its efforts to lessen dishonest commercial activities, and that society needs to be rigorous and exacting in designing and implementing its regime of legal punishments for this purpose. In this regard, it would be a troublesome sign if society was fooled into thinking that its system was functioning effectively.
What is needed in the law for it to be rigorous and exacting?
One component is close attention to whether something is done deliberately and intentionally, or whether it is done negligently, or whether it is without fault. If a party who is without fault is punished and forced to pay a cost, that can undermine the regime of legal punishments. First, it can deflect attention from making sure that intentional wrongdoers are punished (i.e., the potential for societal self-deception to the effect, well, costs were paid so punishment must have been meted out so the law must have been doing its job). Further it offers opportunity for guilty parties actively to avoid punishment by accomplishing a shift to innocent parties. Would be wrongdoers will be encouraged by the idea that the responsibility can be shifted away from them if they decide to go forward with their wrongdoing and it is found out. When innocent parties are punished while guilty ones escape responsibility, a general disrespect for the law is engendered, and that disrespect is detrimental of the law performing a purpose of fostering ethical business conduct.
As to intentional wrongdoing versus negligent wrongdoing, a regime of legal punishments might rightfully be less strict with negligent wrongdoing. This is on the basis that people, as regards intentional wrongdoing, can and should be required in an absolute way to choose consciously not do the wrong, whereas everyone is negligent to some degree from time to time and “zero tolerance” is not a realistic objective. In the case of negligence, the law can and should look closely where, for example, the negligence is slight and other intentional or other more negligent actions (including of the plaintiff) caused a loss, and the law might also take into account that available resources for investigating and punishing wrongdoing are limited, and intentional wrongdoing should have priority.
Further, the law needs to be a definite as possible in advance about what is wrongful and what is not wrongful. Unless a person is able to know what is wrongful and what is not wrongful, there the person is disabled from being able to make a decision not to do something that is wrongful, and the law will fail as a tool for fostering ethical behavior.
Differentiating among intentional wrongdoers, negligent wrongdoers, and parties who are without fault should be in the foreground in dealing with entities that represent conglomerations of individuals, such as corporations. Any corporate act of wrongdoing is designed and implemented by particular individuals in the corporation, but lots of other individuals may be wholly without fault and costs and punishments imposed on the corporation will be ultimately borne by these latter individuals. The discussion above about the importance of punishing guilty individuals, and of not punishing innocent individuals while guilty ones escape, applies in the context of a corporation, and the legal system needs to strive to impose costs and punishments on individuals who design and implement a corporate wrongdoing and to try to be sparring in imposing them on innocent individuals.
The environment in which corporate wrongdoing happens
A corporation’s main objective is to operate as profitably as possible. The greater the profits, the more shareholders and employees can be rewarded monetarily. There are pressures on a daily basis for employees to advance the corporation’s business. Time frames are relatively short, typically for the corporation to achieve the current year’s revenue and profit goals. Bonuses for the contributions that employees make are paid on an annual basis. The employees’ jobs are their means of livelihood and of providing for their families. Plugging away every day to keep the business running profitably and to give security for this year’s source of income is a top priority for employees.
A corporate wrongdoing will be something intended to benefit the corporation financially by increasing revenues, reducing expenses or avoiding or lessening losses in the business. The corporate acts that comprise the wrongdoing are conceived of, authorized by, and carried out by officers and employees of the corporation, frequently a small fraction of all the corporation’s officers and employees. Of the perpetrating group, some have fuller knowledge of the wrongful activity and others will have very limited awareness. Many employees will be completely ignorant of the wrongful actions of the corporation, as well shareholders and customers being ignorant that wrongdoing is going on.
The officers and employees who know what is going on participate as part of their job to do things to benefit the corporation’s business. Their participation evidences their value to the corporation, and their assumption is that they will be rewarded for that in the compensation they receive from the corporation.
If an officer or an employee who is part of the group that perpetrates the corporate wrongdoing thinks the activity is questionable or that it is a clear wrongdoing that has risks of being discovered, and if the officer or employee has qualms about what is being done, there is significant internalized pressure nonetheless to go along with what the corporation is doing and to not try to block the activity. Raising objections can be viewed negatively by one’s peers in the corporation or by higher ups and result in adverse impact on the employee’s status and compensation in the corporation. The actions in question may be in a gray area and not clearly wrong. A tipping factor for the employee to go along can be a perception that, if something untoward happens as a result, only the corporation as a whole will bear the brunt and the employee will escape any personal punishment for his role in the corporate wrongdoing.
In short, all corporations are in the business of earning profits, by going along the employee is just doing his job and what others want him to do, the requested action is possibly in a gray area anyway, his employer will not punish him for what he did, and any other corporation that might learn of his willingness to go along with what others wanted to him to do will not hold that against him in getting another job.
Where and how the law undermines business ethics
Let us focus on where and how the law goes awry in trying to attack corporate wrongdoing. As previously stated, not all of the law goes awry but a very significant component of it does. This is a component in the law that has, by and large, been wrought by lawyers, and in particular by plaintiff’s lawyers. Let us consider them, their motivations and what they have wrought in the law.
Plaintiffs’ lawyers are part of the human species and their most powerful motivations are the same self-seeking motivations that are the most powerful for the rest of us. For plaintiffs’ lawyers, the big money is in suing the corporation. This big money comes in small bits out of lot of different pockets, many of which are entirely innocent of the wrongdoing, including shareholders who may receive slightly reduced dividends, innocent employees who may suffer slightly reduced wages, or customers of the corporation who wind up paying slightly higher prices.
To the extent that is all that happens, and no special punishment is ever imposed on the group of officers and employees who have personal culpability in the wrongdoing, there is going to be a substantial failure of deterrence effect, to wit, the officers and employees who were responsible are confirmed in their previous view that the wrongdoing they participated in had short term favorable financial results for the corporation, they the officers and employees got rewarded for the year in the compensation they received, the wrongdoing might never come to light and everything would be the rosier for it, and it is too bad the wrongdoing was discovered, but the officers and employees have come away basically unscathed, and either their current employer corporation may try a new trick next time, or else they have proved their mettle and the next corporation that employs them will be interested in seeing what they can come up for it.
The question presented is the extent to which plaintiffs’ lawyers have an effect of undermining society’s efforts to be rigorous in fining, jailing and otherwise punishing corporate officers and employees who are responsible for conceiving, authorizing, designing and implementing corporate wrongdoing.
Insight into answering the foregoing question can be obtained through a comparison of plaintiffs’ lawyers with governmental regulators, criminal prosecutors, state attorneys general and legislators, with a focus on their respective manners of compensation. The latter parties work on behalf of the public to design, implement and enforce laws and regulations and a regime of legal punishment to curtail dishonest commercial practices and conduct. The compensation they receive is reasonable for the work done, and in particular it is not geared to the dollar amount of economic activity that their public work affects (i.e., legislators and regulators don’t get paid millions of dollars because they put into effect large governmental budgets, levy commensurate amounts of taxes, and write and enforce laws and regulations that affect billions of dollars of economic activity and that impose and allocate large economic costs on and among businesses, consumers and other parties.)
Plaintiffs’ lawyers perform a similar public role in the design, implementation and enforcement of legal punishments to curtail dishonest commercial practices. Their compensation, which is huge, is geared to the amounts of economic activity that their work affects and to the economic costs that they get shifted around among various parties; the larger the scope of their lawsuits and the greater the dollar amount of the costs they can get shifted around, the greater their compensation. This manner of compensation of plaintiffs’ lawyers creates very powerful incentives for them to seek the objectives of (i) expansion of harms or detriments for which a payment should be made, (ii) higher rather than lower amounts that should be paid, (iii) expansion of liability where there is no fault, (iv) disregard of distinctions between intentionally culpable, negligently culpable and faultless parties, especially in the context of corporations comprised of a conglomeration of employees, shareholders and customers , (v) disregard of culpability of plaintiffs in their own injuries and harms, (vi) not having clear rules in advance about what is wrongful and what is not wrongful, so that a person does not know what is wrongful and cannot make a decision not to do a wrongful act, and exposing every decision and action to an ex post facto determination that it was wrongful and for which there is liability, (vii) disregard of rational cost/benefit principles, (viii) the invocation of junk science, and (ix) usurpation by them and the courts of the powers of the legislative branch and the executive branch regulatory apparatus.
These objectives of plaintiffs’ lawyers are inconsistent with the need, as discussed, for the law to be exacting in punishing and imposing costs on guilty individuals and in not punishing innocent individuals while guilty individuals are not held responsible, and of providing clear rules in advance about what is wrongful and what is not, in order that people may make a decision not to do a wrongful act. The plaintiffs’ lawyers have been very successful in achieving their objectives. This has bred contempt and disdain for the law, swallowed up large amounts of resources that could be available for other activities more effective for promoting business ethics, and has been otherwise distractive and undermining of society’s use of legal punishments to curtail commercial wrongdoing.
The Vioxx case as an example of how the law fails business ethics
Take for example the Vioxx litigation that now seems to be playing out its endgame in the judicial pipeline.
Let us start with all the shareholders who purchased Merck stock in the weeks leading up to the Vioxx announcement and who suffered an immediate 30% or so decline in value following the announcement. Profits that Merck made from Vioxx did not accrue to those shareholders, and they are entirely innocent of whatever wrongdoing Merck committed regarding Vioxx; nonetheless the legal liability system that is entrenched will give no consideration to those factors and results in that 30% being taken from them and contributed to the recovery that the plaintiffs eventually make.
Next consider, if Merck is guilty of wrongdoing, whether any officer or employee of Merck will be personally punished for his participation in the wrongdoing. There has been no indication that this is going to happen.
Next consider the hundreds of millions of dollars that plaintiffs’ attorneys will receive in the Merck litigation. Think how those sums might be alternatively expended in order to pay for programs and activities that would concretely advance protective and preventive objectives related to drugs such as Vioxx. These might include: greater FDA funding for post-drug approval monitoring and studies to detect adverse drug effects; design and implementation of better safeguards at the physician and patient level relative to decisions for a drug to be prescribed in a particular case; development of concrete protocols and guidelines for testing of drugs that drug companies could follow that would protect them against subsequent liability; development of concrete “conflict of interest” rules for researchers and physicians involved in testing or promoting a drug and punitive enforcement of the rules against researchers and physicians individually.
Ultimately, there is a question of what exactly the wrongdoing of Merck was, articulated with sufficient specificity, that Merck and other drug companies can have advance notice of such specifics so they can avoid “wrongdoing” in the future. For the billions of dollars that will wind up getting paid in the Vioxx litigation, no such concrete guidance may be forthcoming at all from the litigation, and, if that is so, all that happens is effectively a huge transfer from one set of parties without fault to other parties who have suffered a harm not caused by any wrongdoing of the first parties.
The problem of the plaintiffs’ lawyers
The situation with Vioxx is emblematic of how plaintiffs’ lawyers cause a huge consumption of manpower, economic resources and mental attention and effort that has little or nothing to do with accomplishing reduction of corporate wrongdoing and is a corresponding enormous diversion of those resources from society’s efforts to reduce corporate wrongdoing.
In evaluating this argument that plaintiffs’ lawyers undermine the promotion of business ethics, we should not listen to the plaintiffs’ lawyers. Our country has seen enough in recent years of baneful effects of large amounts of compensation that create conflicts of interest and that that cause the recipient to advocate or follow a course of action that will increase that compensation and contrary to the better interests of other individuals and groups. Corporate executives standing to gain fortunes from stock options committed massive accounting frauds that contributed to maintaining and increasing lofty stock price levels that would enormously benefit them under their stock options and other compensation arrangements. Accountants have been charged with faulty accounting work arising from the conflict of having lucrative consulting work with the audit client. Stock analysts have been inappropriately influenced in their stock reports by reason of getting compensation based on investment banking business their employer gets from companies the analyst covers. Brokerage firms corrupted the IPO market by allocating stock in hidden exchanges for inflated commissions on unrelated transactions. Mutual funds and insurance brokers have acted in wrongful disregard of conflicts of interest in order to increase their revenues and profits.
Plaintiffs’ lawyers are no different. They are conflicted to the core by their compensation arrangements and are incapable of rendering to society any honest evaluation of how well the current civil liability system is in serving society’s objective of promoting ethical business behavior.
What can state attorneys general do
The above is a very descriptive, common sensical, common knowledge based explication of how the current state of the law undermines the promotion of ethical business conduct, and how the law results in a significant diversion of economic resources away from beneficial ethics programs and activities and misallocates those resources to wasteful and counterproductive uses.
State attorneys general are in a special position to judge the validity of my arguments. They have first hand, real world experience that specially enable them to discern circumstances and factors that abet or that impede the inculcation and practice of ethical business behavior. They have experience that should allow them to evaluate my descriptions of how the law affects the psychology and thinking of employees when it comes to deciding to engage in an unethical activity or not.
I hope state attorneys general will take the time to reflect on the matter and decide what they think. Their opinion will carry much weight.
If they agree with my contention, they can, within the constraints of their official positions, articulate first within their attorney general office and to others in the executive branch of their state government their views and opinion on this subject.
A next further step is attorneys general can articulate publicly such views and inform their state judges and legislators of those views. The judges may have their own judicial thinking and actions modified by what state attorneys general say. The state legislatures are the branch of government that has the duty and authority to set out the significant rules related to the operation of the legal system, and to alter the same as the legislature deems in society’s best interest, and they may be persuaded by what state attorneys general have to say.
Finally, state attorneys general need to evaluate their own conduct in light of the discussion made in this article and particularly the alliances they have made with the plaintiffs’ lawyers.
I hope that there are state attorneys general who will take me up on my suggestions.
Saturday, December 8, 2007
To ethics persons
Subj: Blogging about law undermining business ethics
Date: 12/ /2007 ______.M. Central Standard Time
From: RDShatt
To:
Dear ___________,
I continue with my efforts to disseminate my ideas. One email correspondent said, if I cannot get my article published by an ethics journal or on an ethics organization website, I should do a DIY with a blog. I have now done that. See F. Ethics Organizations
I hope my blog will advance my efforts. You could help that if you cared to post a comment on my blog. A good place to do that would be here .
Thank you very much.
Sincerely,
Robert Shattuck
Date: 12/ /2007 ______.M. Central Standard Time
From: RDShatt
To:
Dear ___________,
I continue with my efforts to disseminate my ideas. One email correspondent said, if I cannot get my article published by an ethics journal or on an ethics organization website, I should do a DIY with a blog. I have now done that. See F. Ethics Organizations
I hope my blog will advance my efforts. You could help that if you cared to post a comment on my blog. A good place to do that would be here .
Thank you very much.
Sincerely,
Robert Shattuck
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