FacebookTwitterGoogle+RedditEmail

The Chicago School and Corporate America

by Russell Mokhiber And Robert Weissman

Frank Easterbrook and Daniel Fischel are University of Chicago law professors who believe that, when it comes to making profits, nothing — not even the law — should stand in the way. (For almost two decades, Easterbrook has also been a federal appeals court judge.)

Twenty years ago, writing about antitrust crimes in the Michigan Law Review, Easterbrook and Fischel, then both professors at the University of Chicago, wrote that managers not only may, but should, violate the rules when it is profitable to do so. And it is clear that they believed that this rule should apply beyond just antitrust.

In a nutshell, this is the Chicago School view of corporate law that has taken hold over the past 20 years.

Under this view, if a Fed Ex truck needs to double park to make a delivery — double park. No problem. Pay the $20 fine. Just as long as you are still making money, violate the law.

Or course, when it comes to corporate crime and violence, we aren’t talking about just double parking.

We’re talking about fraud, corruption, pollution, price-fixing, occupational disease, and bribery.

The Chicago School says these are “externalities” and related fines and penalties should simply be viewed as the “costs of doing business.”

We call these activities crimes, and we believe society imposes penalties for committing these crimes to deter and socially sanction those who would violate society’s proscription.

Lawmakers of both parties are shamelessly portraying Enron and Arthur Andersen as rotten apples, even though those same lawmakers were just until recently on the take from both corporations, and doing the dirty work of defeating laws that would have governed both.

But of course we are not talking about a couple of rotten apples here.

As Easterbrook and Fischel so clearly show, the corporate world is now governed by an ideology that is rotten to the core. After all, as the great Chicago professors teach us, it is the duty of managers to violate the law when it is profitable to do so.

Now, the stink has risen. And slowly, but surely, and hardly noticed, a counter-Chicago movement in corporate law is bubbling up from law schools around the country.

At Boston College Law School, Professor Kent Greenfield points out that it used to be that corporations were created by the state to achieve specified public goals. The corporation was created to build a canal, for example. And then it was to go out of business.

If the corporation decided to sell hot dogs instead, it was acting beyond its powers, and a shareholder or the attorney general could file an injunction under the “ultra vires” (beyond its powers) doctrine — forcing the company to drop the dogs.

Then, the states started to compete with each other for more corporate business — the infamous race to the bottom. As a part of that race, states stopped imposing strict limitations on corporate powers.

The corporate lawyers set up Delaware as the Las Vegas of corporate chartering. And as a result, virtually no corporate activity was beyond a company’s defined activity. Ultra vires was dead, was the common view.

Greenfield steps in and says — wait a minute — illegal activity is still “beyond the power” of corporations. State incorporation statutes and articles of incorporation almost invariably charter corporations only for “lawful” purposes.

He wants attorneys general and trial lawyers to look carefully at the possibility of bringing ultra vires lawsuits against officers and directors of corporate criminals.

At Washington and Lee University, law professor David Millon says that underlying the assorted debates over the nature of the corporation are differences of political opinion.

So, those who see the corporation as a creation of the state do so because we want to see strong public control.

Those who see in a corporation nexus of private contracts (the Chicago School) see it that way because they want to defeat public regulation. (The charter of incorporation is like a birth certificate, and nothing more, they argue.)

This new breed of corporate law reformers, represented by the likes of Greenfield, Millon and Lawrence Mitchell of George Washington University Law School, does not go as far as we would in sending the corporation back to the public woodshed.

But it is good to note that, after years of bowing in subservience to the giant corporatists of the Midwest, a handful of law professors are beginning to agitate against the regressive theories of their Chicago School colleagues.

Their task is simultaneously difficult and easy. Difficult, because the Chicago School has been so successful in winning the academic — and eventually legal — debate about what corporations are and how they should be governed. Easy, because the Chicago School claims are so extreme that the reformers can win the debate — or at least significantly shift the pendulum in the field — by convincingly arguing simply that corporations should follow the law.

Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime Reporter. Robert Weissman is editor of the Washington, D.C.-based Multinational Monitor. They are co-authors of Corporate Predators: The Hunt for MegaProfits and the Attack on Democracy (Monroe, Maine: Common Courage Press, 1999)

More articles by:

Russell Mokhiber is the editor of the Corporate Crime Reporter..

Weekend Edition
November 24, 2017
Friday - Sunday
Jonathan Cook
From an Open Internet, Back to the Dark Ages
Linda Pentz Gunter
A Radioactive Plume That’s Clouded in Secrecy
Jeffrey St. Clair
The Fires This Time
Nick Alexandrov
Birth of a Nation
Vijay Prashad
Puerto Rico: Ruined Infrastructure and a Refugee Crisis
Peter Montague
Men in Power Abusing Women – What a Surprise!
Kristine Mattis
Slaves and Bulldozers, Plutocrats and Widgets
Pete Dolack
Climate Summit’s Solution to Global Warming: More Talking
Mike Whitney
ISIS Last Stand; End Times for the Caliphate
Robert Hunziker
Fukushima Darkness, Part Two
James Munson
Does Censoring Undemocratic Voices Make For Better Democracy?
Brian Cloughley
The Influence of Israel on Britain
Jason Hickel
Averting the Apocalypse: Lessons From Costa Rica
Pepe Escobar
How Turkey, Iran, Russia and India are playing the New Silk Roads
Jan Oberg
Why is Google’s Eric Schmidt So Afraid?
Ezra Rosser
Pushing Back Against the Criminalization of Poverty
Kathy Kelly
The Quality of Mercy
Myles Hoenig
A Ray Moore Win Could be a Hidden Gift to Progressives
Gerry Brown
Myanmar Conflict: Geopolitical Food Chain
Matthew Stevenson
Into Africa: Robert Redford’s Big Game in Nairobi
Katrina Kozarek
Venezuela’s Communes: a Great Social Achievement
Zoltan Grossman
Olympia Train Blockade Again Hits the Achilles Heel of the Fracking Industry
Binoy Kampmark
History, Law and Ratko Mladić
Tommy Raskin
Why Must We Sanction Russia?
Bob Lord
Trump’s Tax Plan Will Cost a Lot More Than Advertised
Ralph Nader
National Democratic Party – Pole Vaulting Back into Place
Julian Vigo
If Sexual Harassment and Assault Were Treated Like Terrorism
Russell Mokhiber
Still Blowing Smoke for Big Tobacco: John Boehner and College Ethics
Louis Proyect
The Witchfinders
Ted Rall
Sexual Harassment and the End of Team Politics
Anna Meyer
Your Tax Dollars are Funding GMO Propaganda
Barbara Nimri Aziz
An Alleged Communist and Prostitute in Nepal’s Grade Ten Schoolbooks!
Myles Hoenig
A Ray Moore Win Could be a Hidden Gift to Progressives
Graham Peebles
What Price Humanity? Systemic Injustice, Human Suffering
Kim C. Domenico
To Not Walk Away: the Challenge of Compassion in the Neoliberal World
Kollibri terre Sonnenblume
Giving Thanks for Our Occupation of America?
Christy Rodgers
The First Thanksgiving
Charles R. Larson
Review: Ta-Nehisi Coates’ “We Were Eight Years in Power”
David Yearsley
On the Road to Rochester, By Bike
November 23, 2017
Kenneth Surin
Discussing Trump Abroad
Jay Moore
The Failure of Reconstruction and Its Consequences
Jeffrey St. Clair - Alexander Cockburn
Trout and Ethnic Cleansing
John W. Whitehead
Don’t Just Give Thanks, Pay It Forward One Act of Kindness at a Time
Chris Zinda
Zinke’s Reorganization of the BLM Will Continue Killing Babies
David Krieger
Progress Toward Nuclear Weapons Abolition
FacebookTwitterGoogle+RedditEmail