CEOs: Too Big to Jail? But Maybe Not Any More

It seems only yesterday we leather-lunged Portland Occupiers were in front of the Wells-Fargo bank shouting “The banks got bailed out! We got sold out!!” The reference was to the Treasury Department giving nine of the country’s largest banks—Bank of America to Goldman Sachs—$700 billion to appear solvent to the public despite the 2008 financial crash. We were going to spend the day picketing their downtown branches.

Most of us had no idea who the bank and investment CEOs were, whose criminal or misguided decisions set off this national financial catastrophe. They were the ones who did take the Federal Reserve bailout millions and promised top-to-bottom operational reforms.

Nobody in our group had bothered to Google their identities because pillorying CEOs would have taken the focus off their institutions. CEOs might come and go, but the company’s culture and policies would live on. And that’s what we wanted to change even if the outfit went under.

We did know that whether a CEO was a tyrannical mover-and-shaker, an owner, or empty-headed, letterhead figure, that person was its legally responsible chief officer. Subordinates or board members might be the company’s real decision-makers, but it was the CEO who had to sign off on them. That’s why CEOs earn thousands more than anyone else on the payroll. Like a ship’s captain, they hold the whip hand literally governing the working lives of their crew and the health and welfare of consumers buying the firm’s products or services. If the business is major enough, it controls the regional or national economy.

Time was when CEOs couldn’t hide from the public, mostly employees who lived near their factories and local shops. If preventable accidents happened at the workplace, the families, friends, and supporters of the dead or badly injured could storm their offices or homes to avenge lost limbs and lives. Company-backed police quickly arrived, of course, to rough up and/or do lock-ups—unless they were outnumbered. It was then that the CEO appeared, urging calm and promising resolution.

As the cold-blooded, taciturn President Calvin Coolidge reminded the nation in 1925 that no matter what industrial crimes bloodied assembly lines and floors: “The chief business of the American people is business.” In other words, it and its CEOs—figureheads or not—are above the law because business controls the nation. Shorthand for this reality today is that many business are too big to fail (TBTF) and their CEOs too big to jail (TBTJ) for workplace disasters.

Take the terrible 1911 Triangle Shirtwaist fire in Manhattan, one of the country’s leading garment factories. Prior to this horrific and historic blaze, Triangle had six small fires in the top three floors of a 10-story “fireproof” building rented by co-CEOs Max Blanck and Isaac Harris . Yet no concern for safety and health of their 600 employees —easily replaced women and girls—existed in this still notoriously dangerous industry. Remodeling would have cut profits significantly.

My parents’ small garment factory in Hillsboro, Oregon was a death trap of lint-dust, oil containers, cloth, poor ventilation, an exit distant from sewing machines—and no fire extinguisher. Neither New York City or its fire department shut down Triangle for doing nothing to correct these usual hazardous workplace conditions . Nor did their insurer cancel fire coverage except possibly to raise premiums after each event and to brand Triangle as a “repeater.”

Though the Triangle fire killed 146, the two co-CEOs quickly and quietly moved operations to another firetrap. Unbelievably, they were found innocent of manslaughter despite overwhelming photographic evidence and employee testimonies. But Blanck and Harris were TBTJ because they were a major employer in the city. At least they got the scare of their lives after the verdict when a mob chased them to a subway station while screaming: “Not guilty! Not guilty! It was murder! Murder!”

Perhaps the TBTF Union Carbide corporation furnishes a later, greater, and spectacular example of a CEO’s power, yet disinterest in a foreign country which it had courted and permitted a U.S. company to operate.

In 1984, CEO Warren Anderson’s sign-off on a decision caused what is still considered the worst industrial crime in the world . The event was a nighttime chemical leak in early December at UC’s poorly maintained storage building in Bhopal, India. Of the city’s 850,000 residents , the deadly methyl isocyanate fumes instantly killed at least 4,000 and eventually affected the lives of an estimated 300,000 in the region. Its deaths and ailments are suffered nearly 40 years later by survivors’ descendants.

To show UC concern and contrition, Anderson flew into Bhopal four days later and was immediately arrested, freed on $2,000 bail to face seven criminal charges, possible life imprisonment—and an enraged mob. Backstopped by Henry Kissinger , former Secretary of State, President Ronald Reagan called India’s prime minister that day and had Anderson instantly flown home. He was, after all, TBTJ. At least he was to spend 30 years until his death at 92 in 2014, haunted by that terrible crime, dodging India’s unending stream of extradition warrants—and the constant threat of contract killers.

Up to the Civil War, CEOs ruled America as unhindered as Kings Henry XIII or Louis XIV. They were stymied and policed finally by a toughened federal government and its million-dollar wartime contracts. Two anti-profiteering laws—the 1863 False Claims Act (FCA) and the Renegotiation Act of 1942 —were designed to curb excesses by greedy CEOs. The FCA’s coverage and regulations have been broadened over the years to cover any contract issued by federal, state, and local departments and their specialty agencies.

FCA penalties—even in 1863 dollars—were built on the assumption that the only effective deterrent had to be eye-popping financial penalties, plus bans (disbarment) on future bids for those lucrative government contracts:

… any person [aka, the CEO] who knowingly submitted false claims to the government was liable for double the government’s damages, plus a penalty of $2,000 for each false claim. The FCA has been amended several times and now provides that violators are liable for treble damages, plus a penalty that is linked to inflation.

The Renegotiation Act was submitted by President Harry Truman when he was a senator and outraged by military contractors’ abuse of government contracts. His factory inspections revealed longtime, common practices of CEOs ignoring “misconduct,” defined as fraud, waste, product failure, breach of contracts, filthy factories, employee abuse—and crime. Those practices couldn’t be stopped overnight, but at least stripping “excessive profits” from crooked contractors would be a good start.

Guilty CEOs were further outraged that the law stipulated the federal tax court would determine what profits were excessive “because of that Court’s special familiarity with all kinds of business and accounting practices in regard to profits, losses, etc.” Government committees were to monitor contractual performances and claw back those excessive profits to the Treasury.

However, that law also contained what was a comforting sop to businesses, perhaps creating today’s “too-big” loophole: “The contractor will not be expected to refund the excessive profits in cash if that depletes its current resources beyond the safety point.” Payback deadline was three post-war years, perfect for delaying tactics. Many affected CEOs certainly condoned company accountants’ creative skills so that bankruptcy neared that safety point. This loophole saved excessive profits, their jobs, the company, and, secondarily, unemployment of thousands.

When peace came, those two laws were applied to all businesses despite infuriated CEOs public howls. The “excess-profits” judgments were now to be enforced by regulatory agencies of the Justice Department (DOJ), the Treasury’s Financial Crimes Enforcement Network (FinCEN), and the Securities and Exchange Commission (SEC).

Less power for Big-Business CEOs arose in 1970 when Congress passed the Occupational Safety Health Act establishing an employee safety and health protection agency for both public and private businesses: OSHA (Occupational Safety and Health Administration). That took a three-year pitched battle against CEOs and other corporate interests fought by the federal government, employees, union leaders, and Americans aroused by workplace accidents and deaths involving friends or families.

Worse was to come for most CEOs.

For over 50 years they had fumed over federal mandates to pay premiums for Worker Compensation insurance on injuries and work-related ailments. Verification was determined by management. CEOs were now faced with OSHA inspectors responding to worker complaints by unannounced visits for verification and enforce those discovered through staggering fines. For example, BP’s Texas City refinery explosion in 2005—15 deaths, 270 injured—was assessed an $87.4 million fine. Soon after, OSHA discovered 439 othe “willful violations” at the plant and fined BP another $30.7 million .

CEOs soon succeeded in getting extensions on those million-dollar fines, just as bank customers do on loans, thanks to the 1944 Contract Settlement Act . Akin to the DOJ’s crime policy of leniency for juveniles and first offenders , settlements had two escape hatches : “non-prosecution agreements” (NPAs) and soon after, “deferred prosecution agreements” (DPA ).

All a CEO and company attorneys had to do was admit wrongdoing, pay the fine, assess blame, correct the violation, and permit outside inspectors to check compliance. Flouting agreement terms with excessive delays and defaults would mean switching the violation from a civil matter to a crime, a trial, the risk of prison, and social ostracism. In addition, a CEO would be unable to deduct the entire fine as a “necessity” business expense under the 2021 IRS’ tax code 162 (f) .

When faced with a $290 million securities fraud case in 1991 involving traders at a major Wall Street investment bank (Salomon Brothers), the SEC and DOJ decided to apply this leniency concept on that prestigious TBTF company. Charges were dropped when the CEO admitted trader “misconduct” and returned the $290 million. His team also “cooperated extensively in the [10-month] investigation and had taken decisive and extraordinary actions to restructure its management to avoid future thievery.”

Federal government settlement records of collections over $1 million from 1995 to 2022, show 19 violations were from one major Pentagon contractor (Boeing) from 2000 to 2021. Ten were from a medical corporation (Johnson & Johnson), 2007-21. Nine from a multi-billion dollar construction company (Halliburton), 1995-2017. As for smaller fry, settlement tracker POGO (Project on Government Oversight), a non-profit organization, recorded 2,862 offenders between 1995-2022. In fairness to the federal enforcer, the Department of Justice (DOJ)—aided by its agencies like the FBI, as well as the Treasury—did recover more than $5.6 billion from fines last year.

Whether the sums were in millions, billions or few hundred thousand, CEOs and their subordinates and stockholders considered such penalties a minuscule fraction of a company’s profits. As corporate-crime pundit Nancy Bilyeau pointed out, why would CEOs worry about such crimes as “fraud, bribery, environmental safety offensives, antitrust violations, and money laundering.”

Nevertheless, 40 percent of CEOs from 1993-2010 did hire independent compliance officers to ensure settlement terms were met. The remaining 60 percent apparently had CEOs who, like their Triangle counterparts, had contempt for the health and well-being of their employees. They kept the excessive profits and blew off penalties, judging from their recidivism records or escape from OSHA detection. Besides, they also knew OSHA and other watchful federal agencies lacked the manpower or political power to take on the TBTF.

Andrew Park, a communications staffer at Duke University’s law school, noted that the DOJs settlements two escape hatches for unscrupulous deeds undermined their purpose:

DPAs have become a staple of white-collar [criminal] cases and the vehicle by which the government has settled cases against many of the major banks as well as giants in the auto, pharmaceutical, energy, technology, and aviation industries. A Manhattan Institute report found that the government negotiated 303 DPAs and NPAs (non-prosecution agreements) between 2004 and 2014, and 16 of the Fortune 100 were under one in 2015.

Escape from the SEC, however, was something else. It gave no quarter to CEOs permitting company misconduct on Wall Street. Its staff believed setting examples was a greater deterrent to robber-barons than phony vows of reform and its costly efforts and expense. In the early 2000s, the Commission began publicly frog-marching nearly a dozen CEOs to prison :

Adelphia Communications’ John Rigas (2002)

Kadmon Pharmaceutical’s Samuel D. Waksal (2003),

Rite-Aid’s Martin L. Grass (2004),

WorldCom’s Bernard Ebbers (2005),

Computer Associates’ Sanjay Kumar (2006),

Enron’s Jeffrey Skilling (2006),

Qwest’s Joseph Nacchio (2007),

Madoff Investment Securities’ Bernie Madoff (2008).

Restive DOJ prosecutors agreed with SEC methods and began suggesting money, time, and effort could be better spent on inspections by going after the CEOs of TBTF companies, instead of interrogating dozens of lower-level personnel. So in September 2015, the department’s deputy attorney-general Sally Yates wrote a famous internal seven-page memo to do just that.

She advocated starting investigations by determining the identity of the “culpable individual” (aka, the CEO) who approved or winked at violations. Fines and remedial costs would come out of that individual’s pocket. “Misconduct” would be a felony subject to prosecution, prison, and social ruin from peers.

So the “Yates Memo” was a hair-raising document for CEOs and their Congressional and company protectors. The key portions were:

One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing. Such accountability is important for several reasons: it deters future illegal activity, it incentivizes changes in corporate behavior, it ensures that the proper parties are held responsible for their actions, and it promotes the public’s confidence in our justice system. …by [first] focusing our investigation on individuals, we can increase the likelihood that individuals with knowledge of the corporate misconduct will cooperate with the investigations and provide information against individuals higher up the corporate hierarchy…. Although in the short term, certain cases against individuals may not provide as robust a monetary return on the Department’s investment, pursuing individual actions in civil corporate matters will result in significant long-term deterrence.

New directional approaches are never immediately accepted and DOJ officials handled this popular suggestion cautiously, but included it in the department’s US Attorney’s Manual . Between 2015 and 2019, 72 individuals were prosecuted on the basis of the Yates policy. The trend is expected to increase, and as an observer commented in 2020 : “…it is safe to anticipate that those individuals involved in corporate transgressions will remain very much in DOJ’s crosshairs from now on.”

While CEOs await this scary prognosis, many have been celebrating what looks like the impending demise of their oldest and greatest enemy, 135 years of federal regulations governing the American business world. Their constant claim has always been that regulations are a costly, unnecessary, hobbling, time-consuming obstacle to production and profits. The response has also always been the same: that regulations wouldn’t exist if businesses had initially addressed complaints about everything from public safety to trading practices.

Congress passed the first regulation of business in the 1887 Interstate Commerce Act against the railroad industry. Its five-member Interstate Commerce Commission (ICC) still enforces regulations. The ICC also has been the model for the federal government’s other regulatory agencies.

In the case of all those railroads, the ICC regulations were to govern everything from ticket prices, shipping rates, trading policies, and treatment of competitors. In the eyes of CEOs in large and small businesses, the government had assumed dictatorial “regulatory control” over their enterprises. So for decades, CEOs and business interests have been at war with the government to destroy that power by what is called “regulatory capture,” led by brigades of influential outsiders to eventually kill all agencies enforcing these laws. As Sen. Elizabeth Warren explained their efforts to bribe Congressional, presidential, and judicial branches of the government:

When it comes to undue industry influence, our rule-making process is broken from start to finish. At every stage – from the months before a rule is proposed to the final decision of a court hearing a challenge to that rule—the existing process is loaded with opportunities for powerful industry groups to tilt the scales in their favor….Dodd-Frank [bill] included a provision called the Volcker Rule to stop banks engaging in certain kinds of risky behavior. Before that rule could be written, groups representing Wall Street interests met with federal regulators 419 times, accounting for 93 percent of meetings between federal regulators about the Volcker Rule…

The CEOs seemed to have won this war a few days ago when Republican brigades and the corporate world captured six of the nine Supreme Court justices to convince them to kill all regulations by destroying federal agencies’ authority to create, mandate, and enforce them. Chief reason behind the ruling was that regulatory powers were not specifically included in the U.S. Constitution by its Framers in 1787.

Their first target has been the Environmental Protection Agency (EPA) , but as former Labor Secretary Robert Reich commented:

In passing laws to protect the public, Congress cannot possibly foresee all ways in which those laws might be implemented and all circumstances in which the public might need the protections such laws accord. Starting today [July 1], though, all federal regulations will be under a cloud of uncertainty—and potential litigation.

For example, regulations set by the Department of Labor’s OSHA. Or those from Agriculture’s Animal and Plant Health Inspection Service. Or Health and Human Services’ Medicare and Medicaid Services. Transportation’s Federal Highway Administration. Veterans Affairs’ Health Administration.

But then came the “Friday Bombshell” on July 8 of president Biden’s Executive Order overturning the Court’s 6-3 decision overruling Roe v. Wade on abortions. Well-informed and furious CEOs may have canceled celebratory events about the Court’s 6-3 West Virginia v. EPA decision soon wiping out all federal regulations. They know that presidential precedent has been now been set for another Executive Order, this one overturning the Court’s EPA. Foiled once again!

It’s well to remember that most CEOs and their successors are highly unlikely to change views or actions on regulations, especially balking at those protecting the safety and health of employees, consumers, or the general public. But also that CEOs come and go, sometimes rapidly: Retirements. Better offers from corporations or high-ranking positions in government. Prestige. Deaths. Corruption. Notoriety. Or ousters by boards or shareholders for collapsing stock prices.

The real solution for protecting federal regulations is not action from a president’s Executive Orders, Congressional laws, grassroots’ monster rallies or other pressure groups. It comes from a public enraged about unaddressed issues and greedy businesses putting profit before people no matter what the consequences. That’s who and what it took—usually collective efforts—to put each rule on the company books despite CEO hostile tactics or claiming ignorance that regulations exist until an OSHA inspector arrives.

For instance, employees can do more than seethe and grieve when a coworker falls into a cauldron of boiling metal , as happened last month. Or see baby formula or other food products contaminated in filthy factories still shipped to supermarkets. Equipment crushing a crane operator. Worker Compensation claims denied for 717 infected by COVID on an assembly line.

It’s true that work-exhaustion, disabilities, or fear of retaliation keep millions throwing up their hands in futility about such conditions (“That’s how it is around here,” “That’s the union’s job, not mine,” “I’m only one guy.”)—until it happens to them. They believe the CEO is TBTJ to challenge about their work lives. And most will never join a strike whether wildcat or union authorized.

Yet quiet, successful protest actions and disclosures can be done at home. People can call OSHA’s whistleblower number (800-321-6742), for example. Or email their Senator or House Representative—preferably if they facing re-election in the November midterms—telling them to craft a bill to codifying regulations. Email president Biden ( or call him (202-456-1111), to issue an Executive Order overruling the Court’s EPA decision affecting agency regulations.

CEOs are neither all-powerful gods nor above the law where employees are concerned. It has always taken power-of-the-people to teach them that ultimately the real CEOs in the workplace are us.